6 critical areas of focus to help the construction industry have more success ! The GuardRailed Construction series, by Glenn A Cort, Esq., LEED AP
Cone 6: “Closeout”
Finish Strong as a Team and people will remember how you made them feel!
One of my favorite quotations of all time is by Maya Angelou, an author and American civil rights activist who worked with Martin Luther King. In her most famous quotations she says:
“People will forget what you said, people will forget what you did, but people will never forget how you made them feel.”
At the end of a project, everyone should feel great, hand shakes all around and a parting of the ways with only the warmest of well wishes. The fact is, however, for reasons we need to explore more deeply, this is not happening enough of the time for many project teams. Owners are holding payment (which brings them no pleasure) contractors are frustrated claiming they don’t know the difference between punch list and warranty, . . in fact the term ‘punch list” is becoming the subject of some bad jokes in the industry. The term “substantial completion” is being tossed around so much without context it begins to sound like a bad rash.
Is it that bad out there ? Maybe not, but surely the majority of those in the industry would agree that Issues surrounding start of warranty, the warranty itself, the operations and maintenance manual, owners beneficial use and contractor’s final payment, are among of the leading causes of dispute and can drain goodness from the end of a project.
The good news is that my research on line reveals a lot of good articles on this subject. In fact, of all the issues I am presenting in this blog series, I think the associated problems may be the easiest to remedy. We have chosen a specific path and it has helped greatly. The American Institute of Architects (AIA) with its form G704, sets forth a formal process for closeout which even handed and effective. Here’s a sample of that form provided by the AIA.
As with many forms, however, their effectiveness and adoption rate by all parties depends in part on the shared knowledge of the signing parties. Therefore, it’s important to explain how the form works at the outset of the project. We use the first kick-off meeting.
The key terms in play for definition are “substantial completion” versus “the punch list” versus “warranty items.” Sister concepts. The G704 form itself is logical and helpful in completing this task, and the process shouldn’t take but ten or fifteen minutes.
For example: The Punch List should be defined as work that both parties agree is not conforming to contract specifications and typically includes minor incomplete or incorrect work or incidental damage to finishes. The contractor proffers the G704 to Owner when they believe that the project is substantially complete, a good faith verbal agreement should proceed this along with the item placed on a project meeting agenda by the contractor.
The parties should agree that the contractor will not start the Punch List work until the G704 is fully executed. In theory this makes all the sense in the world but because this may sound like an unfavorable term for the owner, it needs to be explained. Why would the builder start a punch list, if the Owner has not agreed to the line between substantially complete and punch items?
Lastly, also all parties should agree for liability purposes that in no case will anyone take occupancy of the newly built premises until the G704 is signed. The Owner’s final acceptance starts when the Warranty and General liability shifts to the Owner from the builder’s risk policy. Clarity on this matter is essential for all parties, for obvious reasons.
Therefore, in closing of this “Cone” along your road to success and ours – if you are not using AIA contract documents for closeout, you might want to consider using something like it. It is not easy to talk about this stuff at the outset of a construction project when relationships are just being formed, but if the honest intent is to make clear an issue that has been unclear for many in the past, I think we can be confident that is the best thing to do. A formal process to define what the end looks like, will ensure that people have pleasant thoughts and warm feelings about the project for years to come. Thank you for reading, and good luck!
PS. Our next post or video on this will explore whether the AIA G704 process addresses if the quality of an Operations and Maintenance manual, after owners occupancy of the building, and punch list completion, should allow the owner to hold up final payment.