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ConstructionPro Week, Volume: 3 - Issue: 20 - 05/16/2014

How Does One Determine Substantial Completion?

By Bruce Jervis

 

“Substantial completion” is one of the more significant milestones in a construction project, affecting the rights and responsibilities of the owner and contractor. The impact may include release of retained contract funds, responsibility for insurance and commencement of statutory claim limitation periods.

 

Substantial completion is easy to define. It is the stage of completion where the project is fit for occupancy and use for its intended purpose. While this sounds straightforward, it is frequently difficult to apply to the specific facts. Projects and intended uses vary. Consequently, it is useful for the parties to stipulate a date of substantial completion.

 

Many standard contract documents address this issue. American Institute of Architects forms call for the contractor to apply to the project architect for a certificate of substantial completion. This is an effective process, but only if it is followed by the parties. In a recent Oregon case, there was apparently no application and no certificate of substantial completion. This resulted in protracted litigation of the question of when the statutory 10-year claim limitation period started to run.

 

In your experience, is substantial completion readily identifiable? Is it appropriate to treat a project as substantially complete when ancillary work – for instance, parking lot and other site improvements – continue at full pace? Do parties adhere to contractual procedures for establishing a date of substantial completion? I welcome your comments.

 

COMMENTS

Substantial completion refers to contracts not projects, buildings or parking lots. It means totally complete except for those defects / deficiencies which cannot or should not be perfected. It does not mean partial completion.
Posted by: Peter Adams - Friday, May 16, 2014 11:26 AM


Disagree..........

You are completing the PROJECT and substantial completion means the project is "ample or considerable" in amount of completion. It usually means only punchlist items are remaining to complete.
Posted by: Don Godi - Friday, May 16, 2014 11:51 AM


Substantial Completion can impose significant problems to all parties Owner, Contractor, and Consultant. The Owner want to occupy, the Contractor wants to get onto his next project, the consultant is oftem left holding the baby.The AIA set out a good process but getting the parties to follow it is not easy. The keys to me are pre planning and ensuring that the requirements are incoporated into the close out sections of the specifications. Establishing quality standards in the specifications and on regular site inspections during the job is also a key. How many defects and omissions are allowable is often the argument- and that can become a minefield. If for example there are finishing issues that will require the contractor to carry out substantial work after the owner has moved in causing disruption to his operation then SC should not be issued.

Setting the date is also an issue but again preplanning is a must.I always record the SC date in the pre construction meeting and in each project meeting thereafter. Dealing with extension of time claims when they occur rather than leaving them to fester is another key to always having an SC date in the record. Substantial Completion remains a constant source of disputes and I believe as with so many construction processes preplanning the event and realistically assessing the time required in the project schedule can mitigate but not remove the problems that will occur.
Posted by: Jim Scott - Friday, May 16, 2014 12:25 PM


Substantial completion refers to the ability to use the WORK (e.g. the building, not the contract!) for its intended purpose. At a bare minimum, this means at least obtaining certificate of occupancy from the building official.
Posted by: Steve - Friday, May 16, 2014 12:57 PM


For those of us doing Federal Construction: The FAR does not address "Substantial Completion". The Military uses the term "Beneficial Occupancy" for the same purpose. See this link to a USACE Bulletin on the subject. All military agencies follow this policy. http://www.wbdg.org/ccb/ARMYCOE/COEECB/ecb_2012_21.pdf

Ron
Posted by: Ronald Vietmeier - Friday, May 16, 2014 1:09 PM


Depending on the contracts, the language can be very prescriptive or very vague which forms enough challenges.

The trigger of clocks and events is often more vague and takes some digging to get real clarification. Even when the language is specific, both the contractors and owners do not really want to follow the course of action outlined contract language. This challenges the consultant's ability be seen as impartial, fair while following the guidance of the contract and meeting the needs of the parties to closeout the contract.

The notion of the having the owners and contract follow the guidance of the contract is not just restricted to Substaintial Completion language, but it is one that sticks outs as we round 3rd base looking for home plate for the Project.


Posted by: Randy Pointkoski - Friday, May 16, 2014 3:53 PM


Substantial Completion is outlined in AIA standard contracts, the parties to a specific contract should always add supplementary conditions further defining the parameters to fill in detail required to induce the Architect to Certify its Achievement. If left un-adjusted the formal punchlist it prepared as an attachment to the SC certificate but the work to correct it extends to "Final Completion" Final Completion usually has its own set of Administrative Completions in addition to the completion of corrective punchlist work.

In some cases, Owners make the completion of Punchlist a condition precedent to acknowledging the Substantial Completion Date.
Posted by: Dave Morin - Friday, May 16, 2014 4:10 PM


Other considerations for substantial completion include: warranty start date, transfer of utility bills to the owner, punchlists and parcial payment release of retention.
Posted by: Martin Swiderski, RA - Sunday, May 18, 2014 10:37 PM


All of the previous commentors make good points; however substantial completion vs early completion vs benefical occupancy presents its own set of issues. All building systems must be operating to achieve substantial completion but what if this is achived earlier then the contract completion date? Do product warranties begin upon date of start up or at date of benificial occupancy or contact date? My project achieved B.O. in the 16th month of a 24 month (Partnering) contract with punch list 95% complete. Owner never accepted contractors updated schedule showing early completion.
Posted by: Project Engineer - Tuesday, May 20, 2014 10:54 AM


I would think that the "substantial completion date"---especially pertaining to home builders and the substantial completion date triggering the start date of any builder warranty start date----would have to be Close of Escrow. The homeowner would have no idea of the various completion dates or occupancy dates that the builder has--but Close of Escrow is definite and recorded. The homeowner had no control over the home prior to close of escrow and no warranty period should start to run prior to the homeowner actual ownership and control of the property---How would the homeowner know if there were defects if they didn't have ownership of the home!!!!!
Posted by: leslie diane - Wednesday, May 28, 2014 6:52 PM










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