Mastering Project Closeout For Emerging General Contractors

There’s always a lot of excitement and anticipation at the start of a construction project as you prepare to dive into the work. But as the project goes on, dealing with the same issues with the same project team members can get tiresome. By the end of a project, you’ll find yourself wanting to close out the job, finalize the finances, and get off-site as smoothly as possible.

For emerging general contractors, navigating the path from the inception of a project to its completion is a journey filled with challenges and learning opportunities. Project closeout is a critical phase that often determines the overall success of a project and uncovers just how well you managed the entire project. This phase not only marks the project’s conclusion but also sets the stage for post-project evaluations, finalizing documentation, and ensuring all contractual obligations have been met. Understanding and mastering the project closeout process can significantly impact an emerging contractor’s reputation and available future projects.

Key Takeaways

• Project closeout is the final phase of a construction project.
• How smooth project closeout runs will be determined by how well you’ve run the rest of the project.
• The way you handle the project closeout phase will reflect on your reputation and can impact your ability to secure future work.

What is Project Closeout?

Project closeout refers to the final phase of a construction project’s lifecycle. It involves a series of essential steps aimed at formally concluding the project. This phase ensures that all aspects of the project have been completed satisfactorily, all project deliverables have been handed over to the client, and any pending documentation, payments, and contractual obligations have been fulfilled. The closeout process is crucial for ensuring that the project is completed on time, within budget, and to the agreed-upon quality standards.

Project closeout can look different for a general contractor versus a subcontractor but in either case, there are several items that must be completed in order for the project to be successfully turned over to the owner.

Key Steps in Project Closeout

Your goal in the project closeout phase of the project is to ensure a smooth transition from project completion to project handover. Let’s walk through a project closeout checklist to make sure you have everything in order.

Completion of Work

Verify that all construction activities have been completed according to the project specifications and plans. Often, any small, miscellaneous pieces of work that have yet to be completed or any kind of damage to permanent work will make its way onto what is known as the punch list. The punch list represents the final pieces of work that need to be done for the project to be considered complete. Punch list activities usually include project scopes from both the general contractor and subcontractors. Identifying and correcting items and rework before it reaches the punch list will help ensure that you can close out the project from a work progress standpoint as quickly as possible, ensuring that you are not staying on the site any longer than you have to.

Final Inspections and Approvals

Conducting necessary inspections with relevant authorities and obtaining final approvals to ensure compliance with building codes and regulations. This is where thorough scrutiny of the contract documents throughout the entire project pays off because if you identify items in either the plans or the specifications that do not meet code, writing an RFI to address and correct such items will be important I will allow you to pass final inspection and make sure that the building is built to code.

If the project is going to be occupied, it will have to pass multiple inspections to obtain what is called a “certificate of occupancy”. This document allows the building or structure to be legally occupied and used for its intended purpose. This is a critical document for the owner because if there is a revenue plan for the building or structure it will likely need the certificate of occupancy before being used. That’s why it’s very important to make sure at that everything that is built in the construction process meets the applicable codes and jurisdictional standards.

Submission of Project Documentation

Compile and submit all project-related documentation, including as-built drawings, warranties, operation and maintenance manuals, and other necessary records to the client. This process is usually a massive level of effort and requires searching for organizing and providing to the owner documentation collected throughout the construction of the project. As-built drawings provide a detailed record to the owner of how the work was actually built in the field if any deviations were made from the original drawings. Operation and maintenance manuals otherwise known as o&m manuals, provide the owner with all the specifics of the permanent materials and products used to construct the project and detailed instructions on how to operate and maintain the various systems and structures that comprise the building. Keeping all of this organized throughout the construction process is the easiest way to streamline the compilation of project documentation towards the end of the project.

Final Payments and Accounting

Close out all contracts, finalize accounts, and ensure that all subcontractors and suppliers have been paid. Finalizing the financials can be a burdensome effort on a project, especially if there are loose ends like change orders that have not been agreed to by the general contractor and the owner which could then result in claims. You also need to make sure that retainage held against subcontractors throughout the project is released, as well as final unconditional lien waivers after they have completed all of their remaining work, including any items left on the punch list. The closeout documents will play a key part in finalizing all of the financial aspects of the project, which is why documentation must be kept organized and easily accessible throughout the project.

Client Handover

This is the official handoff of the completed project to the client, including providing necessary training on system operations and maintenance. Paper or electronic copies of the closeout documentation will usually be formally submitted to the owner as part of the final closeout documentation of the project. In addition to providing this closeout documentation, there will often be a series of training sessions for specific parts of the project on how to run and operate those systems. For example, for a commercial building the mechanical contractor will usually train the owner’s operation team on how to run the mechanical system and all the capabilities that it provides. The handover of contract documents and training of the owners on how to operate all the systems within the building usually represent the final steps of the project closure process.

Post-Project Evaluation

The last thing you’ll do is conduct a post-project review to identify lessons learned, successes, and areas for improvement. This is one of the most important phases of project closeout, and it’s where the contractor can look back at all the things that went right and wrong on the project and learn from them. As you progress through the project, it’s a smart idea to keep a log of “lessons learned” on the project for future reference. This can include mistakes that were made or situations that came up that had to be handled in a unique way. This Lessons Learned log provides critical information in handling those situations more efficiently and effectively in the future on similar projects.

How to Prepare for a Successful Project Closeout

As I mentioned previously, project close-out is usually a reflection of how the project has been run, so if the project was rough and there was a lot of disagreement, the project close-out process will likely follow a similar pattern. However, by keeping documentation on the project organized from day one, you can cut down on a lot of the work, stress, and financial risk at the end of the project. In turn, this lets you get your people, equipment, and resources off of the job and on to the next project so they can keep generating revenue for your company.

Project closeout often presents challenges, primarily due to the extensive coordination and documentation required. However, emerging contractors can take proactive steps during earlier project phases to facilitate a smoother closeout process:

Implement Rigorous Documentation Processes

Establishing a robust system for documentation from the project’s outset ensures that all necessary records are accurately maintained and easily accessible at closeout. All of the RFIs, submittals, change orders, and other relevant pieces of project documentation should be systematically organized and filed throughout the project to make sure that the information is easily accessible and can be compiled towards the end of the project with minimal effort and minimal coordination. Any paper copies of documentation, ideally, should be scanned and stored electronically so that a backup exists. Many owners will accept electronic copies of project documentation, which can make your life a lot easier if you are systematically capturing project documentation in electronic format throughout the course of construction of the project. storing this information in an organized file folder system will allow it to be much more accessible when it comes time to hand it over to the project stakeholders.

👉🏼 Learn how to implement a document control process.

Regular Communication with Stakeholders

Maintaining open lines of communication with all project stakeholders, including clients, subcontractors, and suppliers, helps identify and address potential issues early. Having all the project documentation organized in an electronic format allows you to quickly understand if you are missing certain key pieces of documentation and having good communication with all the stakeholders on the project helps to facilitate getting any missing pieces, whether that’s an invoice from a subcontractor or a product cut sheet from a vendor. Even one missing piece of documentation can hold up this final phase of the construction, so good communication with all members of the project team is essential to streamline this process as much as possible.

Quality Control

Implementing stringent quality control measures throughout the project lifecycle ensures that the work meets the required standards, reducing the likelihood of delays during the final inspections. If there are quality issues in the permanent work built on the project, it’s highly likely that those issues will be discovered during final inspections and will prevent final permits and potentially the certificate of occupancy from being granted. If there have been any non-conformance reports issued throughout the project due to the permanent work not meeting quality standards, maintaining records and documentation that the NCR was addressed and corrected is very important. Those records will ensure that any scrutiny on these areas of work can be easily addressed and don’t hold up the sign-off. Additionally, maintaining high-quality standards throughout the course of construction of the project will reduce the number of items on the punch list, which ultimately means that the final list of work tasks can be completed in a shorter amount of time. The less time that you have to spend closing out a project, the faster you can dedicate your project resources to the next job and continue to generate revenue.

Financial Management

Keeping accurate and up-to-date financial records throughout the project makes for a smoother final accounting process. If financial records haven’t been thoroughly documented, or some discrepancies are discovered at the end of the project, it can throw a wrench into the project closeout process and bog down your team. This is why it’s important to resolve any discrepancies, whether that is with subcontractor invoices or progress payments for work completed, as they are encountered during the project. Having to go back through and reconcile financial discrepancies long after they have occurred is a tedious process and the information, as well as people’s memories, tend to fade over time. Managing the project’s finances with a surgical level of detail at every step of the way is the easiest thing you can do to make sure that closing out all the contract financials at the end of the project goes smoothly.

Each of these steps will result in a more streamlined final phase of your project. Ultimately, you want to make sure that you can address any discrepancies or issues that came up throughout the entire course of the project and show that they have been successfully resolved. Keeping documentation and financials organized throughout the entire course of the project and making sure that you understand what the issues were, how they were corrected, and having access to the documentation verifying that they were corrected is a massive step towards making the end of the project as easy as possible.

Use Project Closeout as a Guage for How Your Projects Are Run

Project closeout can significantly impact an emerging general contractor’s reputation and future success. The closeout documents represent the final deliverables for the project, and this final phase also represents the last opportunity to make a good impression on the owner in the level of service, organization, and professionalism that you provide. If you stumble your way through the project closeout process, it can drastically affect the owner’s opinion of how it is to work with you and, ultimately, affect whether they choose to use you on another project.

Alternatively, if you can show the owner your level of sophistication and organization by navigating the project closeout phase successfully and as smoothly as possible, it shows the owner that you have been running the project efficiently and in an organized manner from day one. The way that you close out a project is a direct reflection of the way that you have run the project from the beginning.

By understanding the importance of this phase and implementing strategies to prepare for it throughout the project lifecycle, emerging contractors can ensure a smooth transition to project completion. This not only enhances client satisfaction but also positions the contractor for future opportunities in the competitive construction industry.

Further Reading: Foundations of Construction Project Management for SMBs