Project closeout in construction is a phase of the project management process where all activities are finalized. Project closeout requires involvement from all parties: the client must approve of the final product, and the workers need to wrap up duties associated with the particular job.
The construction project closeout process is complex yet crucial. Around 77% of megaprojects are at least 40% behind schedule, and many of these holdups may have to do with problems at the closeout phase.
Issues with the project phaseout negatively impact profitability and increase the risk of disputes. Understanding the significance and the vital aspects of project closeouts can mitigate these hurdles.
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The Importance of Construction Project Closeouts
Construction project closeouts are necessary for four main reasons:
1. Leaves Lasting Impressions
Contractors are limited in terms of the chances or opportunities they get. The competitive nature of the industry makes it critical to perform optimally. Incomplete or disorganized project closeouts portray poor overall performance. On the contrary, a successful construction project closeout improves customer satisfaction and reputation across the industry. It increases your number of return customers, thereby increasing revenue.
2. Enables Final Payouts
Typically, construction disputes arise at the final stages due to disaffection about project quality, improper communication between contractors and subcontractors, failure to meet expectations, and so on. Closeouts allow the contractor to conduct proper quality control, correct errors, and sort out other important issues before finally handing over the project to the client. This reduces disputes and facilitates smooth payment of final payouts.
3. Readies the Site for the Owner
After completing the project, the closeout stages allow the contractors to ensure that all aspects of the project have been completed according to the contractual obligations. It also allows the contractor to clean up the job site, return the equipment, remove temporary builders, and dispose of waste in an environmentally friendly manner.
By having an organized, timely plan for closeout, you can present the final project to your client mess-free, leaving a positive, lasting impression.
4. Facilitates Handing Over of Documents
A critical part of the closeout process is handing over all relevant documents to the client. An organized closeout plan provides the contractor with time to organize relevant documentation before handing it over. The contractor can walk the owner through the following documents:
- Building and operations manuals
- Maintenance manuals
- Warranty and guaranty publications
- Attic stock and spare parts paperwork
- Project record drawings
- Commissioning and testing reports
- Adjustments and balancing accounts
- Transmittals of purchased items
- Completed punch list items
Understanding the importance of construction project closeouts helps contractors refine their closeout process so as to mitigate issues. Start with the following nine aspects of construction project closeouts to build your process.
The 9 Aspects of Construction Project Closeouts
There are nine essential components and activities of construction project closeout procedures. These are:
1. Punch Listing
A punch list — also called a deficiency list, snag list, or punch-out list— is a checklist of all items that should be completed before a construction project is deemed finished. Typically, all parties of a construction project play a role in executing the punch list, including the contractor, subcontractors, owners, and architects.
While it is typically prepared at the tail end of a project, a contractor may create a preliminary punch list for each contractor at the end of their individual tasks to ensure that they have satisfied all the requirements. Such punch lists could be executed in the middle of the project.
At the end of the project, the contractor and architect may also do a walkthrough of the project and take note of the necessary corrective actions before the final inspection. After a successful review, the architect will issue the certificate or notice of substantial completion.
2. Cleaning the Site
Clean the site and prepare it for the final inspection. This requires you to ensure the space is devoid of all construction traces. The cleanup process can be intensive, depending on how you manage the site throughout the project. Therefore, conducting minor and strategic cleanups is essential before the final one.
The cleanup process involves removing temporary buildings and structures, complying with rental equipment agreements, and clearing and adequately disposing of waste. This helps you avoid last-minute delays and disagreements. You may also want to include maintenance and operations manuals for clients so they know how to upkeep their new property.
3. Collecting Construction Project Closeout Documents
Construction projects involve large volumes of paperwork, each of which may be relevant. They may be necessary for record-keeping purposes and may also serve as evidence in the case of disputes. Closeout documentation can include the following:
- Design and engineering drawings
- Design approvals
- Certificates of substantial completion
- Certificates of occupancy
- Requests for information
- Contractor-subcontractor agreements
- Inspection and permit records
- Financial documents
- Documentation regarding any tests completed on the property
Collect and gather the requisite documentation at each project stage and keep them safe. While keeping an organized file for your own records is advisable, you should be prepared to hand over original documents to the owner, if necessary, during the closeout phase.
4. Reviewing Modifications and Change Orders
A change order is an amendment to a construction project that modifies the contractor’s scope of work. They usually adjust the job requirements in the contract or the duration for job completion. Such alterations are only valid when the contractor and owner both agree to the modifications. Construction project closeouts allow you to review change orders and assess whether you have appropriately effected them.
5. Conducting Inspection
It is always necessary to arrange for a site inspection before handing it over to the owner. The first inspection between the contractor and architect is essential because it helps identify and correct errors in a timely manner. The final review, which involves the owner, allows you to receive direct feedback and confirm client satisfaction before handing over the project.
6. Addressing Feedback
Constructive criticism allows you to understand the client’s needs better. It also offers an opportunity to learn new things or learn from errors or issues occurring on a project site.
Before wrapping up the project, walk the client through all their requirements and confirm their satisfaction and approval. Preparing a document that asks the relevant questions and captures the answers is advisable. If there are further client requests, project closeouts allow you to implement them.
7. Closing Open Contracts
When the client approves the project, ensure the contractual obligations between the various parties have been performed and close all outstanding contracts. You may seek the assistance of an experienced construction attorney to ensure the process is smooth. This helps you mitigate the risk of legal action for breach of contract. It is also important to review warranties with your client during this stage so they know how they are protected.
8. Presenting to the Client
After completing the project according to the specifications, correcting errors, and addressing modification requests, hand over the project to the client. Identify those involved in the handover process from the contractor’s and owner’s sides. Additionally, the project manager should confirm the deadline for the project handover and communicate that to all parties involved. You’ll also need to transfer any titles for equipment over to the new owner.
Knowledge-sharing sessions also create an engaging communication environment and allow you to gather further information for future projects. It also allows you to explain budget overruns to the client.
9. Taking Notes for Future Projects
Gather all feedback and evaluate the successes and failures at each project stage. It helps to prepare a detailed assessment with summaries for quick reference. These offer valuable lessons to you and your company, especially when encountering similar projects. The experience will assist you in maneuvering similar challenges easily, help you avoid future closeout mistakes, and improve your overall process.
Work With a Construction Project Closeout Attorney at Calabrese Law Associates
Construction project closeouts mitigate disputes and facilities the smooth transition between project completion and occupation. Construction attorneys assist you in preparing the necessary documentation and ensuring that all contractual obligations are met, making it straightforward to complete payouts and retain a good relationship with all relevant parties.
Calabrese Law Associates is an experienced construction law firm dedicated to providing excellent and supportive legal services to contractors in the Greater Boston Area. We have served in this industry for years and are ready to assist you with your legal needs. Contact us now to learn more!
This publication and its contents are not to be construed as legal advice or a recommendation to you on how to proceed. Please consult with a local licensed attorney directly before taking any action that could have legal consequences. This publication and its content do not create an attorney-client relationship and are being provided for general informational purposes only.