Getting the Last 10%
Anyone involved in construction projects has at least one war story about completing the last 10 percent of a challenging project. The last 10 percent I’m referring to here is the range of tasks or deliverables that can include: punch list work, commissioning issues close-out, as-built documentation, O&M manuals delivery, owner training, post occupancy corrective work, and warranty related items. The list goes on and on.
Why is it that completing this last 10 percent of the project seems to require more than 10 percent of the overall project effort?
Perhaps it’s a function of some parties not managing or even understanding the full scope of work associated with this last portion. On more than one occasion I’ve had various parties admit that they were not aware of some of the required scope items and were going about this last portion of work with the notion of “this is how we’ve always done it.” Or, perhaps it is a result of a highly competitive market in which budgets, fees, and time constraints cause the final aspects of the project to suffer the “losses” of those constraints. In this case, market pressure may force many of the parties involved in a project to minimize their efforts during this last portion of work in order to salvage any profit or even avoid losing money.
Don’t mistake the comments above for an argument that project costs and fees should be higher. Yes, these comments indicate that some parties are not fully aware of contractual requirements of the project. So how is this situation remedied? The initial notion might be to have a precise scoping meeting after all bids are received and perform a very long, exhausting line item review to make sure that every scope item and task are acknowledged and covered. This may help, but it is no guarantee. I’m sure that many have performed such a painstaking review and still had the same difficulties in successfully closing out a project. Besides, it seems that there is very little “project memory” from these scoping meetings years later when the project is in the final stages.
The solution I suggest is a two-pronged approach. The first prong involves incentivizing the project close-out tasks and deliverables to a greater extent by holding more retainage on the project or holding the retainage longer. Selecting which option should be based on past experience. Ideally, the retainage should not be released until all the i’s are dotted and the t’s are crossed on the project.
The second prong in this solution is to tie payment requisitions to commissioning milestones on the project. I offer this argument for doing so: If the owner hires an experienced, qualified Commissioning Authority (CxA), that CxA will have a clear understanding of the close-out requirements and status of those deliverable items. This is because the CxA is the knowledgeable party with regards to the overall project and it is typically in the CxA’s purview to track and verify the successful completion of these items. For LEED Certified projects, especially those seeking the Enhanced Commissioning Credit (Energy and Atmosphere credit 3), the CxA verifies completion of owner’s staff training, oversees and contributes to the development of a Systems Manual, and performs a post-occupancy review 10 months into the 12-month warranty period. The CxA’s scope also commonly includes reviewing the contractor submitted O&M documentation, turnover of spare materials, and tracking the completion of all outstanding issues identified in the commissioning process. This is a better solution because all of the items listed above typically occur in the last 10 percent of the project. Leveraging the CxA’s knowledge on this phase of the project is key as they will know if and when these items were successfully completed and have met the project requirements. Establishing the successful completion of these CxA-verified items as a milestone for payment leverages your unbiased, third-party, owner’s advocate CxA to confirm the work was completed.
Taking this even further, I would offer this is a good reason for employing this approach on the entire construction project. It allows owners to increase the success rate of their projects by leveraging their CxA’s knowledge throughout all phases of the project. This would be particularly helpful to owners who have neither the time nor staff to dedicate to developing the knowledge of the project that the CxA has. Additionally, the true verification that the projects systems and equipment are not only installed but also operating correctly is only confirmed after the CxA has performed functional testing of said systems. Tying payment requisitions to commissioning milestones, such as completion of functional testing, would create a high level of confidence in the project’s successful completion.