Successful Construction Project Closeout

“The hardest part of the race comes at the end.”

Whether your construction project was flawlessly executed or was a recurring source of frustration, when you approach project completion, you must finish the race to properly close out each contract. The proper close-out can be a trust and confidence issue reflective of how well the school district managed the construction project with your board of education and voters. Finish the race to retain that trust and confidence.

There are multiple tasks to be completed and documentation to be obtained as part of the closeout process. Even after final payment to a contractor, there are steps that must be taken to successfully close out a project. The architect and construction manager are contractually obligated to assist with the closeout process but understanding what should be done and when, will serve you well once the contractors pack up and move on to their next job site.

This article outlines the key components and steps that make for successful construction project closeout. It’s not a detailed dive into each, but instead a primer designed to highlight the major elements of the process.

Commissioning, training, operation and maintenance manuals, inventory stock, and technical support contact information. Your construction manager should help with the transition of the work done by each contractor in the new or renovated building. If a complex system was installed (e.g., new HVAC system) it should be commissioned by an expert (a Commissioning Agent) and proper training should be provided to District staff along with operation and maintenance manuals and technical support contact information. If a new item requires special maintenance procedures (e.g., special flooring) the required staff training and a supply of any specifically required supplies should be provided. Videotape these trainings to assist with staff turnover or future issues with systems.

As-built documentation. You should obtain a set of “as-built” drawings and documentation for filing in the project file and use in conjunction with future projects. Contractors are contractually obligated to supply marked-up plans and specifications to reflect what was actually built. The as-built drawings will be the only source of accurate and complete knowledge about the final new or renovated building. In addition, they will be a valuable reference source in conjunction with any future Building Condition Survey.

Change Orders. During the project there will be numerous Change Orders, often a source of confusion and frustration. These should be completed and submitted as the project progresses. Do not allow these to be stockpiled until the end of the project. As part of project closeout, be sure that every Change Order has been completed and signed by all required parties and that an original has made its way into the project file. Your Board will need to approve the Change Orders and they will need to be filed with the NYSED.

Claims. Be sure all claims have been satisfactorily resolved. Don’t make final payment until all claims by a contractor, subcontractor, or supplier have been fully and finally resolved.

Certificates of Substantial Completion. Your project architect will provide a Certificate of Substantial Completion for each contract. This milestone date triggers contractor warranty obligations to the school district. Make sure you schedule a walk-through with your architect and construction manager for ten months after the Substantial Completion date to look for defects that you may require contractors to complete under warranty. This is also the point in time when the District assumes responsibility for the new building or building renovation to include operation, maintenance, the cost of utilities, insurance coverage, and safety and security.

Completion of the final punch-list. As part of the preparation of a Certificate of Substantial Completion, your architect and/or construction manager, in cooperation with each contractor, should prepare a final punch-list. Be sure that each item on the list is completed to your satisfaction with documentation before you make final payment or release any retainage withheld during the project. If the contractor is slow or non-responsive in completing the punch list, then please call the office and we can assist in the timely completion.

Manufacturers’ Warranties. Have all available manufacturers’ warranties issued in the name of the District or assigned to the District and filed in the project file. Obtain and preserve in the project file all related documentation, including any sales and marketing literature and material defining performance representations that was used in the selection process.

Demobilization and cleaning. Have contractors remove all temporary facilities, structures, and systems and be sure that the entire building and site are thoroughly cleaned to your satisfaction and as required by the contract. There are contractual obligations requiring the contractors to properly clean the building, do not get tricked into having your staff do the contractor’s work.

Contractor’s final application for payment. You must have a completed and approved final payment application from each contractor before you make final payment and release any retainage. This gives you a final accounting of all the money that’s been paid to the contractor and is your last opportunity to review all payments for accuracy. It is also your last opportunity to exert leverage to ensure compliance with all aspects of the contract.

Contractor, subcontractor, and supplier affidavits and releases. The American Institute of Architects has developed industry-standard affidavits for use in conjunction with the closeout process. They provide key protections for the District and defenses against claims by contractors and others after final payment. In addition to obtaining properly completed and signed AIA affidavits you should require a final release and indemnification instrument from each contractor (releasing any claims the contractor may have upon final payment and indemnifying the District against loss due to a claim by a subcontractor or supplier) and lien waivers from all subcontractors and any suppliers that provided a substantial dollar volume of materials or supplies.

Cost reporting. Be sure that your municipal advisor and business office have all the necessary forms and information required in connection with the preparation and filing of the final cost report. Failure to properly and timely file the final cost report can result in a loss of State Aid. If there is litigation on your project, be certain to work with your municipal advisor on how to preserve the school district rights for state aid.

The Project File. Organize and file all project documents up to and including closeout. The file must be maintained for the length of time required by applicable law and regulations and in compliance with the District’s record retention policies. The school district is obligated to maintain these records for six years after the building ceases to exist.

The “10-month” inspection. On-site, in-person review of all work and systems with the assistance of the architect and construction manager prior to the expiration of the applicable contract warranty period (usually 12 months) is sometimes referred to as the “10-month” inspection. Even though it occurs long after final payment, it is a critical last step in the closeout process that must not be overlooked. If any issues are identified during the inspection, to preserve the remedies available under the contract and the contractor’s performance bond, you must provide formal written notice in a timely fashion. Failure to provide notice may preclude relief under the contract warranties and/or the ability to seek relief under the contractor’s performance bond.

If you have any questions about construction project closeout or if we can assist with any aspect of a District construction project, please don’t hesitate to contact us at one of the telephone numbers listed below.