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.

Critical Components in General Conditions  -  Definitions

Originally posted in 2017, https://www.projectmanagement.com/blog-post/48070/Part-12-----Do-You-Know-the-Entire-Contract, Parts 1 -12 were tailored for Project Managers to know the various parts of a contract between a Buyer and Seller.    The information could be applied to contracts for purchased materials and furnished products.    At the time, the articles were focused on topics that were essential for Project Managers to contribute and take a lead role in developing the Contract, and to be best prepared for the post-award execution.     The previous articles covered:

1. Information For Bidders (IFB) – Due Dates
2. IFB – Company Qualifications
3. IFB – Key Personnel
4. iFB – Bid Requirements
5. General Conditions (GC) – Buyer Contacts
6. GC – Performance Schedule
7. GC – Progress and Milestones Payments
8. GC – Liquidated Damages
9. Specifications – Division 1
10. Specifications – Division 1
11. Special Conditions/Supplemental Terms and Conditions – Part A
12. Special Conditions/Supplemental Terms and Conditions – Part B

The Contract is the baseline for Buyers and Sellers to define, execute, manage, and closeout the work as part of a project.   No matter how much effort and time the Buyer uses to create the Contract, it will never be perfect and there will be times when the Buyer and Seller will have questions and uncover conflicts or ambiguity that will need to be resolved fairly.    As a result, the Contract normally includes a section in the General Conditions for Interpretation.   Among other items, this requirement indicates that when a conflict is discovered the more stringent shall apply, and as needed, the Seller shall notify the Buyer in writing of the specifics within a fixed period of days from when the Seller becomes aware of the conflict.

When clarity is required on contract requirements, there are several options available for bidders and   Sellers with the Buyer.

Pre-Bid/Proposal

During the bid/proposal period, bidders are required to present to the Buyer any questions or requests for clarification on the Contract requirements.   This includes identifying conflicts in the Contract Documents, which normally defer to the more stringent requirement. 

Following receipt of bidders’ questions, the Buyer will provide an answer and issue an Addendum to the Contract.   The Addendum becomes part of the Contract and they are distributed to all bidders registered for picking up proposal packages.  

Post-Contract Award

After the Contract is awarded to the Seller, all questions on conflicts in the requirements or on vague requirements will follow the Request For Information (RFI) process.  The Buyer’s RFI process will be presented to the Seller as part of several topics on administration and execution at the Contract Kick-Off Meeting.  

The RFI process follows a Buyer’s specific format and content for asking questions and requesting clarifications.   The duration for response will be established by the Buyer unless specific due date are identified by the Seller in the RFI.  

An often overlooked and under-developed is the General Conditions section for Definition.   This is usually ignored because the presumption is, if its not in the Definitions is because the details are provide in detail in other sections of the Contract.   However, this may not always be the situation.     

Critical Components in General Conditions  -  Definitions

The first action when questions on requirements arise with the Contract is for Buyer and Seller to review the entire Contract including the Definitions.   While this may not resolve the question, it may eliminate an unnecessary RFI. 

The Buyer’s response to the Seller’s RFIs become part of the Contract and they need to be managed, and as determined by the Buyer may result in changes to the Contract documents.   The Seller may also follow within notice of potential change if the Buyer’s RFI response can be substantiated as extra work not originally mutually understood at award of the Contract.

Some definitions are not in the Contract because they are assumed normal practice for executing contracts in a particular industry.  As noted in Part 6, the typical contract milestones are Notice to Proceed, Substantial Completion and Contract Completion.    For construction contracts, particularly in rail transit projects, the may be additional milestones and definitions needed to support the Buyer’s desired execution of the work.   As a result, the following definitions and milestones should be considered:

• Punchlist:    A list of minor touchups and repairs that do not restrict the Buyer’s use of work for its intended purpose.    The work on the list shall not include base scope not yet installed unless otherwise agreed upon by Buyer and Seller. 
• Operational Use:   Prior to Substantial Completion or Construction Completion, the Buyer’s critical business determines the need for use of a portion of the work.   
• Final Acceptance:   This is the condition when the Seller provides all deliverables regarding the work to achieve Final Acceptance such as as-built drawings, spare parts, O&M Manuals, Training, Software, Warranty, and Asset Management Construction Completion, and the Buyer acknowledges Acceptance, and takes responsibility for future operation and maintenance.
• Contract Construction Completion:  This is the contract level condition when the all construction is completed, including punchlist, certifications and demobilization, is completed and verified by Buyer’s final inspection and sign-off, and the Seller is able to demobilize personnel and equipment and no longer requires access to the work site from the Buyer.    The only remaining contract work is the administration of the closeout processes and documentation to achieve Contract Completion.
• Intermediate Construction Completion:    For contract scope that can be separated without interdependence with other scope, all intermediate work scope, including punchlist, certifications and demobilization, is completed and verified by Buyer’s final inspection and sign-off, and the Seller is able to demobilize personnel and equipment and no longer requires access to the intermediate scope work site from the Buyer.      
• Contract Substantial Completion:  This is the contract level condition when the work is completed by the Seller for use by the Buyer as intended.   The only remaining construction is the punchlist work. 
• Intermediate Substantial Completion:   For contract scope that can be separated without interdependence with other scope, the work is completed by the Seller to a condition the intermediate scope is suitable for use by the Buyer as intended. 
• Final Completion/Closeout:     This is the contract level condition when the all contractual, legal and administrative activities and deliverables are provided by the Seller and acknowledged by the Buyer, including the reconciliation of changes, payments and claims; release of liens and other contractual notices are completed; and the Buyer releases retainage withheld on payments.             
• Intermediate Final  Completion:   For contract scope that can be separated without interdependence with other scope, this is the condition the Seller substantiates reconciliation of changes, payments and claims; release of liens and other contractual notices for the intermediate scope are completed; and the Buyer releases retainage withheld on payments equated to work. 
• Delay:  This is a Seller’s formal Notice to Buyer presenting that a condition of the work, including unforeseen site conditions, limited work hours, lack of prescribed support from Buyer or adjustments in pre-award means and methods approved by the Buyer, has changed the Seller’s originals plans, and as a result, the Seller’s ability to achieve the original schedule milestones are impacted.
• Excusable Delay:  This a Buyer’s substantiation of a Seller’s Notice, regarding a delay that impacts original schedule milestones, and determination the Seller demonstrated reasonable and proactive attempts to mitigate the impacts, and it results in a contract modification to adjust the schedule milestones.
• Concurrent Delay:  This is a Buyer’s determination that the Seller’s Notice of delay is parallel to other excusable delays presented by the Seller and already granted by the Buyer during the same period.

TIP:     Definitions apply to the entire contract.   The content for terms and phrases in Definitions should not be repeated in other parts of the Contract.   This will avoid creating conflicts from duplicate but differing language.

TIP:    Definitions are the primary source for information when there is ambiguity in other sections of the Contract.    

Critical Components in Special Conditions/Supplemental Terms and Conditions  -  Part B

In most contracts, the Contract Terms and Conditions may be amplified using sections for Special Conditions (SC) or Supplemental  Terms and Conditions (STC).

This is the 12th 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 Conditions/Terms and Conditions (GCs) and the Technical Requirements [Specifications and Drawings.] 

In the rail transit domain, there may be unique requirements that are created by work conditions, from implementation of alternative delivery methods, for multiple milestones with liquidated damages and for incentives to beat performance milestones.   By exception, these requirements are expressed in SC and STC.

INSURANCE :   Typically, insurance requirements cover General Liability, Workmen’s Compensation, automotive, and professional liability.  The scope and insured amounts are established by the Buyer’s legal and risk management groups.   In a railroad environment, the requirements are supplemented to include:

Railroad Protective:   This coverage applies to a contract work zone that requires the contractor to work under hazards such as moving passenger trains and on-track vehicles, high voltage third rail and overhead catenary systems.

Environmental:   This coverage applies to a contract work zone where there is known materials and risks of hazardous materials, such as contaminated soil, asbestos containing materials and cables, lead in paint and cable insulation, and hazardous materials in soils such as PCBs and mercury.

WARRANTY:   Generally, the standard contract form specifies the requirements for warranty of the products, including the period based on a defined date typically a contract milestones, such as Substantial Completion.    However depending on the complexity of systems, first time applications of technology or unique execution means and methods in an operations environment, trade standard warranty requirements may not be adequate.    In these cases, Buyer’s will supplement requirements with processes and metrics.

The SC and STC Warranty requirements such as:

• Seller’s time to respond to Buyer’s request
• Buyer’s right to perform repairs
• Seller’s time to complete repairs after Buyer’s request
• Seller’s inventory of spare parts
• Management of manufacturer’s warranties

TIP:    Warranty commercial requirements in the SC/STC should be coordinated with requirements that are identified in technical specifications.

MATERIALS PROVIDED BY BUYER:    Division of work on contract uniformly specify the contractor responsibilities for labor, materials, equipment and supervisory services to complete the work.   In unusual circumstances, the contract requirements stipulate the Buyer provides the Seller with materials for installation as part of the contract scope.    As a result, the contract will incorporate technical information in the Div 1 specifications, and commercial conditions for transfer of materials between Buyer and Seller and the responsibilities for accepting and storing materials for installation when required.   This may include warehousing requirements, bonding, insurance and processes for accepting materials.  

TIP:  Ensure the project risk management plan and the contract management plan includes the required resources and processes for executing and managing the work under this project requirement.

TIP:   Ensure a cost benefit justification is documented to support the decision for the division of work on the contract.

Critical Components in Special Conditions/Supplemental Terms and Conditions  -  Part A

In most contracts, the Contract Terms and Conditions may be amplified using sections for Special Conditions (SC) or Supplemental  Terms and Conditions (STC).

This is the 11th 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 Conditions/Terms and Conditions (GCs) and the Technical Requirements [Specifications and Drawings.] 

In the rail transit domain, there may be unique requirements that are created by work conditions, from implementation of alternative delivery methods, for multiple milestones with liquidated damages and for incentives to beat performance milestones.   By exception, these requirements are expressed in SC and STC.

LIQUIDATED DAMAGES (LDs):    As discussed in Part 8 of this series, most contracts with liquidated damages are based solely on a performance milestone for substantial completion.    However, the Buyer can incorporate more milestones and different LD amounts depending on the contract delivery method and interdependencies with predecessor or successor contracts.    Contracts where these requirements may be applicable include design-build construction contracts, design-build system contracts, and bid-build construction contracts with Buyer furnished materials.    These contracts may incorporate milestones for delivery of major equipment, completion of design submittals, completion of construction submittals, and completion of construction corresponding to access constraints and work restrictions. 

INCENTIVES:   Incentive requirements are the exception to 99% of contracts.  For Buyer’s with a defined benefit for early completion of milestones, the opportunity to utilize the contract provision may off-set the premium cost for accelerated work.  In these cases, the contract may incorporate incentives for Seller payments tied to performance schedule milestones.  

Incentives are intended to encourage contractor creativity to accelerate completion of milestones while achieving the form, fit and function of products.     Similar to decisions on LDs, Buyer incorporation of incentives needs to be carefully considered.   Schedule benefits should be tabulated and quantified in the Buyer’s business case that justifies the incentives in a contract.  

While LDs reduce a contract amount for delays, incentives can increase the contract amount for completion of milestones ahead of the contracted dates.   As a result the Buyer’s project finances need to ear-marked funding to cover the liability for Seller’s success.   

The contract language is likely to be more extensive and include specific criteria for the Buyer confirming entitlement for the Seller achieving early completion of defined milestones.    The contract will also amplify the claims, remedy and resolution requirements regarding variances between Buyer and Seller interpretation of entitlement.

TIP:   LDs and Incentives should be carefully balanced with the administrative effort to monitor, manage, document and enforce.   

TIP:   Contract language should define the coordination between LD and incentive requirements to ensure Buyer and Seller clearly understand enforcement, conflict resolution and remedies.    

TIP:    The Buyer’s procurement/contractor acquisition should select either the LD or Incentive requirements to avoid conflicts in focus by the contractor during contract execution.   LDs and Incentives in a single contract will create distractions as the contractor makes internal decisions to capitalize on milestones tied to incentives while accepting delays and cost liabilities on milestones tied to LDs.   

TIP:   Incentive estimate should be vetted thoroughly to ensure the document can be defended by the Buyer in response to a claim from the Seller or subsequent litigation action by the Seller.