Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.
Legal Issues Related to Large-Scale Airport Construction Projects Copyright National Academy of Sciences. All rights reserved. ACRP LRD 38 27 liquidated damages did not keep the designerâbuilder from missing its completion deadline. However, the airport represen- tative interviewed for this case study determined that the air- portâs assessment of these damages was critical in the airportâs settlement negotiations with the designerâbuilder at the end of the project. Consequently, the airport felt that its use of this provision was successful, even though the project was not com- pleted on time. XIII. PROJECT HANDOVER PHASE For many construction projects, project closeout and hand- over can be a complicated and protracted process involving verification that the contractor has completed required work (or corrected noncompliant work), contractor training of air- port personnel, the partiesâ resolution of remaining claims and final payment, and other administrative tasks. To aid with this process and with the help of the Airport Consultants Council, the FAA developed a set of best practices for the closeout of the airport projects (ACC 2008). These best practices were devel- oped so that completed projects could be closed out as soon as possible, and the FAA could recover any unused funds for use on other projects. The FAA recommends that a project be closed out within 90 days of substantial completion. During this closeout phase, all as-built drawings, financial information, materials manuals, and electronic drawings need to be up to date. If federal funds were used on the project, all required documentation needs to be submitted to the FAA as soon as possible. According to the FAAâs best practices, the airport must schedule final inspections immediately after the project reaches substantial completion. In addition, a punch list needs to be prepared, and the archi- tect needs to make sure that those punch-list items have been completed on time. After that, the owner processes the contrac- torâs final payment. If there were any issues regarding disputes, claims, or liquidated damages, they need to be addressed expe- ditiously before the closeout. Articles 9.8 (Substantial Completion) and 9.9 (Partial Oc- cupancy or Use) of AIA 201A-2017, General Conditions of the Construction Contract, address project handover and discuss in detail the tasks that the owner, architect, and contractor must complete before handover (AIA 2017). Before issuing the cer- tificate of substantial completion, the architect checks the work and prepares the list of work that still needs to be completed. The contractor prepares the punch list and checks all of the completed items to make sure the list is complete. The architect then verifies that all defective and missing items are fixed before issuing the certificate of substantial completion. According to AIA general conditions of contract docu- ments, âthe responsibilities of owners and contractors for secu- rity, maintenance, utilities, damage to the work and insuranceâ should be clearly mentioned in the certificate of substantial completion (AIA 2017). The certificate should be submitted to the owner and the contractor for their written acceptance of their assigned responsibilities noted in the certificate. After the substantial completion certificate is signed by both parties, the costs. The owner further concluded that including incentives in the contract helped the airport complete the project on time, with better performance by the contractor. In contrast, the owner representative for the CMAR project that entitled the CM to a 30% share of savings under the GMP said that its clause did not result in any shared savings; accordingly, the airport would like to reconsider adding this provision to future CMAR contracts. Specifically, the airport noted that incentive payments are not federally eligible, and the split of savings would have to come 100% from local funds. The third CMAR project in this study did not utilize any contract clauses intended to incentivize reducing costs. All three airports utilized disincentives in their projects in the form of liquidated damages. The liquidated damages would be charged to the CM firm on a daily basis if the CM could not complete the project on time. The liquidated damage rate for all three airports was nominal, and was similar to the liquidated damage rates on their other DBB projects. Despite the nominal amount set for these liquidated damages, the case study par- ticipants felt that use of a liquidated damages provision helped them complete their projects on time. One participant said that while the liquidated damage rate the airport set for its CMAR project appeared to be very low, the rate was based in part on how important (or in this case, unimportant) the project was in terms of finishing on time. In contrast, the participant gave an example that in one of their DBB projects, liquidated damages were set at roughly $75,000 per day. This high rate reflected that it was critical for the contractor to complete the project ahead of an upcoming major event. The case study participants did not find major differences in setting up liquidated damages in their CMAR contracts compared to their DBB contracts. B. Progressive DB Case Study Results Similar to the CMAR projects case study, the progressive DB contract for the terminal expansion project provided that the designerâbuilder would be entitled to a 20% share of any sav- ings that the designerâbuilder realized under the GMP set by the parties. One airport representative interviewed for this case study determined that this incentive provision successfully en- couraged the designerâbuilder to seek cost savings/efficiencies after setting the GMP. However, sometimes these savings were only achieved by lowering project quality, which the airport representative ultimately determined was not in the airportâs best interest. By way of example, the interviewee noted that the designerâbuilder received approval to modify an existing digital screen requirement. However, the alternative product used by the designerâbuilder was only appropriate for use indoors, and these particular screens would be exposed to the elements. This proved problematic, considering that the owner had approved the change. C. Lump-Sum DB Case Study Results While the central utility plant lump-sum DB contract did not use any incentive-based payment provisions, it did use a disincentive in the form of liquidated damages. The threat of
Legal Issues Related to Large-Scale Airport Construction Projects Copyright National Academy of Sciences. All rights reserved. 28 ACRP LRD 38 key elements of PPP project handover are inspection require- ments, minimum residual life requirements, development of a handback plan, operations and/or maintenance training, estab- lishment of a handback reserve account, delivery of spare parts and tools, residual life calculation methods, and final handover acceptance procedures. Airport owners should consider each of these topics carefully when developing handover provisions for a PPP project. A. CMAR Case Study Results All of the case study participants for CMAR projects stated that they did not find any material difference for the project closeout processes between traditional DBB projects and CMAR projects. The only difference cited by the participants was that the CM helped the airport prepare the punch list and certifi- cate of substantial completion, while in DBB projects this was typically done by the architect. One of the participants noted that no matter which PDM the airport uses; the airport typi- cally requires the contractor to train the airportâs maintenance staff as part of the handover process. Interestingly, the airports in the case study did not tailor their CMAR contract documents to explicitly address the project closeout processes. However, the airports used the AIA 201A-2017 form for these projects, so any project closeout tasks not addressed by the CMAR contract documents were covered by the AIA form. One of the participants mentioned that the main lesson learned related to project closeout for its CMAR project was that the role of the CM firm in project closeout and handover needed to increase. For this project, the CM was not very in- volved in transitioning the project, and these duties largely fell to subcontractors. Based on this experience, the owner deter- mined that it is critical that the CM not only stay involved dur- ing the handover phase, but that it should lead that effort. Another of the CMAR case study projects included signifi- cant involvement of the entity that would ultimately be respon- sible for all the concessions in the new terminal. Unfortunately, that entity was not involved until late in the design phase of the project, which affected the design (requiring redesign efforts), construction, and closeout phases of the project. The airportâs main lesson learned related to the handover phase of the proj- ect was that any entity handling concessions (or other parties, stakeholders, or future users that could affect the project) need to be involved from the early stages of project so that the transi- tioning phase goes smoothly. B. Progressive DB Case Study Results A key responsibility for the designerâbuilder under the land- side progressive DB contract for the terminal expansion project was to help with the buildout of concessions in the terminal and then turn that space over to the concessionaires. The designerâ builder coordinated the entire buildout and turnover process, which helped the airport avoid responsibility for addressing is- sues with the condition of the facility (e.g., where the facility did not meet the concessionairesâ expectations). When using other PDMs, the airport had been unable to avoid responsibility for project handover phase is complete. An owner may choose to use portions of a facility before reaching substantial completion and handover; however, if the underlying contract does not con- template such usage, the owner will need to enter into a separate agreement with the contractor to establish relevant terms and conditions. Article 9.10 of the AIA 201A-2017 form addresses final ac- ceptance and completion of the project facilities and provides that upon completion of the work, and the ownerâs receipt of written notice from the contractor for final inspection and final payment, the architect will inspect the work to verify that it has been completed as stipulated in the contract documents. This process concludes with the architect promptly issuing a final certificate for payment, which constitutes the fulfillment of the contractual obligations of the contractors to the owner. Considering that PPP projects include maintenance and/or operation responsibilities after completion of construction, the project handover requirements for PPP projects differ some- what from the process described above. At substantial comple- tion, generally the developer is still required to provide as-built drawings, prepare a punch list, submit warranty information, provide evidence of required governmental approvals, and submit all other documents needed to close out the construc- tion phase of the project. However, other responsibilities typi- cally associated with substantial completion and closeout of the construction phase may not occur until the end of the devel- operâs operations and/or maintenance period, which could be more than 20 or 30 years later. By way of example, training of the ownerâs personnel on operations and/or maintenance of the facility may not occur until the end of this period. Furthermore, at the end of the PPP operations and/or main- tenance period, the developer is typically required to handover the project facilities in a previously specified condition, and this condition may be different from what the owner would have specified at construction completion. When developing the handover specifications for a PPP, among other factors, the owner should consider the length of the operations and/or maintenance period, the costs associated with renewing various project elements, and the anticipated life cycle of those project elements in order to determine the appropriate residual life re- quirements. By way of example, while an owner may decide that a building must generally have 20 years of residual life at hand- over, an HVAC system may be required to have only 5 years of residual life. Furthermore, to ensure that the developer hands the facility back in the required condition, owners typically require the developer to either provide handback security (e.g., a letter credit), or establish a handback reserve account funded specifi- cally for use in bringing the facility into the required handover condition. If a developer fails to perform the required handback requirements under the contract, the owner has the right to ac- cess this security account to rectify the problem. AIA documents do not address project handover in the context of a PPP. However, for reference, the FHWA has con- ducted a study on developing a framework for handover of PPP projects (Cui and Ham 2017). The study determined that the
