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Functional Completion

One of the benefits of commissioning is a more compact, more directed, more orderly construction project closeout period. Anyone who has constructed a building lately knows that the 80/20 rule applies well to construction. The first 80% of the construction takes 20% of the effort, while the last 20% of the process takes 80% of the effort. This oversimplifies the issue, but the point I’m interested in making is that it is the end of a project can be its most painful and protracted part.

Commissioning presents a process and tools for easing the end of construction, but owners have had varying degrees of success in implementing and enforcing these. One of these tools is what we call the “corrective action report” (CAR). This is a form which is used to document deficiencies discovered during the commissioning process and, most often, during the verification or functional performance testing phase of commissioning. We create one form for each deficiency and track the status of each issue in a CAR Log.

Like a punchlist (the CAR Log can be seen as a “functional” punchlist in addition to the “installation” punchlist traditionally developed by the design engineers), the CAR Log can be used as a metric to demonstrate completeness of the project. If all deficiencies in the CAR Log are not satisfactorily addressed, then the project is not done yet. However, as one owner has articulated to me recently, just documenting the deficiencies does not in itself correct them.

How does an owner encourage timely and effective correction of the deficiencies discovered during the testing phase? For many owners, the thing that gets their contractors’ attention is money. As such, owners are typically quite savvy about holding enough “retainage” to keep the contractors engaged at the end of the project.

At the end of the project the owner and contractor have somewhat conflicting motivations. The owner’s project manager is under pressure to finish the project on schedule and get it “off the books.” The contractor is interested in not spending any more money on the project, since, at that point, anything spent often comes right out of their profit. These conflicting motivations often result in a contest not unlike arm wrestling. There is a lot of energy that goes into the game but there is very little discernable movement or progress throughout most of it.

If contractors are allowed to do nothing (i.e., not correct deficiencies) at no risk to themselves, they can sit and wait for the owner to close the project and accept the building “as is” and “deal with it later.” We’ve seen this more and more in recent years, and it’s demoralizing to the commissioning team but, more importantly, to the owners themselves.

We believe that strictly enforceable liquidated damages need to be written into the construction contract to allow the owner to start “back charging” the prime contractor after a certain number of days following issuance of corrective action reports. We know that liquidated damages are often tied to scheduled completion dates, but “functional completion” should be given at least as much priority as project timeliness. Because functional completion is a new term, it and the potential liquidated damages tied to it needs to be clearly defined by legal counsel prior to issuing a project for bid. This is the part that should make it “enforceable” at the end of the project.

The client who suggested this particular column topic has a different situation, though, because the “owner” is a large, private institution that contracts most of its construction work (lots of messy renovations in existing facilities) on a time-and-material or cost-plus-fixed-fee basis. As such, there is no “final payment” that defines the end of the project.

Clearly, the owner can threaten to not hire the contractors again, if they don’t complete the CAR Log work in a timely fashion. However, there really aren’t enough qualified contractors to go around town, and that threat would not ring true to the current contractors. Our recommendation needs to be the same as for the low-bid, fixed price type projects: change the “rules” in the contract.

The owner needs to make the contractors understand how serious they are about commissioning and start requiring the contractors to commit to a functional completion schedule. Missing that schedule should have financial penalties attached to it. The owner can not be expected to keep an open checkbook project alive for the contractors’ convenience. The contractors need to take some risk, especially for something they have control over and the owner does not (i.e., correction of deficiencies).



Engineered Systems, October, 2001

Rebecca Ellis, PE, LEED AP, CCP, CxA
Questions & Solutions Engineering
1079 Falls Curve
Chaska, MN  55318