Project Management View from Rail Transit Programs and Projects

Projects and imbedded contracts are executed by companies to maintain and/or expand the assets needed to operate, sustain and expand in accordance with business plans.  Transitioning project products to operation of the business requires long term planning and execution equal to management of projects, which are considered temporary. 

Most Contract Forms do not formally describe the transition process from Seller/Contractor to Buyer/Owner, including the periodic inspection and maintenance of the contract product. This process is usually left to the Buyer and Seller project teams to establish a process within the contract requirements.  The transition needs to be managed by the project team to assure the Owner’s preparation for operation of the contract product.  

In general, Sellers remain responsible for protecting, maintaining and repairing contract products until the Buyer takes possession and uses a portion or all portions of the product. Under the traditional contract form, the transition from Seller to Owner occurs at a point in the contract when the product meets the contract requirements and is suitable for use with only minor work and punchlist to be completed.  Some custom contracts may specify that the Seller remains entirely responsible for the product, even the portions used by the Owner, until completion of all work and acceptance by the Buyer.  

Unless the contract product is totally new to the Owner's business, the operation, maintenance and repair of the contract product is already known by the Owner.  Together with the manufactures' recommended list of spare parts and consumables, the Owner will review its experiential data on the needed parts and life cycles to best maintain its business objectives. This will enable the Owner to establish the procurement information, inventory levels, and purchase quantities to assure availability of parts to support operations of the business.   

For contract products that are new to the Owner’s business, the Buyer will need to have the Seller provide comprehensive training manuals and conduct classroom and field training.  The Buyer will arrange training with the Owner based on availability of persons that will be responsible for operation, maintenance and repair of the products. Additionally, the Owner will integrate the training into their in-house training for new hire employees. Many contracts may require that the Buyer/Seller video tape the training sessions and submit the videos as part of deliverables to satisfy final contract completion.  

Spare parts are not normally part of contract deliverables. However for new products, the Owner will not have an inventory of parts, and the parts may long purchase lead times. As a result, Buyer specifications for new products may require the Seller to provide spare parts as a deliverable to support the Owner use of the product until internal inventory can be acquired under operations.

Contracts with warranty provisions specify the start and period of the warranty provided by the Seller.  Warranty provided under the contract typically becomes effective after the Owner begins using the product for business operation.  In most cases the Seller’s and manufacturers’ warranty will continue for a period after the final completion and closeout of the contract by the Buyer. This means the Owner will need to manage the remaining period of warranty after the contract is closed with the Seller.  As a result, before the contract is closed, the Buyer will need to obtain assurance/security from the Seller that persons and resources will be available and responsible through the end of the warranty period as specified in the contract. The Owner will need to review and implement the process and documents in the Seller’s Warranty Plan, which will include statement of warranty, contacts, notices and other documents to support the process.  

Contract Forms can vary and may be customized by the Buyer based on local preference, new initiatives, and the type and method of contract delivery, such as Design-Bid-Build and Design-Build. As a result, it will be up to the Buyer's project team to make adjustments and create a project management plan that details the transition process to the Owner.  

In order to avoid the shock of transitioning at the end of the contract/project, Buyers need to engage and influence Owner's to:

 - Review all shop drawings and material submittals, and deliverables for O&M Manuals and As-Built Drawing Packages.  This assures the Owner has all the information needed to plan for the business to operate, maintain and repair of the product.  

 - Participate in start-up and testing. This assures that the Owner witnesses the product operation and verifies the product meets the contract and that the product is working as expected.

 - Attend contractor/manufacturer training on systems. This assures the Owner's designated personnel are ready to use the product and are prepared for the maintenance and repair of the product.  

 - Evaluate contractor/manufacturer warranty, spare parts and consumable items for operations.  This assures the Owner's readies internal processes for asset management, procurement, and staffing levels.  

TIP: Buyer must implement continuous outreach with the Owner to convey confidence that the product meets requirements, and that the product is compatible with business operations.  

TIP: Buyer must assure Owner's assigned personnel remain consistent or that a qualified designee is available throughout the contract, including during the processes for submittal reviews, progress inspections, final inspections for acceptance, and warranty period.  

TIP: Owner must recognize the ultimate responsibility for meeting deadlines, handling aggressive workloads to meet the contract schedule milestones, and for completing due diligence in monitoring the Seller's work.

TIP: If the project/contract is part of an expansion of the business, the Owner will execute parallel plans for hiring and qualifying employees, adjusting labor agreements and service contracts and for purchasing resources – material, tools, equipment, and vehicles, needed for the project products. 

Related Article:

What are the Requirements for Seller Turnover of Contract Products to the Buyer?

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Projects are temporary endeavors, and as a result, Buyer's hire consultants and contractors (aka Sellers) to execute the work.   Intuitively, Buyer's should be the Owner, Operator and Maintainer (Owner.)  But in cases where the work is extremely large and complex, involves government agencies or it requires special expertise, the Buyer may not be the Owner.    

It is becoming more common in the rail transit industry for major capital projects to be managed by Buyers that are not the Owner.  This requires a cultural shift between the Owner’s experience and expertise to the Buyer.  As a result, the Owner is giving up control to the Buyer with the expectation the Buyer understands the Owner means, methods and business functions and products.   Despite the Buyer’s experience in delivering projects, the Owner needs to perform diligent oversight and to assure participation by key staff, who will inherit the project deliverables for operation and maintenance.   

Usually, non-Owner Buyers deliver projects using the most innovation and leading-edge tools, techniques and methods for executing the work.  Some Buyers can over-emphasize performance metrics beyond scope, schedule and budget, and branding management success in numerous charts, graphs, road maps and press releases.  This will complicate the Project Management Plan (PMP), and it requires that the Buyer's management team be ready for the extra effort to create and maintain deliverables, and to assure the Owner remains updated and engaged throughout the work.  

To bridge the gap, the Buyer will need to assure staffing levels, processes, documentation, and access to project information are applied to engage the Owner.  This article discusses some of the critical interfaces between the Buyer and the Owner with an emphasis on Owner’s in the rail transit industry.

Rail transit companies are highly regulated by government and the organizations are highly regimented due to labor-union contracts.  But they also tend to be a close net group of employees who are proud of their work in providing transport services to customers who rely on it for their own livelihoods.  Many larger companies have dedicated staff and management assets that enable self-management of capital projects involving design and construction of facilities, fixed systems and rolling stock necessary for sustaining and expanding the business.

Buyer's Alignment with the Owner's Operations and Best Practices

Owner's often recognize limitations of their organization to handle projects for improving or expanding operations based on established business plans.  As a result, expertise is contracted to supplement the Owner's planning, initiating, execution and monitoring and closing projects.  However, the Buyer needs to review the Owner's past contracting and project management experience with projects.   

The Buyer's objective is to avoid the negative past experience and to repeat and amplify the positive past experience and practices.  To accomplish this, the Buyer should acknowledge the Owner’s best practices, and explain to the Owner how and what will be integrated into the project. 

For rail transit companies, getting buy-in requires the Buyer clearly tailoring the project management plan to the Owner’s organizational structure, business operations and existing procedures and standards. 

Assignment of Dedicated Personnel from Owner

Most project teams have dedicated personnel assigned to the project throughout the life cycle.  While far easier on projects managed by the Owner, contracts and projects managed by a different Buyer creates a gap in the strategy, tactics, and means and methods of management.   While the Buyer may have a robust Project Management Plan (PMP), the interface with the Owner needs a special section.  As a result, the Owner will need to dedicate its most experienced staff that are familiar with the management of projects and with the authority to make decisions throughout design, construction, commissioning and closeout. 

The Owner’s project participants should have a broad breath of project experience and depth of knowledge in requirements and management of capital projects. 

For rail transit companies, this includes participants representing track, power, signal and communications, facilities and stations, and rolling assets, such as passenger cars and operational equipment and vehicles.

Owner Access to PM and Document Control System

Project management has been made more effective from the use of tools that emulate the proven paper processes used decades ago.   While the tools reduced the staff of expeditors in the project controls group, it was replaced by all participants having access and training to use the tools.  Owner participants need access the project scope, Seller's contract, and all of the Seller's submittals and deliverables, such as shop drawings, materials and product data, system O&Ms, schedules and progress reports. This also means assuring compatibility of Buyer’s project management hardware and software with pre-existing operating systems used by Owner’s employees throughout the organization to perform a broad range of integrated business functions.

If the tools have license restrictions, the Buyer's project management staffing will need to take the effort to convert files and provide links and pdf documentation to the Owner's participants.  As a result, a simple make-buy analysis may show the price of the license(s) may be far less than the extra administrative handling of the documentation separate from the project tools. 

For rail transit companies, this involves integrating the project’s management system with the Owner’s computerized systems, which are used across the business assets for operation and maintenance of the project work.

Giving Owner's Personnel Authority for Decisions

The Buyer's PMP will describe the roles, responsibilities and authority of the project participants, including the Owner, for making decisions. The PMP should define the process and criteria for documenting decisions as well as leadership’s mitigation of competing interests of managerial silos/departments.  As a result, the Buyer's PMP will need to be aligned with the Owner's existing processes and documents used for managing capital projects in an operations-based organization. 

Owner’s personnel will need to commit to make decisions by balancing the Buyer’s project requirements and the Seller’s contract requirements following a prescribed order of precedence that avoid risks to business operations. 

For rail transit companies, this includes decisions on scope and operational interfaces for safety/security, right-of-way engineering, and rolling stock.  

Control of the Project Environment

Buyer’s contract(s) with Sellers specifies conditions for performing work on the Owner’s property.  These requirements are normally not negotiable.   However, Owners recognizes the need to be flexible in accomplishing Seller’s work.  As a result, the Buyer’s stringent control of the Seller’s work needs to be balanced with the Owner’s ability to adjust operations to accommodate the Seller’s plans.

This means the Buyer and Owner will agree on compromises and/or accommodations to the Seller that are highly confident in allowing the work to be accomplished to meet the goals and milestones committed to the public by the Buyer. 

For rail transit companies, this also includes outreach to communities and political influencers with interests in and/or funding for improvements adjacent to the right of way and stations, including green space and gardens, residential housing and commercial development. 

Buyer Leadership Response to Seller’s and Owner’s Concerns

The Project Management Plan is an essential framework for executing and monitoring performance on the project.   Normally, a Buyer is the Owner aligned with plans for managing the Seller’s execution of the contract work.  When this arrangement involves expertise to supplement the Owner, the Buyer needs to gain the confidence of the Owner by demonstrating its understanding of the Owner’s business.  All too often, the Buyer trumpets its expertise over the Owner’s experience, knowledge and capability for managing projects.

This is a cultural dilemma between Buyers and Owners that is compounded by differing management tactics and strategies, social and economic objectives, funding partners, statutory requirements, and local government and community stakeholders.   The PMP must include an oversight board to address managerial differences, dispute resolution and decision making.

For rail transit companies, this should include leadership from the Owner and Buyer with select representation from funding partners, local government, and as needed, subject matter experts.   

TIP:  Buyer’s need to acknowledge, review and integrate the Owner’s existing project management and contracting experience and best practices into the project’s execution plans.    

TIP:  Buyer’s with expertise in other industries provides cross pollination opportunities for managing projects.  But what works in one industry [real estate development] may not work in other industries [government funded railroad agencies.] 

TIP:  Buyer’s need to be knowledgeable with the history of the Owner’s industry and the effort needed for compliance with government statutory requirements.

TIP:  Government agencies routinely review Owner’s funding requests and assess their past experience and performance on projects with priority given for ability to fully expend grants amounts.  Under-spending grant amounts are not favorable since the remaining amounts means the government needs to find a grantee to use it or lose it within the funding period.  Over-spending grant amounts is less unfavorable, but it means the Owner needs to self-help to make up the shortfall in funding.  

Consumers are familiar with warranty through the experience of purchasing an appliance or electronic product.   Upon opening the box, consumers encounter documentation for safety, start up and use.  The documentation includes mail and on-line registration as well as the terms and conditions for warranty on the purchased item.  It is also the point for purchasing an extended warranty, which will supplement the manufacturer’s coverage and extended the warranty period and coverage for problems requiring repair from normal use.  Similarly, the Sellers and Buyers involved in a contract follow a similar process albeit for multiple items.

Warranty is typically defined in the General Provisions (PGs), and depending on the source of project funds, the period can range from 12 months from the Seller to longer periods as specified by the Buyer and as offered by manufacturers.  The start of the warranty period can also vary as described in the GPs.  The warranty period covers labor and materials required to repair breakdowns in the work and defects from improper or poor workmanship. 

Most standard contract Forms, indicate the warranty period starts at the completion of work satisfying the milestone for Substantial Completion, which is a point in the Seller’s progress when the work is ready for its intended use.   Other hybrid contracts, may specify the period starts at acceptance by the Buyer or at operational use by the Buyer of portions or of all work in total.

• EXAMPLE:   If the manufacturer’s warranty is 90 days from delivery or installation, the Seller is obligated to provide warranty labor and materials for the period described in the Contract, IE 12 months from Substantial Completion.  Depending on the complexity of the component or system, the Seller may need to consider extended warranty agreements with manufacturers for the balance of the period.
• EXAMPLE:  If the manufacturer’s warranty is 5 years from delivery or installation, the Seller is obligated to provide the warranty labor and materials for the period described in the Contract, IE 12 months from Substantial Completion.  After the 12 month period the Buyer assumes responsibility for managing the remaining period directly with the individual manufacturers.

Whether starting at Substantial Completion or Acceptance, the start and end of the Seller’s warranty can be straightforward.  However, if the Buyer takes possession of portions of the work for its own benefit ahead of the contract milestone, it creates the need for the Seller and Buyer to create a tracking mechanism and performance metrics for warranty, including the notification from Seller to Buyer on periods that will expire and prompting the Buyer to take over management of warranties beyond the contract period. 

Depending on the relation of the work to Buyer’s business, warranty requirements may include Seller’s time to response, Seller’s time to repair, and the option for Buyer to implement repairs and back-charge the Seller.  These requirements are normally encountered on systems that are critical to the Buyer’s operation where restoration is essential for customers, surrounding communities, and other businesses that rely on the Buyer’s operation to sustain the local economy. 

• MYTH:   During the warranty period, the Seller is responsible for maintenance, such as cleaning, changing filters and fluids, replacing batteries, and scheduling service for recalls and tune-ups. 
• FACT:   A Seller’s warranty does not relieve the Buyer from operating, inspecting and maintaining the work.   If the work is not maintained, misused or modified by the Buyer, the Seller’s and manufacturer warranties will be voided and the cost of repairs will be borne by the Buyer. 

This illustrates the need for the Seller to provide the Buyer with a Maintenance/Warranty Management Plan, which contains the process and documentation for managing warranty claims and for assuring performance through the warranty period.  

Unless specifically identified in the Seller’s contract bid, warranty has no value until is used by the Buyer to make repairs within the covered period.  Depending on the contract milestones, the end of the covered period could occur after the Contract Completion.   At that time, the Seller is no longer maintaining a project office to work with the Buyer on scheduling and completing residual work associated with warranty and/or product recalls.   And the contacts for the Contract are no longer assigned responsibility for managing the warranty.

While materials, products and systems used today are highly reliable and the calculated failure rates are extremely low, the potential of failure exists, and it remains the project teams responsibility to ensure the warranty is managed past the contract completion milestone.   The warranty terms and period offered by most manufacturer’s is a business decision that indicates the confidence level that failure of materials or problems from workmanship will not occur during the period of warranty.   Otherwise, failures that require repair will erode profits on booked revenue.   

During the transition to operational use of the Seller’s work, the Buyer will be updating its operating plans and internal controls to create material management and work flows for longer term maintenance and repair needs.  For similar items already used in the Buyer’s operation, this effort may be minor.   If the Seller’s work contains materials, products or systems not currently used by the Buyer, the effort may involve creating or updating staffing plans, purchasing plans and inspection schedules. 

To aid both Seller and Buyer, manufactures’ contacts, product information, and warranty information is contained in the Operation and Maintenance Manuals, which also includes a list of recommended spare parts, and the specific installation locations shown in the As-Built Drawings.   And in unusual cases, the Buyer may specific physical parts to be delivered by the Seller as part of the contract scope.  This further assures the Buyer’s readiness for initial maintenance and repairs when the work is accepted and the Buyer assumes responsibility for the work and management of warranty. 

TIP:   As part of most Project/Contract Management Plans, the Buyer will assign technical experts to participate in the review of shop drawings, material submittals, and startup and testing procedures for the work by the Seller.   The Buyer’s experts are essential for assuring the Seller’s work meets the requirements throughout the entire lifecycle from design to contract completion to the end of warranty.   This applies to various delivery methods including design-bid-build, design-build, or design-build-operate-maintain.

TIP:   Many Buyers have operating departments or contract services for maintenance and repair of fixed assets and rolling assets.   The fixed assets may include elevators, escalators, HVAC, fire alarm and suppression, computers, communications and security, and shop equipment.  The rolling assets may include roadway vehicles and trucks, shop vehicles, emergency generators, and other types on-road and off-road vehicles.  The Buyer needs to identify a point of contact and to allocate staff to manage the warranty period and the materials needed for long term inspection, maintenance and repair of the assets. 

TIP:   Particularly on mega-project contracts, Buyer requirements for Seller price proposals should include a specific item for the cost allocation of warranty meeting the requirements in the GPs.   This will establish a value for use at a later stage in the contract for determining performance securities and/or for negotiating costs for extending manufacturers’ warranties based on actual progress of the Seller work.   Any differential will establish an equitable balance of warranty costs between Buyer and Seller. 

TIP:  Some US government funding sources may limit the Buyer’s warranty period requirement from the Seller to a maximum of 12 months from the specified construction milestone. 

By standard contract Forms, punchlist is associated with the milestone for Substantial Completion or when the product of the contract is suitable for its intended use with only minor work remaining or as otherwise stated in the contract.  In conjunction with the Buyer acknowledging the Seller achieved Substantial Completion, a Buyer inspection and the creation of a mutually agreed upon list of remaining work will be established.  So what happens with the punchlist?

The punchlist becomes the baseline for the remaining work that the Seller is obligated to finish as part of the contract.   Under usual circumstances, the Seller controls the area where the work is conducted.    As a result, the Seller can complete punchlist with means and methods of choice and the timeframe to Construction Completion.   However, if the Buyer decides to use portions of the work, the Seller's conditions for completing the remaining work need to be coordinated to avoid inconvenience to Buyer's employees and customers.       

At the time of contract award the date for completing the punchlist is contained in the performance milestones, which can normally be found in the General Provisions.  And the duration and date is commonly cited in the milestones for Construction Completion and Contract Completion. 

At Construction Completion all construction, including all punchlist work, site restoration and demobilization, is completed by the Seller and confirmed by the Buyer.  While the durations between Substantial Completion and Construction Completion can vary by the Contract scope, it will be what the Buyer and Seller consider reasonable, executable and achievable. 

Once the punchlist is established, the Seller will schedule the manpower, equipment and materials needed to complete the work for construction completion.  While it is anticipated to be minor work, scheduling activities to do the work depends on the scope of the punchlist item. 

• Example: Repairing a crack in a wall or repainting the ceiling or installing covers on sprinkler heads may require clear floor space and room for ladders and scaffolding to reach the work area.  This may mean the Buyer needs to delay plans for using the work.   

Scheduling also depends on the Buyer's use of the completed work.   If the work is not in-use by the Buyer, the Seller's access will be guided by the hours allowed by the contract.   However if the Buyer is using the work prior to Construction Completion, the hours may be restricted as dictated in conditions to the Seller for achieving Substantial Completion. 

• Example:  Repairing and retesting a fire suppression system may require the area remain clear and accessible exclusively to the Seller.   This means the Buyer needs to stop use of the work and restrict employee and customer access until the punchlist work is completed.  
• Example:  Repairing a system on a transit passenger car may require the car be removed from service and be stored at an accessible location for the Seller to complete the work.  This may mean the Seller needs to arrange for the work to be done at the time and location determined by the Buyer, such as nights and weekends at a terminal or yard.

However, the Buyer’s full scale use of the work prior to Substantial Completion will present work conditions that were unanticipated at the time of Contract Award.   This may create challenges that affect both parties in meeting milestones and in adjusting access for employees and customers in areas already in use.    As a result, the Buyer and Seller may need to modify the approach to completing the punchlist work.

Similar to quality processes, like those for material review boards, punchlist items and the means and methods used by the Seller to complete the work needs to be evaluated by the Buyer.   The Buyer's evaluation will determine if the Seller completes the punchlist item, if the Buyer will accept As-Is, or if someone else will do the work.  While punchlist items may be considered minor, the work conditions for the Seller, and the Buyer's use of the work may require decisions by both parties to mutually reduce potential impacts to Seller achieving contract dates and the Buyer starting and maintaining operations.   

Punchlist items may need to be classified as:

• By Seller
• By Others/Buyer
• Accept As-Is

Some of the criteria for classifying the punchlist items include:

• Conditions needed by Seller for the work
• Accessibility provided by Buyer for the work
• Flexibility of the Buyer postponing use of the work
• Inconvenience to Buyer’s employees and customers
• Loss of early revenue in the Buyer’s business plan

Punchlist items that are not completed by the Seller will likely require contractual adjustment with the Buyer so funding can be re-assigned for another party to do the work.   This may include balancing the Buyer’s benefit of use with the challenges on the Seller to complete the punchlist.    

TIP:   Realizing the risk some punchlist items may be classified Accept As-Is, the Buyer’s project team and construction manager should ensure the Seller’s remaining work, especially items that could affect the Buyer’s early use of the total work, is completed prior to substantial completion.

TIP:   Buyer should always be aware of the value of remaining work, including punchlist, and ensure the Seller ’s invoice requisitions are reduced so the remaining payment is equal to or larger than the cost breakdown assigned to the remaining work.  This will aid the Buyer to implement contractual adjustments for punchlist work not completed.

TIP:   Once contract progress achieves Substantial Completion, the Seller’s submission of a Detailed Contract Schedule (DCS) usually stops because the remaining work is not considered significant enough to deliver the DCS to the Buyer.  As a result, the Buyer needs to establish an alternate method for the Seller to demonstrate a plan to the Buyer to manage and finish the work through Contract Completion. 

TIP:   While understandable, the Buyer’s construction manager is focused nearly entirely on Seller’s progress and compliance with the contract technical requirements – specification and drawings.  To facilitate work post-substantial completion, the Buyer must ensure that the CM is aware of interdependent requirements contained in General Provisions, Special Conditions, Contract Addenda and other conditions established for award, and that the CM integrates these commercial requirements into management of Seller.   

TIP:   Depending on the scope of the Contract, the Seller’s progress may make segments read for intended use by the Buyer prior to all the work being completed.  As a result, the Buyer and Seller may create a distinct punchlist for each segment, which will aid in the Buyer’s use prior to the Substantial Completion milestone. 

A punchlist is most common in the construction industry.  But it may be an overused term on prime contracts between Buyers and Sellers - when a simple To-Do-List might be more appropriate description for a tool construction managers (CM) use to monitor contractor progress toward achieving contract milestones.  

Punchlist is not normally part of the definitions in the construction contract Form.   As a result, Punchlist means different things to Sellers and Buyers.

Definition

From various sources of expertise, punchlist is described as:

• American Institute of Architects (A201-2017):  @ Substantial Completion – a comprehensive list of items to be completed prior to final payment.
• Design Build Institute of America (535): @ Substantial Completion - (ii) the remaining items of work that have to be completed before final payment.  
• PMI PMBOK Construction: the work items that are identified during a final inspection that need to be completed.
• Construction Coverage (website):  is a document created in the final stages of a construction project to provide a list of items that must be addressed before construction is considered complete and payment is issued.
• Merriam-Webster (dictionary):  a list of usually minor tasks to be completed at the end of a project.

Punchlist is interdependent with the progress of work by the Seller and the milestones specified by the Buyer in the Contract.  The milestones are typically contained in the General Conditions/Provisions (GCs) of a contract document.  Punchlist creation is associated with substantial completion and punchlist completion is associated with construction completion.   

Work Flow

Punchlist work flow:

1. Seller and Buyer's CM confirm to Buyer Project Manager work is substantially completed
2. Buyer's CM/Project Manager coordinates inspections by the Buyer's project team members and other stakeholders and creates a punchlist
3. Buyer's CM submits the punchlist for review and final edits by the project team and stakeholders
4. Buyer's Contracting Officer acknowledges substantial completion to Seller, submits the punchlist for Seller's corrective action by the construction completion date 
5. Seller and Buyer's CM confirm to Buyer's Project Manager all work is completed and achieved construction completion
6. Buyer's CM/Project Manager coordinates final inspections by the Buyer's project team members and other stakeholders to verify all items on the punchlist are completed
7. Buyer's Contracting Officer acknowledges construction completion and instructs Seller to demobilize and perform site restoration by the final completion/contract completion milestone.

Most US standard contract Forms, cite the requirements for substantial completion and construction completion in the General Conditions/Provisions regarding section related to Performance Schedule and Payments.   

Punchlist Content

The content of a punchlist should contain only minor touch-ups and repairs to installed/constructed work that is described by specific in-scope observations and the locations to be corrected for completion.   A punchlist that contains base scope items not yet installed or tested and operational is not acceptable and not suitable for meeting the completion milestone.   Items observed that are not in-scope will be deleted from the punchlist and be addressed by the Buyer through other project processes for changes to work. 

In addition to contract milestones and payments, an acceptable punchlist that the Buyer determines meets the substantial completion requirements is often tied to incentives and liquidated damages.   Meeting substantial completion is also related to other contract requirements. 

Punchlist Interfaces

Interfaces with other contract requirements in the work flow include:  Item 4-After substantial completion, Seller and Buyer can initiate reconciliation of incentives and liquidated damages.  Buyer can suspend consideration of all potential changes, instruct Seller to demobilize and to perform site restoration by the final completion/contract completion milestone, request Seller to submit deliverables such as O&M Manuals, As-Built Drawings Package and Warranties, and if applicable, release performance bonds.   Item 5-After construction completion, Seller and Buyer can initiate the contract closeout.  Item 7-After demobilization, Seller can reduce insurance coverage.

TIP:   A punchlist should only be submitted once by Seller and reviewed by Buyer for completeness an accuracy.  Thereafter, it is locked down.  No items can be addressed.  Items can only be verified as completed and closed.  

TIP:  All items on the punchlist should be addressed and closed by the Sellers within a period that avoids the risk of further damage or new conditions that requires corrective action. 

TIP:    For Buyer’s, including their construction managers, that require in-progress punchlists to assess the contractor’s physical work relative to the construction substantial completion milestone, a more granular definition of punchlist may be needed.  Here are some proposed definitions that can provide guidance to Buyer and Seller as the punchlist changes with the progress of construction.

• In-Progress/Preliminary Punchlist:   List of remaining work and corrections prepared and submitted prior to the milestone for substantial completion, and it may contain items that are part of the base scope but not yet installed and tested.  This Punchlist is submitted as information, and it represents Buyer and Seller  in-progress inspection observations from multiple parties.   This Llist is monitored until substantial completion is achieved by the Seller.   
• Formal Punchlist:  List of remaining work and corrections is mutually prepared by the Buyer, Buyer’s construction manager, and Seller after substantial completion, which represents the work is ready for it intended use, all tests are completed and all work is operational.   This Punchlist is submitted for review and comments by Buyer.   Concurrently, Buyer will schedule a walkthrough inspection by the Buyer and all end user representatives to compile a complete punchlist.  This List with comments resolved will be the official list of remaining work.
• Final Punchlist:  List of items confirmed completed by the Seller and confirmed completed by Buyer or Buyer’s construction manager.  This Punchlist is submitted for Buyer Sign-Off along with a request by Seller  for final walkthrough.   The Buyer arranges for all parties to attend for sign-off that all items on the punchlist.    Sign-off of this Punchlist is the predecessor to Buyer’s acceptance of the Seller’s work, which is an interdependency of criteria for completing the contract closeout.   

TIP:   An observation listed on the punchlist should identify the inspecting agency/inspector name and date, cite the specific location (s) and the drawing/specification/code, and describe the needed correction to meet with the contract requirements, approved shop drawings or other industry standards for the type of work.

TIP:  The punchlist observations should be actionable and the description begin with words such as repair, replace, adjust, touch-up, polish, remove, rebalance and clean.  Items with words such as install, test, paint, fill, energize, backfill and connect may indicate that base scope is not yet completed.