As the contractor, when was the last time you looked over the substantial completion terms in one of the contracts? You may know the date set in the said contract to complete the project substantially. Reaching substantial completion is a significant milestone in construction projects. As the contractor, you and your team should better understand what substantial completion is and how it is being determined for every job.
This article will tackle substantial completion, its definition, why it matters, how contractors are affected, and how to approach it carefully.
What is Substantial Completion in Construction?
Substantial completion is when a construction project is evaluated as sufficiently completed to the point that your client can use it for its intended purpose. Since no two construction projects are similar, there isn’t a catch-all objective checklist identifying when the construction project is “sufficiently complete”. Instead, one of the three scenarios plays out in determining this. As a contractor, you should pay attention to the following:
- You and the owner should develop and agree on a substantial completion checklist tailored toward the construction project. The item list should be specified inside the contract documents.
- All parties, including you, the owner, and the team, should agree to use the occupancy certificate.
- The owner is expected to decide whether the buildings can be used for their purposes or occupied instead. This decision-making process involves the engineer, construction manager, architect, the owner, or the owner’s designated representative.
When the project reaches this stage, you must make sure everyone is on the same page as the prime contractor. A construction punch list of items should also be included since a corresponding timeline is associated with it.
Why is Substantial Completion Important?
All items associated with the project are tied to substantial completion. Therefore, having a comprehensive list of what should be completed for a project to be substantially complete delivers more clarity. Removing any ambiguities over what substantial completion means on every project points out there can be a lesser chance of disputes further down the road.
Moreover, substantial project completion is really important for both you and the owner. Below are some of the most impactful reasons:
- It creates a timeline for the whole project.
- It creates a mutual expectation between you and the rightful owner of the project.
- It ensures payments to the contractors.
- It reduces the possibilities of project risk.
- It specifies how and when the project ownership transfers to the client.
Disputes can occur in one way or another. Therefore, you and your team should be prepared for rising concerns regarding the listing. To avoid conflicts, achieve another level of clarity throughout the process. Simply begin by making sure to have a detailed and comprehensive list of all items. Make use of construction scheduling software – this helps you input, track, and store critical information about your projects under “substantial completion”.
Substantial Completion vs. Final Completion
Substantial and final completion is two final phases of the project. Substantial completion refers to when buildings are to be used for their intended purpose. The latter occurs when the project is one hundred percent complete and requires no additional work. Between the two, the substantial completion is considered the largest milestone of any contractor.
From a serious standpoint, the date of substantial completion is far more crucial due to all timelines and dates it triggers. Moreover, this completion comes first and generally determines what items are to be completed firsthand and added to the punch list. Below are other important facts regarding substantial completion.
- It’s the date when the contractor stops being fully liable for minor incomplete details and construction delays.
- It’s the date wherein the owner is once again accountable for the state of the properties.
- Limitation periods in some construction claim to begin on the said date
- · The date by which the contractor is entitled to the last payment stated in the contract agreement.
When it comes to construction delay claims, if the contract does not have any clear points of substantial completion, the date becomes subject to the argument since it immediately impacts the damage figures. This is another reason why the dates must be accurately defined and recorded for every construction project. Best to input, define, or record dates using Pro Crew Schedule. This reliable construction management software is designed for project management for construction. Sorting out every detail of your project, mainly the dates, is incredibly easy. You can organize dates, files, or documents, but you can also efficiently track every aspect of your construction business.
Pro Crew Schedule is everybody’s go-to scheduling software in their day-to-day business operations. Check it out and get a live demo for free!
How does Substantial Completion Affect Contractors?
For any contractor, substantial completion is genuinely an important milestone. In many cases, additional stipulations will be included that may withhold a portion of the project until its completion. However, you and your subs can receive payments when the construction project reaches substantial completion as a contractor.
You must also be aware that warranty periods may commence when your project reaches substantial completion and some limitations may begin to run. You are not the only one or the only thing that is affected by substantial completion. Claims, warranties, liability and deadlines are affected too. This is what you need to do:
- Warranties: The clock assigned for warranty periods, typically known as a one-year correction timeframe, starts once substantial completion has been established. You are contractually obligated to correct defects in your materials and overall work during this period. Using online inventory software, you can double-check and review these materials and prevent any defects from happening. Now is your perfect time to deploy the latest construction tech in the industry.
- Claims and Liability: Substantial completion starts the timeline for the repose. This builds a time period when your client or the owner claims for some defects. In many cases, the point of this completion starts with bond claims.
But, substantial completion marks the point when contractors and subs are being released from specific types of liabilities, such as liquidated damages and delay claims. At this moment, you should not be held liable for any irregularities, especially if the project performed successfully that it got to a certain point.
What Comes After Substantial Completion?
When managing construction projects at this stage, your project will soon be labeled as “Substantial Completion”. This is when you have to make the next move – hand it over to the owner after ensuring that everything is done and covered. Again, this is another milestone for you and your team.
Moreover, once substantial completion is reached, the countdown on the following items is cited. Take note of this:
- Allowing to receive last progress payment and the release of remaining retainage.
- Release you from liabilities for ant liquidated damages and construction delays.
- Begins the clock on warranty obligations
- Begins the countdown for bond and lien claims
- Begins the clock on repose and limitations
- Transfer responsibilities of the projects from you (contractor) to the owner.
- Marks the end of the risk policies and start of the owner’s property policy.
This will be a point where you and your subs enter the final closeout phase of the project and begin finishing up the items on the construction punch list that have not been corrected or completed. Once these items from the list are completed, you now reached the last completion of the project.
Pro Crew Schedule Can Solve Your Substantial Completion Concerns
Substantial completion can be tough to pin down. There will be a lot of concerns you and your team will face along the way. Therefore, it is crucial to communicate openly with your clients and other involved stakeholders. Another important thing is to keep a detailed and comprehensive record of your work. If you need help with keeping confidential records and putting together your client and team at one place – you need a standalone, cutting-edge software solution.
Pro Crew Schedule is specifically designed with construction professionals in mind. This cloud-based subcontractor scheduling software has scheduling tools and features that can help manage your construction business. It acts like an all-in-one central hub tailored for you and your team where everyone can get updates from pre-construction to post-construction.
When you nearly complete your projects and on the way to substantial completion, Pro Crew Schedule is one construction tech you and your team should be equipped with. This phase is complex and, again, hard to pin down. Make it easier to manage, record files, and track documents using this powerful cloud-based solution.
So, get started with a 30-day trial! Check out the many great features of Pro Crew Schedule.
Redefining substantial completion early in the construction project can be very beneficial to contractors and subs. Because if that is always the case, everyone knows when certain timelines are triggered, what are missing in the list, and when to expect payments.