ALBERTA STANDARD GUIDE FOR TAKE-OVER PROCEDURES
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1 ACA DOCUMENT C 2004 ALBERTA STANDARD GUIDE FOR TAKE-OVER PROCEDURES For use in conjunction with the CONDITIONS OF CONSTRUCTION CONTRACTS COPYRIGHT 2004 ALBERTA CONSTRUCTION ASSOCIATION Prepared by Standard Practices Committee Alberta Construction Association In consultation with and endorsed by: CONSULTING ENGINEERS OF ALBERTA THE ALBERTA ASSOCIATION OF ARCHITECTS
2 RECOMMENDED PROCEDURES CONCERNING FINAL COMPLETION AND TAKE-OVER OF CONSTRUCTION PROJECTS INTRODUCTION The purpose of this document is to provide recommended standard procedures to facilitate the closing phases of a construction contract and the orderly take-over of the construction project by the owner from the contractor. The Standard Practices Committee of the Alberta Construction Association has developed this document in the hope that it will be accepted by the industry and become a part of the general conditions of construction contracts. N.B. Words in this document importing the masculine gender include the feminine gender. INDEX Documentation Procedures Definition of Substantial Performance Stage 1 Contractor s Inspection for Substantial Performance Stage 2 - Contractor s Application for Certificate of Substantial Performance Stage 3 Following Substantial Performance Stage 4 Application for Final Payment Stage 5 Guarantee Period (s) App. A Sample Certificate of Substantial Performance DOCUMENTATION PROCEDURES A. The contractor, in consultation with the owner/architect/engineer and as soon as possible after the award of the contract, shall initiate preparation of two lists as follows (except when specified otherwise in the contract documents): 1. Items required for operation of occupied premises: This first list shall itemize all data, operating instructions, maintenance manuals, record drawings, spare parts, materials and other items, as required by the contract documents. 2. Items required to complete the contract: the second list shall show all documentation which will later be required to be submitted and approved by the owner/architect/engineer before he will issue his certificate for payment covering the release of final payment and of the lien holdbacks (statutory declarations, Workers Compensation Board letter of good standing, guarantees and other items as required by the contract documents as applicable to the project). B. The contractor shall transmit copies of the above-mentioned two lists to the owner/architect/engineer for review and approval. 2
3 C. Within 14 calendar days of receipt of said lists, the owner/architect/engineer shall review said lists and notify the contractor of his approval of same, with or without changes; assembly by the contractor of the items on said lists shall then commence. DEFINITION OF SUBSTANTIAL PERFORMANCE For the purposes of this document and the Alberta Builder s Lien Act, a contract is substantially performed: a. when the work or a substantial part thereof is ready for use or is being used for the purpose intended, and when the work to be done under the contract is capable of completion or correction at a cost nor more than: 1. 3 per cent of the first $500,000 of the contract price per cent of the next $500,000 of the contract price, and 3. 1 per cent of the balance of the contract price, or b. when the work or a substantial part thereof is ready for use or is being used for the purpose intended and where the work cannot be completed expeditiously for reasons beyond the control of a contractor, the value of the work to be completed shall be deducted from the contract price in determining substantial performance. STAGE 1 CONTRACTOR S INSPECTION FOR SUBSTANTIAL PERFORMANCE 1.1 When in the contractor s opinion the project meets the requirements of substantial performance, he shall make a preliminary inspection giving written notice of this to the owner/architect/engineer for information only. 1.2 The inspection team shall consist of: a. the contractor or his representative(s) b. such subcontractors or their representatives as may be required by the contractor. 1.3 Upon completion of this inspection a list of all incomplete and deficient work shall be prepared by the contractor and issued to those concerned including the owner/architect/engineer. 1.4 Any sub-contractor may request substantial performance for his sub-contract. The contractor shall then initiate inspection as outlined in Stage The contractor is cautioned that the work should be ready prior to calling for inspection. Any visits to inspect work not ready may cause the owner to incur additional costs for unnecessary visits by his consultants, and may cause the consultants to be inconvenienced and incur additional costs as well. Premature inspections may result in disputes over payment for additional costs incurred by the owner and its consultants. 3
4 STAGE 2 CONTRACTOR S APPLICATION FOR CERTIFICATE OF SUBSTANTIAL PERFORMANCE 2.1 When the contractor considers that the work is substantially performed he shall submit a comprehensive list of items to be completed or corrected and a Certificate of Substantial Performance for review by the owner/architect/engineer to establish a date for Substantial Performance. 2.2 This application shall include: a. A statement to the owner (through the architect/engineer where applicable) to the effect that: 1. the work has been executed in accordance with the plans and specifications, and 2. the contract is substantially completed, and 3. the performance of the balance of the contract is in process and total completion is scheduled for the day of.., 20.. b. A statement of completion with the cost values of: 1. work to be completed; 2. work which cannot be performed for reasons beyond the control of the contractor. c. The submission of all data, operating instructions, evidence of all tests, maintenance manuals, record drawings, spare parts and materials, etcetera, to enable the owner to use the constructed works. 2.3 Concurrent with submission of the Certificate of Substantial Performance, the contractor shall complete the preparation and assembly of all items covered by the second list as approved by the owner or his representative under Documentation Procedures A a. Not later than 10 days after receipt of the contractor s application, the owner/architect/engineer shall make an inspection of the work covered by the application and such other work, if any, which the owner/architect/engineer may deem necessary. b. Not later than 7 days after his inspection the owner/architect/engineer shall notify the contractor in writing of his agreement or disagreement with the contractor s assessment of the work. c. Where there is disagreement the contractor shall make the necessary corrections and reapply. d. Where there is agreement the owner/architect/engineer shall issue a Certificate of Substantial Performance and assign an appropriate date. STAGE 3 FOLLOWING SUBSTANTIAL PERFORMANCE 3.1 In accordance with the Alberta Builder s Lien Act, holdback monies are payable on the 46 th day following the issuance of a Certificate of Substantial Performance, provided that no builder s liens have been filed in the intervening period. 3.2 Upon receipt of verification of acceptance of the Certificate of Substantial Performance as set forth in Stage 2, the contractor should invoice the owner for release of the appropriate holdback monies. 4
5 FOR EDUCATIONAL PURPOSES ONLY 3.3 The holdback to be released following Substantial Performance of the Work is 10% of the value of the work performed to that time and in Alberta is referred to as the major lien fund. The owner is not entitled to withhold any portion of the lien fund to meet the cost values set out in 2.2 (b) above. Instead, such cost values should be taken into account in determining the value of the work upon which to base the lien fund calculation. STAGE 4 APPLICATION FOR FINAL PAYMENT 4.1 When the contractor is satisfied that the entire work is completed, and after making his own inspection, he shall make a written request for a final inspection by the owner/architect/engineer. This inspection shall be carried out and completed not later than 10 days of the request, and shall constitute the inspection prior to the issuance of the final certificate for payment. 4.2 If there are any deficiencies determined by this inspection, they shall be listed by the owner/architect/engineer and provided to the contractor. This list shall be recognized as the deficiency list for purposes of completion of the work under the contract. 4.3 Such deficiencies shall be corrected by a date mutually agreed upon between the contractor and the owner/architect/engineer, unless a specific date is required by the contract, and a re-inspection by the owner/architect/engineer shall be called for by the contractor, following his own inspection, to take place not later than 7 days from the date of the request. 4.4 Upon request, the owner shall make monthly progress payments on completed deficiencies. 4.5 When all work has been completed and all deficiencies have been rectified, excepting incomplete work or deficiencies not rectified due to reasons beyond the control of the contractor or a sub-contractor, then all amounts due under the contract shall become payable, and a final certificate for payment shall be issued. Any remaining holdback monies are payable on the 46 th day following the date of total completion of the Work, provided that no builder s liens have been filed in the intervening period. STAGE 5 GUARANTEE PERIOD(S) 5.1 The guarantee period(s) for the project shall commence at the date of substantial performance of the work, as noted on the Certificate of Substantial Performance. 5.2 No later than 30 days before the expiry of the guarantee period(s), the contractor shall arrange with the owner for an inspection of the project to be carried out by the contractor with the owner/architect/engineer. This inspection shall be carried out and completed not later than 10 days before the expiry of the guarantee period(s). 5.3 If there are any defects determined by this inspection, they shall be listed by the owner/architect/engineer and provided to the contractor. This list shall be recognized as the final deficiency list for purposes of completing the contractor s guarantee obligations under the contract. 5
6 SAMPLE CERTIFICATE OF SUBSTANTIAL PERFORMANCE To Owner And To Contractor Date of Inspection.. Project Address In accordance with the contract dated. between the contractor and the owner, hereby certifies that, WITH THE EXCEPTION OF THE ITEMS LISTED ON THE ATTACHED PAGE, 1. (a) the work or a substantial part thereof is ready for use, or (b) the work is being used for the purposes intended; and 2. The work to be done under the contract is capable of completion or correction at a cost of not more than $... The contractor and his sub-contractors shall continue to work towards total completion. Provided no liens are registered, holdback monies withheld under the contract are due and payable 46 days after the date of this Certificate. Architect/Engineer. Signed by Distribution:.. Date. Owner Contractor (This is a sample only of the Certificate of Substantial Performance, referred to as Appendix A in the index) 6
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