Getting a construction project from substantial performance to completion and turnover is not easy. This process involves actions performed by individuals from all facets of the construction chain, with General Contractor leading the pack.
Project close-out is a tedious process involving a lot of paperwork. Project close-outs have become a real challenge for many contractors; once the work is completed the trades have already moved on to the next project, putting close-outs on the back burner. As tedious as it may be, close-out is a critical aspect of construction projects. Finishing a project cleanly and on-time is a win-win for all parties. The contractor receives their deposit cheque* and the owner sleeps with a peace of mind. *It is common practice for the owner to withhold a deposit cheque (between 5%-10% of the contract) in addition to the 10% holdback. The cheque is released upon final job completion, including permit closure and clearing deficiencies.
One of the challenges is that many contractors do not have a formal system in place. I have put together a sequence to assist you in developing, maintaining and executing your project close-outs.
Holdback & Construction Lien
The substantial performance date starts the 45 day lien period where an individual, not paid for the work performed, can register a lien. If no lien is claimed against the property after 45 days, the time limit expires. On the 46th day, the General Contractor can request the hold back to be paid by the owner if no lien is claimed against the property after 45 days. For more information on this section, check out Overview: Substantial Completion.
Site Review & Deficiency Work
The owner, the general contractor, and consultants will conduct a final walk-through at point of substantial completion. Deficiencies are noted to be compiled onto a deficiency list. General Contractor is obligated to complete every single deficiency in order to reach full project completion to have the construction deposit released. Keep in mind when coming across deficiencies with mechanical, electrical, and plumbing systems as they impact permit closure.
At substantial completion, the project is ready for occupancy. The authority having jurisdiction is to formally issue an Occupancy Letter or a Notice of Final Inspection. Depending on the scope of work, three forms of occupancy exist – unconditional, conditional, and partial. Architectural, Mechanical, and Electrical Occupancy Letters are required depending on the scope of work.
Turnover to Client
As mentioned in Overview: Substantial Completion, the project is formally turned over to the client at substantial completion. Key actions involve transfer of keys along with all responsibilities for utilities and insurance to the owner.
The first step is for General Contractor to obtain base as-built drawings (.CAD file) from relevant consultants. The drawing package is forwarded to relevant trades to complete specific as-built drawings. As a rule of thumb, As-built drawings are required for electrical, mechanical, telecommunications, structural, and fire protection. All trades are requested to provide a warranty letter and supporting documents on maintenance and operation of their product or installation.
Another aspect of close-out involves permit closure. Final inspection is to take place once all deficiency is completed. Once the permit is closed, a final permit report is to be documented.
All close-out documentation is compiled in a close-Out Binder to be sent off to the consultants for final review and approval. At the time of approval, the General Contractor forwards a binder to the client/end user and the building management team for their record.
Construction deposit is to be submitted by the Tenant or Tenant’s contractor prior to the commencement of construction, to be held in a non-interest bearing account until such time as the required closeout documents are received to the satisfaction of the Landlord. This includes the rectification of all deficiencies, building permit closure, and a complete close-out binder.