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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2021. Practices for Closing Out Highway Projects from Substantial Completion to Final Payment. Washington, DC: The National Academies Press. doi: 10.17226/26304.
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Page 1
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2021. Practices for Closing Out Highway Projects from Substantial Completion to Final Payment. Washington, DC: The National Academies Press. doi: 10.17226/26304.
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Page 2
Page 3
Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2021. Practices for Closing Out Highway Projects from Substantial Completion to Final Payment. Washington, DC: The National Academies Press. doi: 10.17226/26304.
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Page 3
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2021. Practices for Closing Out Highway Projects from Substantial Completion to Final Payment. Washington, DC: The National Academies Press. doi: 10.17226/26304.
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1   The project closeout process incorporates completing the physical construction work, finishing outstanding and defective work, collecting, reviewing, and approving of project information and documentation, reconciling financial information, and making and receiving final payments. Although project closeout only entails a small portion of actual construction work, closing out highway construction projects for state departments of transportation (DOTs) is a complex and vital process that is a part of project delivery for highway construction projects. Because of its importance, project closeout and the people performing the associated processes need to focus on collecting and reviewing the details of projects so that proper documentation and information are collected and shared throughout the duration of design and construction and in turn are used to close out a project in a consistent and timely manner. In terms of documentation, highway construction projects generate many documents and information that become critical for closing out a project, as the work has to be reviewed to make sure it conforms to the contract documents, as well as reviewing and verifying all payments and accounts so that they can be closed. Closeout ensures that the completed project conforms to the contract documents as well as reviewing and verifying all payments and accounts. All of these components make project closeout an important and complex phase of a highway project. Closing out a highway project can take considerable time, and state DOTs have recog- nized that it is not unusual for the completion of a project to take months or years. Challenges that DOTs experience in closing out a project include items such as changes of personnel, migration of information from paper-based to electronic, and the fact that many DOT project staff have other responsibilities, including priorities of new projects outside of closing out current projects. When a highway construction project is not closed in a timely manner, the project may experience additional costs to the DOT, frustration on the part of the contractors for the release of retention and final payments as well as from bonding requirements, the potential that source funding may no longer be available for use, loss of project documentation, loss of staff with project knowledge (through retirement/attrition), and potential adverse impacts to internal and external relationships. Although there exist many formal and detailed checklists and processes for closing out a project at state DOTs, a better understanding of the factors that drive project closeout helps ensure timely final- ization of highway construction projects. The purpose of this synthesis was to identify and document the state of the practice for closing out highway construction projects from substantial completion to final financial closeout of the project, which includes the closeout of the field work and administration related to construction and final acceptance, as well as the financial reconciliation, final payments, and closing of project-related accounts and funding sources. The scope of work entailed the following objectives, which were to investigate: S U M M A R Y Practices for Closing Out Highway Projects from Substantial Completion to Final Payment

2 Practices for Closing Out Highway Projects from Substantial Completion to Final Payment 1. The durations of time to close out a project from substantial completion to final contractor payment and final closeout, including the expected and actual durations, and the process used to set the DOT project closeout duration goal; 2. The required documentation for closeout, such as certifications of work and materials, test results, as-built documents, and other required project closeout acceptance documents; 3. The implications of not closing out a project, which include the inability to move resources to other projects and responsibilities, additional costs to a project, the risk of not being able to adequately document project costs, and funding sources that may de-obligate funds; 4. The policies, processes, tools, and metrics agencies use to control the duration required to close out a project such as milestones, performance metrics, and monitoring and tracking mechanisms; 5. The major factors influencing the delays in the closeout of a project, including internal processes and external stakeholder influences; and 6. The current practices of project closeout as reported by DOTs. The investigation of highway construction project closeout included a literature review and content analysis, a survey questionnaire distributed to 50 state DOTs, and case examples with identified state DOTs. The literature review involved collecting and reviewing relevant construction and financial project closeout documents, reports, and articles as well as DOT documents, reports, templates, and guidelines on their construction and financial closeout processes. The information collected from the literature review led to the creation of a web- based survey questionnaire, which was distributed to the American Association of State Highway and Transportation Officials (AASHTO) Committee on Funding and Finance. Forty state DOTs completed a full survey questionnaire response (80% response rate). Following completion of the survey data collection, structured case examples with eight DOTs were conducted to document specific project closeout processes and aspects that relate to the objec- tives. The DOTs of Connecticut, Florida, Georgia, Iowa, Minnesota, Ohio, Oregon, and Texas agreed to participate and fully participated in the project closeout case examples. From the data collected in the literature review, survey questionnaire, and the case examples, the key findings and practices related to the project closeout objectives of this study are as follows: • Project Closeout Duration 1. Closeout Planning: State DOTs begin planning a project with the end in mind to invoke project closeout processes early on in a project. The sooner that a project team considers closeout during the design and construction phases, the easier it is to collect and organize required documents and information as the work progresses. 2. Management Emphasis: When upper DOT management emphasizes the importance of project closeout, the duration to close out a project appears to shorten as internal DOT stakeholders prioritize timely project closeout. 3. Average Project Closeout Duration: The duration to close out a project varies from state DOT to state DOT as well as from project to project. State DOTs set project closeout duration goals and then use these goals to measure the performance of the closeout process. • Project Closeout Documentation 1. Documentation and Audits: Missing or lost, incomplete, and inaccurate project docu- mentation and audits delay the closeout process, as more time at the end of a project is needed for tracking down the documents and making sure they include complete and accurate information.

Summary 3   2. e-Construction: e-Construction initiatives have impacted the project closeout process, as they make the closeout documentation portion more efficient through real-time sharing of information and the use of electronic reviews and digital signatures for approvals. One-half of the state DOTs that participated in the survey reported that they use e-Construction services during the project closeout process. 3. As-Built Drawings: As-built drawings supply a record of the installed facility for future preservation and facility improvement. The process of completing as-builts is evolving at DOTs as states slowly move from paper-based systems to electronic-based systems. 4. Incentives: Contract incentives encourage contractors to submit project closeout docu- mentation promptly, or portions of payments are withheld until complete and accurate documents are received in full. • Implications of Not Closing Out a Project 1. Resources: The implications of untimely project closeout result in the inability to use resources for other projects and responsibilities, as resources are tied up in project closeout longer than expected. 2. Additional Project Costs: Project closeout delays lead to additional funds needed for a project due to the resources needed for additional time and interest paid for delayed payments as contractors wait for the release of final payment and retainage. 3. Contractor Impacts: When closing a project takes extensive time, this delays the final payment and release of retainage to the contractor as well as impacts the contractor’s bonding capacity and future work, since part of their bonding is tied up in a project that is taking much longer than expected to close. These impacts can negatively affect the DOT-contractor relationship for future work. This is particularly detrimental to project closeout, as cooperation between the DOT and contractor was the most frequently cited factor for project closeout success. 4. Lost Documentation: Not tracking documentation properly during construction and delays in project closeout increases the possibility of losing critical documents. Lack of proper documentation results in unsupported or ineligible costs to that funding source. 5. De-obligation of Funds: Highway projects receiving federal aid are at risk of losing federal funding if a project does not close out in a timely manner and is left inactive for one year after the project acceptance end date. Case examples have noted that the de-obligation of funds due to untimely closeout leads to more work to find and the use of other sources to cover costs that were eligible for federal funding. • Project Closeout Processes and Tools 1. Continual Closeout Processing: Having inspectors perform audits as the work progresses helps to make sure project closeout data and documentation are completed throughout the construction phase, which reduces the documentation efforts needed at the end of a project. 2. Electronic Resources: Using automated tools and an electronic-based project closeout system has made project closeout more efficient, as documents are shared, reviewed, approved, and signed in less time when compared to using paper-based processes. 3. Importance of Communication: Communication and cooperation among the internal divisions of the DOT and their external stakeholders are key to timely closeout so that the project team understands the project closeout process and objectives. 4. Measuring Project Closeout: Project closeout performance measures used by state DOTs are the total number of days between project closeout milestones, the number of projects needing to be audited, the number of projects that are on the FHWA inactive list, and the number of projects that have errors in the final packet.

4 Practices for Closing Out Highway Projects from Substantial Completion to Final Payment 5. Performance Measures and Accountability: The inclusion of project closeout perfor- mance measure results with state DOT employee performance reviews provides accountability and focus on the part of employees to improve their closeout efficiency and timeliness. • Project Closeout Delay Factors 1. Stakeholders: Stakeholder-related issues that delay project closeout include changes in personnel, not billing on time, and outstanding claims. Local utilities and railroads impact the closeout process, as these entities may not follow the DOT closeout schedule and lack urgency to close out a project. 2. Local Municipality Projects: Locally funded projects may experience longer project closeout durations, as local municipalities may lack a formal closeout process to follow and use paper-based documentation. 3. Multiple Funding Sources: The use of multiple funding sources for a highway construc- tion project adds more work and complexity to the project closeout process. 4. Documentation and Claims: Delay factors identified include difficulty in receiving required closeout documentation in a timely manner and outstanding claims between DOT and contractors. Any document issues and open claims means no reconciliation of accounts, and the project cannot be closed. • Project Closeout Practices 1. The Closeout Process: State DOTs have formal project closeout processes in place, which are detailed in construction manuals, specifications, final closeout documentation, and finalization checklists that describe the sequential steps of project closeout, the required documents, and the duration expected for each step in the closeout process. 2. FHWA Influence: The FHWA has a formal project closeout process for projects using federal aid that state DOTs use and follow along with an accountability system for projects that remain open but inactive for too long. 3. Improving Project Closeout: State DOTs noted that their internal improvements toward project closeout have resulted in more efficient closing of projects. State DOTs today realize the importance of timely project closeout internally without external influence. 4. Closeout Rating System: A closeout rating system that categorizes meeting the project closeout duration goal instead of one goal for all projects is used. A rating system based on the number of pay items to reconcile and close for a project normalizes the project duration closeout goal based on the project size and complexity. 5. Influence of Lean Construction: State DOTs are implementing Lean Construction into project management, including the closeout phase, in order to find the gaps in knowl- edge and pinch points in the closeout process so that process improvements can be put into place, which makes the project closeout process more efficient and timelier. 6. Training: By providing training and documenting the project closeout process, DOTs help their employees to recognize the importance of project closeout and how to carry out their responsibilities associated with project closeout effectively. From the data collected and observed findings, this synthesis acknowledges gaps in its examination of highway construction project closeout. It is proposed that future research and study may be of interest in the following areas for improving project closeout of highway construction projects: (1) implementation of the use of technologies and digital as-builts for project closeout; (2) quantification of the impact of delayed closeout; (3) guidance for streamlined project closeout processes; (4) development of project closeout principles in project level inspections; and (5) practices for closing out Public-Private Partnership (P3) projects.

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Although project closeout only entails a small portion of actual construction work, closing out highway construction projects for state departments of transportation (DOTs) is a complex and vital process that is a part of project delivery for highway construction projects.

The TRB National Cooperative Highway Research Program's NCHRP Synthesis 570: Practices for Closing Out Highway Projects from Substantial Completion to Final Payment compiles and documents information regarding the current state of the practice for closing out highway projects from substantial completion to final payment.

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