(This is part two of a two-part series.)
The planning, design and construction of your station, whether new or renovation, is one of the most rewarding endeavors that you will ever take on. Yes, it will be stressful at times, but when all is completed you will hopefully look back on the process with satisfaction.
If difficulties in the project are encountered, they are most likely to occur during the construction phase. It seems that construction phase challenges are more prevalent than ever before in today’s construction climate. In part one of this article, we discussed specific items or practices that you can perform or avoid during the construction process in order to eliminate common pitfalls. Items that we have already discussed include:
- Avoid selecting an unqualified general contractor.
- Utilize the qualified design team for construction observation.
- Set the proper tone for interaction between the players.
- Pay close attention during submittal reviews.
- Identify scheduling problems early.
In part two, let’s consider some additional practices.
Identifying and Correcting
Several parties will observe and safeguard the quality of the work performed during construction. First, the project owner will watch the daily progress with unmatched interest. Second, the design team, as discussed previously, should have construction observation included in their scope of work – mandating that they safeguard the owner’s interests during construction. Lastly, the governmental Authority Having Jurisdiction (AHJ) who provided a building permit for the project, will perform inspections at specified intervals. Most stations fall under the requirements of the building code that calls for “Special Inspections.” This will require the project owner to hire a qualified, third party that will inspect specific structural components and systems. Even with all of these eyes on the work being performed, there is plenty of opportunity for non-compliant construction to occur.
“Non-compliant” work would be defined as any construction that does not satisfy the plans, specifications or code requirements. The quicker that non-compliant work can be identified, the faster it can be corrected. Occasionally, it is beneficial to the project or project schedule to determine a work-around for some minor issue of non-compliance. However, when the contractor regularly produces non-compliant work, the other team members should require correction in order for the design intent and/or code requirements to be met.
Closely guarding the items previously discussed will help in avoiding many of the potential payment issues with the general contractor. The general contractor will typically submit a payment request each month. They should not request or be paid for more than the value of the work performed at the date of the payment request. Prior to the first payment request, the general contractor should have to submit a Schedule of Values. This is a form that identifies all identifiable categories of materials and labor that will be utilized for construction. The payment application can be evaluated each month against the Schedule of Values in order to ensure that overpayment is not occurring.
Overpayment can lead to several problems. If problems arise regarding the contractor’s performance, prior overpayment can weaken the project owner’s position in making sure the contractor remediates the performance issues. If the contractor happens to go out of business during construction, prior overpayment to him will decrease the funds available for hiring another contractor. If the contractor is overpaid for items assigned to his material suppliers or subcontractors, he may be tempted to utilize those funds on other projects, which may hinder his ability to pay his subcontractors when they are actually due the money. This points to another payment issue, non-payment of the general contractor’s subcontractors and material suppliers.
Non-payment of the subcontractors and material suppliers by the general contractor happens far too often, and for a variety of reasons. Whatever the reason, it will almost always cause problems for the project and the project owner. The project owner may began receiving legal notices, or getting phone calls from the subcontractors. The subs may begin filing liens against the project, and may cease performing critical work until they are paid. Before the general contractor receives final payment on the project, they should always be required to provide signed lien waivers from all subcontractors and material suppliers. If during the course of construction the project owner begins to learn of non-payment issues to the subs, then they can consider requiring partial lien waivers from the subs with each month’s payment request.
It is usually necessary, and always wise to require that the general contractor provide a material and labor Performance Bond for the project. This brings a third party known as a Surety Agent into the project as an insurance factor to assure performance of the general contractor. If the contractor defaults on the project, the Surety Agent is required to complete the contracted project. If the contractor fails to pay the subcontractors or material suppliers, the Surety Agent takes on that responsibility.
If significant performance or payment issues arise, it is often necessary for an agent of the project owner to contact the Surety Agent in order to solicit their involvement. The Surety has a vested interest in making sure that the general contractor performs adequately. Otherwise, the Surety will have to spend their funds to satisfy the requirements of the construction contract. Since the General Contractor’s personal property or holdings is often the collateral for the Performance Bond, the Surety tends to have significant influence over the contractor.
One would think that after months of construction, project completion would be a fairly straightforward process. Just let the contractor finish, hand over the keys, then the project owner moves in, and all is finished. Right? It can be more complicated than that. There are many processes that can be encountered from the time that construction is nearing completion until well after facility occupancy. It is helpful to understand some of these items, how to benefit from them and how to avoid the problematic issues.
Temporary Certificate of Occupancy/Certificate of Occupancy: Before the project owner can legally occupy the facility, the Authority Having Jurisdiction (AHJ), or in this instance, the building inspector is required to issue a Certificate of Occupancy (CO) which indicates that to the best of their knowledge, the facility has been built to meet the building code and is safe for occupancy. Many jurisdictions offer a Temporary Certificate of Occupancy (TCO) which may allow limited occupancy. Sometimes a TCO will only allow utilities to get started and furnishings/equipment to be installed. Occasionally, the TCO will allow the owner to move into the building with the agreement that a few insignificant items will still be completed.
Substantial Completion: By definition, it is “the date at which the construction has reached the point that the facility or project can be used for its intended purpose.” This official designation is important for several reasons. If liquidated damages (penalties to the General Contractor for being late) are part of the construction contract, Substantial Completion (SC) is the date when those damages cease to accrue. Typically, it is the architect who determines this date. Please note that the definition does not say “the date at which the project owner begins using the facility.” It is most common for SC to be reached prior to the projects owner’s occupancy. But sometimes the owner can began gaining limited access to the facility prior to it achieving SC, in order to self-perform activities such as furniture or IT/communications installation.
An important point to make is regarding the relationship of the Certificate of Occupancy and Substantial Completion. While the facility can never be deemed Substantially Complete without a CO, the CO does not mean the facility is Substantially Complete. Remember that the CO only shows that the building official believes the facility to be safe for occupancy. There can still be unfinished items that keep the facility from being “used for its intended purpose.” Examples of this in a fire station could be apparatus room floors that cannot yet be parked on, or bunk rooms and shower rooms that are not completed.
Warranty: Most construction contracts require that the general contractor warranties all material and labor provided for a designated period of time, typically one year. Several items in the project should carry a much longer warranty, such as the roof and HVAC system. But everything in the project should be covered by the general warranty. Only normal wear and user abuse is excluded from the warranty. All warranties should be documented in writing and provided to the project owner prior to the project completion. After the project owner occupies the facility, but before the end of the warranty period, a warranty inspection of the entire facility should be performed in order to identify all items that require attention by the contractor.
The planning and construction of a building project is not something that most people have overwhelming experience. The typical project owner cannot be expected to know all the aspects of protecting their interests during construction. Utilizing a qualified design professional during this time will help guard against problems that can arise from these and many other construction pitfalls.