Project Management View from Rail Transit Programs and Projects

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. 

This is the 14th in a series of discussions that is intended to prompt Project Teams to be aware of the entire contract document, including Information For Bidders (IFB), General Provisions/General Conditions/Terms and Conditions (GCs) and the Technical Requirements [Specifications and Drawings.] 

Part 14 of Know the Contract is Contract Completion/Closeout.   Closeout is the successor to all other work performed under the Contract and it is final set of activities between the Buyer and Seller.    While the requirements for Closeout may be scattered throughout the Contract document, the most important are described in the GC’s sections related to Schedule and Payments.   At this phase of the Contract, the Buyer’s Contracting Officer is the primary arbiter for determining that all requirements are met by the Seller and confirmed by the Buyer’s Project Manager.   

Part 6-Schedule Performance and Part 7-Progress & Milestone Payments of this series describe the content in the typical contract Form.   Satisfying these requirements precede completing the Closeout process and documentation, and includes substantiating completion of testing and start-up; training; delivering spare parts; submitting operation & maintenance manuals, software, as-built drawings, asset management data and warranty; and closure of all quality management  processes and deliverables. 

Regardless of the contracting method, such as Design-Bid-Build, Design Build and CM At Risk, the Closeout of the contract is governed by the GCs as well as any Special Conditions and terms negotiated for contract award.   The typical activities and topics include:

• Settling all change orders, requests for extension of time due to Buyer actions,  differing site conditions or claims for extra work and damages
• Reconciling all incentives payments and damage accruals from exceeding or delaying established milestone dates for completion of work
• Confirming receipt of all GC deliverables, including photographs, monthly progress reports and schedules, manpower utilization reports, certified payroll and prevailing wage records,  and prompt payment records.
• Resolving all claims, disputes, legal actions, or pending attorney actions between Buyer and Seller, including all contract issues with Seller’s subcontractors, vendors and suppliers
• Verifying all payments and release of retainage to prime contractor, subcontractors, vendors and suppliers 
• Processing all contract modifications and final contract amount
• Transferring all contract records in paper and digital format

During the Closeout phase, the Buyer may develop Lessons Learned from the Seller’s performance on the Contract.  The Lessons Learned will be utilized by the Buyer to consider changes in requirements as well as management processes and documentation on future Contracts.  Some of the topics from Lessons Learned may include:

• Effectiveness of the contracting delivery method and the Buyer’s and Seller’s organizational structure to support the work
• Realism in Buyer’s duration for contract milestones and effectiveness of incentives and liquidated damages
• Evaluation of Seller’s prime contractors, vendors and suppliers to meet the Buyer’s schedule deadlines
• Buyer’s and Seller’s risk threats and opportunities mitigated and realized during the Contract
• Change orders and claims encountered by Buyer that may be avoided by editing requirements in future Seller’s contracts.

TIP:  The responsible parties for Closeout are the Buyer’s Project Manager with support from the Buyer’s Contracting Officer and the Seller’s Project Manager with support from the Seller’s prime contracting/procurement official.

TIP:  While risking duplication of requirements, create a separate Division 1 specification covering the requirements and deliverables checklist for contract closeout.

TIP:   Most US contract Forms were written based on paper transactions throughout the Contract cycle.  Due to awareness of threats outside normal contract and project processes, security of products, deliverables and documentation is now part of controlling access to sensitive contract records.    As a result, EDMS has replaced paper documents and is used more effectively to segregate, store and restrict distribution of documents that contain sensitive information.      

TIP:  The use of electronic document control system (EDMS) has become a critical part of managing and executing the work at a project and contract level.   As a result, there may be a need to create requirements for content, format, compatibility and the transfer method of the Seller’s EDMS with the Buyer’s hardware, software and the organizational management of records.  

TIP:  Ensure Closeout requirements and terminology are well defined and are consistent with the process and requirements in the GCs.  Clarity of terms is essential for both the Buyer and Seller. 

TIP:  Buyer’s Contracting Officer should provide clear guidance to the Buyer’s Project Manager on the process, timeline and documentation required to satisfy the contract closeout.

Unfortunately for more times than I can count, the term “turnover” [or "handover"] has become commonly used to describe a process for the Seller to transfer contract products to the Buyer.     Unless “turnover’ is defined in the Contract or clarified via Request For Information, the term is subject to arbitrary interpretation by Buyer and Seller.  

In Contracts that are part of my rail transit project experience, “turnover” is not defined but it may be analogous to requirements for Substantial Completion (SC) and to Final Completion (FC).  SC is the earliest date the Seller’s product meets its intended use by the Buyer.   FC is latest date for the Seller meeting all requirements for Buyer’s final acceptance of the Seller’s work.

Substantial Completion is a contractual milestone that consists Buyer acknowledging Seller completion of work minus punchlist (minor repairs and touch ups) and the completed work is suitable for intended use and operation by the Buyer.  Seller’s deliverables for SC includes Buyer’s review and acceptance of reports on all test and inspections, punchlist, closure of permits, issuance of certificate for occupancy/code compliance, completed submittals, and on resolution of Quality - Non Conformance Reports and Observations.  

Final Completion is a contract milestone that consists of Buyer acknowledging Seller completion of all construction and all technical and contractual deliverables.   Technical deliverables include Certificate of Construction Completion, Certificate of Construction Compliance, as-built drawings, O&M Manuals, warranty, training, software, spare parts, asset management.    Contractual deliverables include final change orders, final payment, waiver of liens, confirmation of all payments for vendors and subcontractors, and reports on certified payroll and other reports for use of disadvantages and small businesses. 

While not associated with “turnover”, Construction Completion is a contract milestone that consists of Buyer acknowledging Seller completion of the punchlist.  This also includes directing the Seller to submit its invoice request for final payment on the balance of the 100% EVM in the payment schedule previously approved by the Buyer. 

TIP:    Project participants need to use only terms that are clearly defined in the Contract, and diligently avoid creating ambiguity by introducing terms outside of the Contract.  

TIP:   Contract milestones dates, definitions and processes for Notice by Seller to Buyer on completing the work to meet the milestone are described in Provisions Related to Time.

TIP:   Contract payment definitions, deliverables and processes for Request by Seller to Buyer for payments are described in Provisions Related to Payments.  

TIP:   Requirements for technical deliverables are described in specifications that make up the technical portion of the Contract. 

TIP:   Requirements for deliverables content, format and timeframes for Seller’s submission and Buyer’s review are described in the Division 1 [general] specifications.  

TIP:   The Buyer’s Project Management Plan may be useful in establishing the activities, sequencing and timeframes for coordinating Seller’s delivery of spare parts and software.