Monday, March 8, 2010

The Final 1%: Getting the Project Finished (and Getting Paid For It)

Who has the most touchdowns in NFL history? Most football fans can quickly tell you the answer is Jerry Rice. And most fans know that Brett Favre has the most touchdown passes. Touchdowns are an important statistic because they are so crucial to success in the game of football. Fans and students of the game also realize that it is difficult to get that final yard. It is much easier to move the ball half way down the field than it is to finally push it over the goal line. Not that the first 50-80 yards of turf are necessarily easy, but that last yard is always the hardest.

The same can be said of construction projects. Planning and designing a development, getting financing, winning contracts, and moving dirt all present plenty of potential pitfalls. However, that final push–moving a project from 99% done to completely finished–is many times the most difficult part. Parties fumble around as to details of their final responsibilities and, equally importantly, the timing of those obligations.

Far too often, in the rush to get a project started, final close-out matters are not thoroughly addressed (they definitely aren’t the sexiest part of a project). Parties ignore these details at their own peril.

To avoid disputes at the end of projects, take the time to give them proper attention in the contracting stage early on. For example,
  • Have specific deadlines for when architects are to make final inspections and issue certificates for payment.
  • Provide a definitive timeline for punch list items to be completed.
  • Address all the lien waivers that are needed.
  • Decide whether a surety needs to sign off on anything.
  • Determine whether warranties run from substantial completion or when specific portions of the project were completed.
  • Determine when as-built drawings are to be provided, to whom (and in some cases, from whom), and in what form (blueprints, CAD drawings, pdf, etc.).
  • Most importantly, firmly lay out all the prerequisites that must be satisfied for before the final application for payment.

Most construction disputes arise from ambiguity–not knowing which party has what responsibility, and not knowing the time in which that obligation must be met. Fortunately, ambiguity it is a preventable ailment.

A smooth close out of a construction project begins long before the first shovelful of dirt is moved. All the parties may be rearing to start on the Next Great Building, but you can be assured everyone will be much less excited–and willing to cooperate–on the back end when trying to get that project from 99% finished to 100%.