CONTRACT CLOSEOUT, TERMINATION, AND LIQUIDATED DAMAGES MARCH

CONTRACT CLOSEOUT, TERMINATION, AND LIQUIDATED DAMAGES MARCH 2015 Facilities Directors Conference Hickory Knob State Park

Construction Contract Closeout Construction Contract closeout may have different requirements depending on the type of Construction Contract. Design-Bid-Build Design-Build [email protected] Therefore, what does the contract require. For our purposes, let’s review the requirements of Design-Bid-Build.

Construction Contract Closeout Design-Bid-Build Contract closeout for construction projects begins at the Preconstruction Conference. Preconstruction Discussion Items (Table 7.3-1) Scope of Work Schedule of Values & Schedule of Completion AIA G702 Application for Payment (Final) Inspections & Reporting Submittals & O&M Manuals Substantial Completion and its’ definition Final Completion requirements

Construction Contract Closeout Design-Bid-Build (cont’d) Construction begins Time passes Substantial Completion declared by A/E OSE issues Certificate of Occupancy Now it’s almost too late to send the Contractor the list from OSE Manual 7.22

Construction Contract Closeout Design-Bid-Build (cont’d) What’s required? (Chapter 7.22.1.B) AIA G706 - all wages & bills have been paid AIA G715 - complete project insurance coverage Contractor statement – insurance will be renewed beyond final payment through “corrective work” AIA G701 – Consent of Surety Redline as-builts Warranties O&M Manuals Other documentation (subcontractor) confirming payments & liens Final Pay Application

Construction Contract Closeout Design-Bid-Build (cont’d) Final Pay Application Supposed to be FINAL Items on previous slide should be verified Punchlist items completed Inspection Reports satisfied No outstanding Change Directives No outstanding Change Orders We should be in the 12 month period following Substantial Completion for corrective work. Does this process work at your agency? What will make it better?

Construction Contract Termination Construction Contract Termination may have different requirements depending on the type of Contract. Design-Bid-Build Design-Build [email protected] IDC’s For our purposes, let’s review the requirements of Design-Bid-Build.

Construction Contract Termination Termination Not addressed in the Manual AIA A201, and 00811-OSE, Article 14 14.1 - Termination by the Contractor 14.2 – Termination by the Owner for Cause 14.4 – Termination by the Owner for Convenience

Construction Contract Termination Termination by the Contractor Has this ever happened? Work stopped for 45 days, not his fault (14.1.1) Court order or AHJ stoppage Act of government A/E holding certificate of payment Owner has not made payment within contract time Owner repeatedly delays or interruptions (14.1.2) For reasons above, Contractor gives 7 days notice Paid for work executed Overhead & Profit Costs of termination and damages

Construction Contract Termination Termination by the Contractor (cont’d) Work stopped for 60 days, fault of the Owner (14.1.4) Contractor gives 7 days notice Paid for work executed Overhead & Profit Costs of termination and damages

Construction Contract Termination Termination by the Owner for Cause Contractor fails to supply skilled labor Contractor fails to prosecute work Contractor fails to pay subcontractors Contractor disregards laws, codes, regulations Contractor is guilty of breach of contract For reasons above, Agency gives Contractor and Surety 7 days notice Take possession of site, materials, and equipment Accept assignment of subcontracts Complete work by whatever means necessary

Construction Contract Termination Termination by the Owner for Cause (cont’d) If the unpaid balance exceeds cost of finishing work, Contractor shall pay the difference Have you had this experience? How did it work? Termination by Owner for Convenience Agency give written notice Contractor ceases and protects work performed Contractor paid for work, costs incurred, etc.

Liquidated Damages Listed in the Bid Form (SE-330) and referenced in the 00501-OSE Liquidated damages are to be a recovery of damages, not a penalty Are actual damages too small or too large? Too small and they mean nothing Too large and the contractor raises his price So, how do you decide on the amount?

To Summarize: Construction Contract Closeout Dependent on the contract requirements Construction should begin with the end in mind and a list to the Contractor Construction Contract Termination Contractor can initiate Owner can initiate Liquidated Damages Choose a defendable, correct amount