By Uwe Putlitz

This is part four in a series of articles by Uwe Putliz. In this article, we look at the definition of completion in regards to a contract, as well as the responsibilities of all parties involved.

DC Studio | Magnific.com

Synopsis

Construction contracts typically come to an end in stages:

  • Beneficial occupation (BO) gives the employer access to a portion of the works before practical completion (PC) has been achieved.
  • Interim completion applies to subcontractors (SC) who must complete their work ahead of practical completion.
  • At practical completion, the works are complete and fit for occupation by the employer except for minor defects before final completion, which can be certified at the end of the latent defects liability period.

Who is involved?

Directly, the employer (who may be property owner or a developer) and the contractor; and in the subcontract agreement, the principal contractor and one or more subcontractor(s).

Indirectly, adjoining neighbouring property owners may be involved, to the extent that they may be inconvenienced during the construction period.

Indirectly, stakeholders as suppliers or tenants seeking early access to the works to install equipment or finishes.

What is the purpose of the contract and/or the construction documents?

A standard-form construction contract (SfCC) regulates in legal terms the relationship between the parties with procedures to follow should either party be in breach of the contract.

The specification(s) and drawing(s) describe the extent of the work to be done at a specified location within an agreed period, in compliance with recognised quality and other standards. This document will define the degree of completion required at stipulated dates and possible consequences if such dates are not met.

  • Beneficial occupation is defined state of completion to be achieved by the PrC of one or more identified “portions” within the works by a period before the due date for practical completion (stated in calendar days) for others to install finishes, services, fixtures and fittings not included in the PrC’s contract sum.
  • Note that a section of the works is defined in JBCC SfCC as “an identified portion of the works for which practical completion is required by a date earlier than that required for the works as a whole”. None of the 4 SfCC define a portion appliable to BO.
  • Interim completion, in JBCC terminology, is the state of completion as certified by the PrC where the subcontract works, or a section thereof, is substantially complete.
  • Practical completion, in JBCC terminology, is “the stage of completion when the works, or a section thereof, is complete, (free of patent defects) except for minor defects or incomplete work identified in the list for completion that is safe and allows the employer to use the works for the intended purpose.
  • Final completion, in JBCC terminology, is “conclusive as to the sufficiency of the works” accepting that the PrC’s obligations have been fulfilled other than for latent defects for the principal agent to issue the CoFC on the date when the works are (deemed to be) free of defects.

If a ‘situation’ arises

  • Beneficial Occupation (BO) requires the PrC to allow a direct contractor (DC) access to the site that he/she has no control over (except when in conflict with the PrC’s H&S plan).
    • The all risks insurance must be endorsed for applicable portion(s) of the works, the duration and the type of work. The DC’s contact details must be recorded in the insurance policy.
    • If a DC delays the BO work and consequently the work of the PrC and/or subcontractors, the PrC will probably be entitled to a revision of the date for practical completion and possibly an adjustment of the contract value.
    • Note that a DC is defined in JBCC SfCC as “an entity appointed under separate agreement by the employer (or a tenant) to do work on the site prior to practical completion”. No other SfCC defines the role of a DC.
  • Interim completion applies to domestic or selected subcontractors that the PrC has contractual control over to complete their work ahead of the date for practical completion. The PrC is responsible for any delays or cost incurred.
    • The PrC has limited contractual control over the performance of nominated subcontractors, chosen by the employer or agents causing a delay to the works. The PrC may be entitled to a revision of the date for practical completion and possibly an adjustment of the contract value.
  • Possible reasons causing a delay to the date for practical completion are described in varying detail the 4 SfCC, typically including:
  1. Late possession of the site,
  2. Late or incorrect issue of construction information
  • Late appointment of a nominated subcontractor
  1. Inability to obtain specified materials and goods
  2. Termination by a nominated subcontractor or a direct contractor
  3. Adverse weather conditions (unable to work)
  • (Non)compliance with statutory regulations
  • Instructions not due to the contractor’s (in)action
  1. Force majeure
  2. Suspension of the works
    1. At practical completion, the PrC’s work is nominally complete, the contractor’s all risks insurance policy ends, to be replaced by the employer’s building asset insurance.
    2. The PrC’s performance guarantee ends or reduces until final completion depending on the option chosen.
  • Final completion can only be certified when the works are free of listed defects.
  • The PrC remains responsible for his/her work until expiry of the latent defect liability period (LDLP). In JBCC SfCC. the LDLP extends for ninety (90) days from the date of practical completion until final completion is certified. In other SfCC the LDLP is one year, in some SfCC three years.
  • Final completion in JBCC contracts coincides with the agreement of the final account and the final payment by the employer to the PrC.

How to deal with a ‘situation’

Any potential delay must be notified as soon as practical to the contract administrator (CA) to assess and consider options to minimise/avoid such a delay.  

Desired result

  • To understand the contractual implications of beneficial occupation, interim completion, practical completion and of final completion and the potential the consequences where specified dates are not met.
  • To proactively deal with an event by timeously communicating with relevant participants to determine a preferred method to deal with identified issues.

What must you do?

As the employer

Ensure you are kept in the loop of progress and/or made aware of events that could hamper the planned execution of the works and of remedial action proposed or taken that may require your intervention. 

As the principal contractor

Execute the contract you have undertaken by managing your experience and resources to achieve the contractual objectives and to anticipate possible avoidable events – and react swiftly should mishaps occur.

As the (sub) contractor

Execute the subcontract you have undertaken by managing your experience and resources to achieve the subcontract objectives and anticipate possible avoidable events where different trades work in close proximity at the same time – and react swiftly should mishaps occur.

As a direct contractor

Your contractual relationship is primarily with the employer (or a tenant) to execute the specialist work within specified time, quality and cost etc. You must, at the same time, work in an environment under the contractual and statutory control of the PrC and his/her accepted H&S plan. The occurrence of any event will almost certainly involve both the employer and the PrC.

If the objective is not achieved

Analyse events that frustrated the planned execution of the works to assess a possible cause of failure, be it design, method(s) of construction, defective materials, unexpected site conditions, extreme weather events, labour or neighbourhood unrest, etc to determine the how to correct, proceed with, or to abort the project.

To be continued in Part 5 next week.

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