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Construction Management Closeout Procedures & Processes

Documentation & Warranties

project closeout procedures Whether you’ve just completed a 25,000 SF custom home in Beverly Hills or a significant commercial facility, construction management closeout procedures are critical for an effective handover. A completed and thorough project closeout substantiates that the project has been performed according to the contract documents, all costs have been billed and paid, the building complies with all proper statutes and regulations and the owner can legally occupy the property without fear of encumbrance. It also ensures the client is left with the knowledge and resources necessary to maintain and operate their new or renovated building.

Consider implementing a compulsory project management closeout process as standard operating procedure for every project. Ensure your team starts the process of retaining copies of relevant documents early in the project. Key closeout documents like warranties and systems training manuals come in different formats from various sources as work is completed, not just at the end of a project. For example, when an appliance is delivered it may include warranty information that must be turned over to the owner, often many months before the project is complete. Ongoing focus for closeout documentation on the part of your team will prevent scrambling at the last minute for documents from sources that may no longer be readily available.

Project Closeout. The project closeout process should include a combination of onsite and administrative tasks. Site closeout is customarily coordinated by the general contractor (GC).

Onsite Project Closeout Checklist should include the following tasks:
  • Complete all punch list items. It is all-too-typical on most projects that the GC has to push subcontractors to finalize their work in the field. Generally, punch list completion is verified by the project architect. 
  • Demobilize all contractors’ job storage/ trailers, temporary facilities and equipment including temporary power poles and lavatory facilities from the work site. 
  • Deliver, organize and store attic stock (contractually required surplus materials) such as roofing, tile, HVAC filters, ceiling tile, etc. 
  • Ensure that permanent utilities are installed, tested and working and all project-related services and contracts, i.e., phone, water, power, gas and internet services are cancelled. 
  • Ensure the site is completely clean and ready for occupancy.
  • Ensure all owner training of systems has been completed.
Building Commissioning. Most large projects provide specific contractual requirements for systems commissioning. According to Wiki, Building Commissioning (Cx) is the process of verifying in new construction the subsystems for mechanical (HVAC), plumbing, electrical, fire/life safety, building envelopes, controls, building security and other systems to achieve the owner’s project requirements as designed by the building architect and engineers. The scope of commissioning varies depending upon the complexity of systems and the owner’s desire for quality control and verification. It is becoming standard in large projects to appoint a Commissioning Authority or Agent (CxA) who is often a third party engineer to oversee and confirm that systems have been properly calibrated, balanced and tested, that performance meets design criteria and that the owner or his agents have been trained in proper use. Commissioning, to the extent required, is therefore a significant aspect of project closeout on commercial or large residential projects.

Project Completion. Upon receiving a request to confirm substantial completion by the GC, the architect and the owner should conduct a walk-through inspection to determine the punch list for final completion. Typically, substantial completion is reached when the building is usable for its intended purpose, all utilities are functioning, the project has achieved approval for use or occupancy and the work is more than 97.5% complete. Under typical AIA contracts, substantial completion is a milestone that triggers the inception of warranty periods. The construction manager or architect generally determines this milestone by issuing a Certificate of Substantial Completion.

Final completion signifies that construction is finished in accordance with the contract documents. This means that the punch list has been completed, usually certified by the project architect. In addition, all onsite tasks have been completed and administrative submittals, lien releases, warranties, close-out documentation, manuals, as-builts, etc., have been turned over to the owner and verified for completeness.

In most jurisdictions, the appropriate authority issues a Certificate of Occupancy certifying that the building permit has been signed off and all inspections are complete and signifies that the building is ready for its intended use or occupancy. The owner’s payment of retainage to the contractor is outlined in the contract and is linked to final completion, substantial completion or sometimes the certificate of occupancy.

The goal of administrative closeout procedures is to confirm that all contractual terms have been satisfied, closeout documents provided and payments have been made by the contractor to all the subcontractors and material suppliers. While deliverables vary with each owner’s particular needs, the goal is to provide a transparent and organized handoff of the project to the owner, including any information or documents they may need in the future for reference.

The following is a checklist of administrative tasks and documents to consider during Project Closeout:
  • Review all contractual requirements and ensure that all terms have been met.
  • Review all change orders to ensure all have been accounted for and either voided, rejected or completed.
  • Obtain any outstanding insurance and maintenance bonds, to the extent required by contract.
  • Ensure you have Final Permit Cards, which are the property of the owner, along with building permit plans and any other documents from agencies having jurisdiction.
  • Review and ensure completeness of as-built drawings.
  • Confirm that all Operations & Maintenance Manuals have been provided to the owner by the contractor, that the owner has been trained and knows who & when to call.
  • Review all warranties including full information on warranty status, terms and contact information.
  • Obtain Unconditional Final Lien Waivers from subcontractors and suppliers – if they have legally filed a preliminary notice. All other lien releases should already have been included with the monthly accounting. 
  • Follow up to ensure any outstanding deposits, jurisdictional cash bonds, performance and payment bonds, etc., are released or reimbursed if applicable.
  • File a Notice of Completion with the appropriate jurisdictional authority within the time frame required by State statute.
  • Perform final accounting to have a complete record of all project expenses, for the purposes of completing expense records and to establish a cost basis for the property.
A successful closeout process is not complete until final and complete payments are made, final retainage is released, permits closed out and all parties are satisfied. Delays are common at the last minute during the closeout process when vital pieces of information need to be tracked down or when pending or incomplete change orders cause confusion.

Delivery of Documents. Either the general contractor or construction manager will organize all closeout documentation according to the project requirements. Most clients prefer electronic distribution of most documents, although a printed project manual with warranty and contact information is generally very useful.

Construction Manager’s Role during Closeout. For large projects, particularly those requiring commissioning, a construction manager should oversee the process. It is important to carefully review entire closeout packages, ensuring that equipment and systems utilized in their project are complete and that the owner is aware of the warranty and need for ongoing maintenance to preserve those warranties. We call their attention to the contacts list and ensure the owner knows who to call when. There is a lot of work involved in project closeout for large projects—ensure that your team has a champion who will manage this process.

Retention of Project Documentation. In California, there is a 10-year statute of limitations on filing claims, so it is important to retain all documents during that period following substantial completion. Architects generally keep project records for longer periods. Keep in mind that in the event a latent defect is discovered after the conclusion of a project and the owner files a claim or civil suit, any documentation that establishes that a party carried out their contractual obligations with proper diligence will serve them well in their defense.

Benefits of a Thorough Project Closeout. Thorough documentation protects against potential risks from future disputes on scope, contracts, warranties or expectations. It verifies that all project requirements have been fulfilled and establishes future accountability for maintenance and warranties. Complete and well-organized documentation underscores the project team’s credibility. Implementing a comprehensive, step-by-step approach to construction management closeout procedures ensures handing over a completed project with confidence.
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