Practical Completion

Practical Completion Richard Davies CIBSE Home Counties SE Region 1

Practical Completion What is Practical Completion? A certificate of Practical Completion marks the point at which the Contractor has completed his contractual obligations, and can hand over the Works to the client. 2

Practical Completion At Practical Completion: The Contractor gives up possession of the site to the client The Client becomes the building owner and becomes responsible for insurance, security and maintenance A proportion of the retention monies are released Liability for liquidated damages ends The Defects Liability period begins 3

Practical Completion What should happen at Practical Completion: The Contractor hands over a building in which each of the statutory approvals have been met The Health & Safety file, a full set of Operation & Maintenance manuals, record drawings and test data and the Building Log Book is handed over A comprehensive maintenance regime starts The building owner has a full understanding as to how the building operates 4

Practical Completion : contractor s objective Why the contractor wants to achieve PC Achieves milestones for release of retention monies Avoids (or limits) exposure to financial penalties for delay No responsibility for site security or insurance No more site attendances (Project managers, support staff, site accommodation and welfare.) Also start of the defects liability period. 5

Practical Completion : client s objective Why a client may want to achieve PC Satisfied that contractor has fulfilled his obligations Business needs of organisation (end of previous lease, competitive advantage ) Client takes possession PC by default 6

Practical Completion : client s objective Why a client may not want to achieve PC Works incomplete Works unsatisfactory Works differ from brief/design Systems not proven Absence of statutory approvals (Building Control) No tenant (cost of empty building) 7

Defining Practical Completion How is Practical Completion formally defined? Previously.. When in the opinion of the Architect, Practical Completion of the Works is achieved, he shall forthwith issue a certificate to that effect and Practical Completion of the Works shall be deemed for all purposes of this Contract to have taken place on the day named in such certificate JCT 80 Clause 17.1 8

Defining Practical Completion How is Practical Completion formally defined? Practical Completion takes place when the Project is complete for all practical purposes and, in particular: the relevant Statutory Requirements have been complied with any necessary consents or approvals obtained; Neither the existence nor the execution of any minor outstanding works would affect its use; Any stipulations identified by the Requirements as being essential for Practical Completion have been satisfied: and Cont. 9 Practical n minimising the pain

Defining Practical Completion How is Practical Completion formally defined? Cont. The health & safety file and all as built information and operating & maintenance information required by this Contract to be delivered at Practical Completion has been so delivered to the Employer. Joint Contracts Tribunal 2009 10 Practical n minimising the pain

Defining Practical Completion CASE LAW It is the duty of the Contract Administrator to act as arbiter (and not as the Employer s agent) Minor defects are acceptable at PC [although they must not have Health & Safety implications] Each engineering system must be substantially complete Practical means allowing for site conditions 11

Practical Completion : best practice Best practice All Works complete Health & Safety file complete All O&M manuals, test data, acceptance certificates, Record drawings completed and signed off by the respective members of the Design Team All testing and system proving completed & accepted All user training complete All Keys handed over (and documented) Used consumables replaced (filters, fuel) and spares handed over (and documented) Requirement for fine-tuning visits documented in spec. (BMS) 12

Practical Completion : best practice Best practice / cont Requirement for out-of-season system proving is clearly defined ( chillers and cooling towers to be demonstrated during the summer months ) No patent defects All snags completed No outstanding issues Result: happy client and prospect of repeat business 13

Practical Completion : real world Real World O&M manuals & record drawings incomplete User training given to wrong people Consumables not replaced: dirty filters not changed, no fuel in the emergency generator tank Outstanding defects not identified / documented Snags not identified / documented 14

Practical Completion : real world Real World typical issues Contract Administrator not fully informed regarding outstanding issues Design team unable to identify potential show stoppers Contract Administrator unable to differentiate between potential show-stoppers and snags Client pressure 15

Practical Completion : best client practice Best practice client actions No influence upon the Contract Administrator Building Manager familiar with building and its operation Building Insurances in place Security arrangements in place Maintenance contracts in place as required 16

Practical Completion: real world client actions Real world client actions Pressure on Contract Administrator to resist Practical Completion Building Manager not appointed, or wrong person appointed Maintenance contracts not in place confusion between 12 months defects liability and 12 months maintenance. They are not the same! 17

Practical Completion: real world client actions Real World Practical Completion Key test: Risk to the safety of the occupants Loss of enjoyment to the new occupants Operational risk to the users, building fabric, plant & equipment resulting from non-performance, under-performance or failure of any of the M&E systems. 18

Practical Completion : requirements Real World Practical Completion Requirements: Health & Safety file Signed NICEIC (or equivalent) electrical safety certificates Signed NICEIC (or equivalent) fire alarm acceptance certificates Signed sprinkler system acceptance certificates Operation & Maintenance manual with sufficient information to enable the safe operation of the building, including the Mechanical & Electrical services OR Commitment from contractor to provide full maintenance cover. 19

Practical Completion : requirements Real World Practical Completion: continued Any outstanding Works to be identified, and a timescale for completion agreed with both the client and the contractor All snags identified, and the remedial action agreed together with timescale for completing Works 20

Practical Completion : latent defects Latent defects Defects not apparent at time of completion, but subsequently become apparent (eg: cracking of floor slab, rotting of timber ) Typically 12 months defects liability period, with contractor liable for direct costs; remedial works and associated losses suffered by client. 21

Practical Completion : Minimising the pain Attachment to the Certificate of Practical Completion Practical Completion is achieved conditional to the following: The re-turfing of the front lawn during Spring 2014 The replacement of the damaged front door within four weeks The chillers and cooling towers being demonstrated in Summer 2014 All items on the snag list (attached) being completed within the next two weeks, with repainting in the stairs being undertaken at weekends only 22

Practical Completion : Minimising the pain Case Law: 23

Practical Completion : case law J Jarvis & Sons v Westminster Corporation these words [Practical Completion] mean completion for practical purposes, ie. that for purpose of allowing the employer to take possession of the Works and use them as intended if completion means down to the last detail, however trivial and unimportant, then clause 22 would be a penalty clause, and as such unenforceable one would normally say a task was practically completed when it is almost, but not entirely, finished but Practical Completion suggests that it is not the intended meaning, and what is meant is the completion of the construction work that has been done 24

Practical Completion : case law Crown Estates Commissioners v- John Mowlem & Co Ltd (1994) The ruling: The final certificate is conclusive evidence that: The [Contract Administrator] is satisfied with the standards of workmanship and quality of the materials The requirement has been satisfied for all works under the Contract The implication: The Contractor is relieved of responsibility to be responsible for materials and workmanship used in executing the works. 25

Practical Completion : case law Emson Eastern Ltd v EME Developments Ltd The ruling: The JCT has to be viewed in the light of conditions prevalent on building sites as a manufacturer. It must be a rare new building on which every screw and every brush of paint is absolutely correct.there is not room for completion as distinct from the Practical Completion. Because a building can seldom, if ever, be built precisely as required by drawings and specification, the contract realistically refers to practical completion and not completion, but they mean the same. if completion is something which only occurs after all defects, shrinkages and other faults have been remedied it would make the liquidation damages provision. Unworkable and in practice would require the defects liability period to be added to the time initially negotiated by the partners for the carrying out of works. The conclusion: No difference between Practical Completion and Completion. 26

Practical Completion : case law Big Island Contracting (HK) v Skink (1990) The ruling: Practical Completion could not be distinguished from substantial performance and the contracted works were not completed until each of the systems were operational The implication: Despite the value of the outstanding works being minor, the consequence was significant (safety risk), and therefore it was correct to withhold Practical Completion 27

Practical Completion - references References: -Defining completion of construction works, RICS guidance note: 1 st edition (GN 77/2011) - RICS Practice Standards, UK http://www.joinricsineurope.eu/uploads/files/part7ricsdefiningcompletiononconstructionworksbla ckbook_1.pdf Handover, O&M Manuals, and Project Feedback. A toolkit for designers and contractors (BG 1/2007) - BSRIA 28