Are We There Yet - Substantial-Completion

ASHRAE Pittsburgh Chapter March 6, 2014

Are We There Yet?What is "Substantial Completion" ?

(…and how do we know when we get there?)

E. Mitchell Swann P.E., LEED APF. CIBSE, C.Eng

PrincipalMDCSystems®

www.MDCSystems.com

Copyright E. Mitchell Swann & MDC Systems2

Program Overview

What is “Substantial Completion”

Implication of the selected definition onactual project completion

New considerations in the industry

Example circumstances

Summary

Questions & Answers3

Program Overview

Are We There Yet? What is "Substantial Completion"and how do we know when we get there?

"Substantial completion": These two words can changethe course of history. Well, the course of your paymenthistory, anyway. Many contracts contain that phrase asa key indicator of major project milestones for therelease of retainage, the start of warranty periods andmore frequently everyday, the start up of energymeasurement and verification programs. But thedefinition of "substantial" and "complete" are wide andvaried. This program will explore the permutations andimplications of the various interpretations of "substantialcompletion" and how it can affect the happy family that isyour project team.

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So…

what

is

Substantial Completion?

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Some synonyms….(?)

Mechanical Completion

Unit is essentially complete forstart-up operation and test run.All major work is completed.Minor work not interfering withoperation may not be completed,such as punch list and minortouch-up work.

(from dictionaryofconstruction.com)

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U

Mechanical other stuff to do…

Completion 7

Beneficial Occupancy

When an owner of a propertycan use it before all the

construction is completed.(from Black’s Law Dictionary)

Use of a building, structure,or facility by the owner for itsintended purpose (functionallycomplete), although othercontract work, nonessential to thefunction of the occupied section,

remains to be completed.(emphasis added)

(from theconstructiondictionary.com)

Certificate ofOccupancy

A document issued by a localgovernment agency or buildingdepartment certifying a building's

compliance with applicable buildingcodes and other laws, and

indicating it to be in a conditionsuitable for occupancy.

The purpose is to prove that,according to the law, the building is

in livable condition.

A certificate of occupancy is evidence that thebuilding complies substantially with the plansand specifications that have been submitted to,

and approved by, the local authority.(emphasis added)

So what is substantial completion?

The answer varies,

but…

I know it when I see it!- Judge Potter Stuart

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So how about this?

Section A.9.8.1 (from the AIA 201 - General Conditions of the Contract for Construction) :“the stage in the progress of the Work when the Workor designated portion thereof is sufficiently complete inaccordance with the Contract Documents so that theOwner can occupy or utilize the Work for its intendeduse.”

Sounds like….

Is “mechanical completion” required?Is a C of O required?

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Why does this matter?

The date of substantial completion can establish…

…the date that the owner becomes responsiblefor the property, (the “clock” starts - builders’ warranty);

…the date that a contractor is no longer fullyliable for delayed completion;

…the date the “Statute of Limitations” clock starts(what’s this?) ;

…the date the “Statute of Repose” clock starts(what’s that?);

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Thedate of substantial

completion(…could become a day that might live in infamy.)

Builders Warranty:

…the hands of time….

Written statement by a builderassuring that a project was

completed according to a stipulatedset of standards. It protects the buyer

from latent defects.

Patent Defects

Latent Defects

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The date of substantial completion(…could become a day that might live in infamy.)

…a contractor is no longer fully liable for delayed completion

Liquidated Damages:

Monetary compensation for a loss, detriment, orinjury to a person or a person's rights orproperty, awarded by a court judgment or by acontract stipulation regarding breach of

contract. (Legal Law Dictionary)

(Think of it as "contract performance insurance.”)LIMITATIONS!Allowed when exact quantification of damages is difficult (but ARE “real”!)

MUST be “reasonable” with respect to the “value” of the damages thatcould be incurred.

NOT to be considered/”constructed as a “penalty”.

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Statute of Limitations:

A law that restricts the time within which legalproceedings may be brought.

…a fundamental part of European and U.S. law.…apply to both civil and criminal actions,…designed to prevent fraudulent and stale claims

…after all evidence has been lost…

…after the facts have become obscured over time……defective memory, death, or disappearance of witnesses.

…a defense that is ordinarily asserted by the defendant…the parties may either shorten or extend the prescribed timeperiod by agreement, such as a provision in a contract.

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Statute of Repose:Provides a date upon which the action no longer can betaken - it entirely cuts off an injured person's right ofaction even before it accrues.

…stricter deadline than statute of limitations…it may not be tolled by fraud, discovery of injury, etc.

…neither an avoidance nor a defense…because the cause of action does not exist after “repose”

…bars an action after a specified period of time has runfrom the occurrence of some event.

…but NOT injury or “discovery”

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New considerations…Commissioning

between “complete enough” and “acceptable”

Energy (& resource) Performance M&V“Green Certification”

Outside the project “bubble”

ValidationRegulatory Hurdles

AccreditationSpecialty Operations

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New considerations…

Commissioning

integrated application of a set of engineering techniquesand procedures to check, inspect and test every operationalcomponent of the project, from individual functions, suchas instruments and equipment, up to complexamalgamations such as modules, subsystems and systems.

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Newconsiderations

Energy(& resource)

Performance M&V

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“Green Certification”A third party vetting of thecompleted project?

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ValidationPharmaceuticalsbiotechnologymedical devices

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AccreditationHospitals

Animal Facilities

Data Centers

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So the on-going question is….

ARE

WE

THERE

YET?

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So there can be

variations upon a theme.

Let’s consider…

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Multi-story Laboratory Building

Program featuresBiotech researchGMP compliantBL-3 Suites

SterilizationoperationsLaboratoryInformationManagementSystem

Building featuresVAV HVACsystems

DDC BASintegrated toexisting campusSterilization lineby equipmentprovider

Commissioning(total building)

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New Critical Care Hospital

Program features400 std beds

60 CCU\ICU bedsIncl. 20 bed burn unit

Operating SuitesStandardTransplantsBurn\Trauma

MRI Suites (2)ASHEAccreditation

Building featuresProvisions for TBisolation

“ControlledEnvironment”

Operating TheatresDDC BAS

MRI by equipmentprovider

Commissioning

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Convention Center Hotel

Program features500 Rooms

Meeting RoomsBallroomsRestaurantsFitness Center

PoolSpa

Building featuresDOAS

LEED PlatinumConnected toConventionCenter PlantAnchor fordowntown

redevelopment

Location of nextG8 + conference

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What gets done after it’s “done”…

The sources of dispute

Impact of Liquidated Damages on Risk of Dispute

Things to think about

Contract language……to address specifics (when, what, by whom)…for “phased” completion

…to define “acceptance”…to address “what about”s

…and “I thought you meant…”

…to consider…

time.

We are all faced with a series of

great opportunities brilliantly

disguised as insoluble problems.

John W. Gardner

E. Mitchell Swann P.E.,LEED AP, F.CIBSE, C.EngPrincipal - MDCSystems®[email protected]

Questions?

E. Mitchell Swann, P.E., LEED [email protected] and PartnerMDC Systems, LLC

Licensed Professional Engineer:Pennsylvania, New Jersey, New York, Connecticut, California, Michigan, Illinois, Georgia, KentuckyUS Green Building Council LEED Accredited Professional

Mr. Swann has over 20 years of extensive experience on both domestic and international projects in the areas ofmanagement consulting and problem solving, engineering design, project and construction management, forensic

engineering and construction claims analysis. Mr. Swann’s career includes the analysis, evaluation and design of complexsystems across a wide range of industries and buildings types including commercial, institutional and industrial facilities,hospitals laboratories, pharmaceutical manufacturing, microelectronic operations and data centers. Mr. Swann has chairedtechnical committee within national and international organizations and been a contributing author and editor for a numberof technical publications and journals. He is a frequent speaker both nationally and internationally and is a listed member ofthe speakers’ bureau in the Distinguished Lecturer program of ASHRAE. He has recently presented on Green Buildingissues in Abu Dhabi, Dubai, Delhi, Detroit, Chicago, Seattle, New York City, Indianapolis, Kansas City, Virginia andDelaware. He is a contributing author to the ASHRAE “Green Guide - The Design, Construction and Operation ofSustainable Buildings” and co-author of the ASHRAE Survival Guide to Design|Build Project Execution.

Professional Affiliations:American Bar Association, American Society of Heating, Refrigeration, and Air Conditioning Engineers, InternationalSociety of Pharmaceutical Engineering, US Green Building Council, Defense Research Institute

Other Activities:Pennsylvania Environmental Council - Board

The Engineer’s Club of Philadelphia - Board of DirectorsEnterprise Heights CDC - Board Chair

Drexel University - Alumni Board of GovernorsNational Association of Asian American Professionals (Philadelphia Chapter) - Board of DirectorsNational Society of Black Engineers Greater Philadelphia Chapter - President Emeritus

MDCSystems® Summary of ServicesProgram & Project Development

including…

Performance Assessment &Benchmarking

Project Modeling including…

“What if…” Scenario AnalysesVariability/Sensitivity Analyses‘Out of Bounds’/”Go - No Go”Limits

Project Planning including…

Feasibility Studies

Master Scheduling including…

Resource & Constraint Analysis

Project Monitoring including…

Schedule Compliance

Cash Flow & “Burn rate” projections

Resource Utilization

Consulting Services including…

Sustainability/Green Buildings

Peer Review

Practice Management

Forensic Analyses including:

Building Systems:

Architectural incl. Building Envelope

HVAC/Mechanical, Electrical & Piping

StructuralInstrumentation & Controls

Design Errors & Omissions (Standard ofCare)

Differing Site Conditions

Forensic Project Management®

Schedule AnalysisDelay, Disruption, Suspension &AccelerationLabor Productivity & Inefficiency

Scope Definition and Change

Termination - Default or Convenience

Procurement - Bid/Award Transparency

Forensic Accounting including…Valuation of Damages

Overhead & General Conditions

Business Interruption & Lost Profit

MDCSystems®

Providing Expert Project Delivery Solutions Worldwide

MDC Systems is a project and construction management consultancy withover 40 years of experience serving a wide array of clients and industries bothnationally and around the globe.MDC has worked on projects as diverse as residential property developmentsto pharmaceutical plants to highway excavation and construction.MDC concentrates its services in primarily four areas:

program management, project management consulting, forensic engineeringand construction claims consulting.One of the key facets of MDC’s professional staff is our expertise in the

technology driven issues that are so frequently at the heart of today’s complexprojects.

MDC’s construction claims consulting practice combines all of the skillsinherent to our other service offerings and deploys it for our clients when andwhere projects don’t go quite as smoothly as everyone had hoped. MDC is anindustry leader in the area of construction schedule development and analysis

including delay, acceleration, interruption and extended duration. MDC pioneeredthe court tested and approved Time Impact Analysis methodology for scientificallyanalyzing construction schedules and the impact of events upon their executionand completion.

www.MDCSystems.com

Selected Recent AssignmentsEngineering Consulting and Project Management, Execution &

Technical Analyses: Construction Claims :Analysis of Moisture Migration and RHControl in a Microelectronics ProductR&D Facility (Colorado).

Analysis and Improvement of EnergyConsumption at a “Green” School

(Pennsylvania)

Peer Review & Design Supervision for aRadiant Heating/Cooling Floor System(New Jersey)

Peer Review of Schematic EngineeringDesign Effort for Hospital Complex

(Qatar)

Analysis of Formaldehyde Outgassingfrom Construction Materials

(Pennsylvania)

HVAC System Failures inPharmaceutical Packaging Facility(New Jersey)

Analysis of Process Technology Failureat Waste Treatment Plant (New Jersey)Analysis of Piping System Joint

Failures at a Hospital central Plant(New Jersey)

Analysis of Destructive Vibration\Harmonics on Large IndustrialCompressors at a Chemical Plant(Louisiana)

Excess Rock Excavation Claim on a HighwayProject - Unforeseen Conditions (New

Jersey)

Electrical Contractor Inefficiency Claim onMulti-Prime Project (New Jersey)

Electrical Usage Charge Dispute BetweenLandlord & Tenant (New York)

Schedule Delays and Change Orders onmultiple Airport Projects for Major

Equipment Supplier (various)Schedule Delays and Associated CostOverruns for Underwater Pipeline Project(Ireland)

“Standard of Care” Defense - Design of aFood Processing Facility (Pennsylvania)

“Custom & Practice” - SpecificationsDevelopment and Bid Transparency Issues(California)

“Standard of Care” Defense - Design andDocumentation of a Pharmaceutical Plantusing 3D Modeling (Texas)

“Standard of Care” Plaintiff - Delay andCost Overruns for a Pharmaceutical Plantusing 3D Modeling (Singapore)