Confusion and lack of consensus over what a construction project punch list or punch-out list is and what it isn’t, contribute mightily to project conflict in the close out stage of most any construction project – big or small. However, if proper guidelines are established, better understandings could be reached with more satisfactory outcomes for all parties. This post will explore some strategies that could help mitigate or resolve most of this sort of conflict.
It is necessary to first define what a project punch list is, and isn’t. The punch list is chiefly intended to represent works in progress, or incomplete works, and secondarily remaining unstarted work. The two should be kept separated for as long as possible. At a certain point, unstarted work may be added to a punch list. This is typical of delayed projects, with the list work increasing in correlation with a delay. Owners like to pack the list, as the practice results in delaying their payments.
For example, installing hardware is typically one of the final activities on a project, which is why it often lands on punch out lists. This practice gives a false impression of both contractor performance and list volume. The cause of this phenomenon is frequently that the list is issued too early, and is conflated with unstarted work. The technical argument goes that if an activity hasn’t begun, it doesn’t belong on the list – even on a delayed project.
If the unstarted work is late or threatens the critical path, there is an argument to include it as punch-list work, however, I would categorize such work separately as remaining work. Part of my reasoning is that the confusion that arises between the two can unfavorably skew or impact contractor payment applications. Since the list has no value in a project continuation sheet ((AIA G703) line items of activity costs,) activities are indexed based on the percentage incomplete.
At a certain point, for example, when all remaining work is in final progression, most – if not all such work will be designated as punch list work. This clarification should help to minimize the length and duration of the punch list. A contractor prefers remaining work to be on the list, as opposed to incomplete work on the payment application. In order for that process to work, activity remaining scope must be bona fide punch list, or as I like to say – substantially complete.
For example, if fire alarm system programming is 95% complete, it has 5% effort remaining. That is different from punch list designation. Fire alarm punch list can be described as adjustments made after all points have been run out and programmed, with only some tweaks and adjustments remaining. A fire alarm system is all or nothing, which is an argument for fire alarm work not to be included on the list.
A contractor, in his zeal to close out a project, may also preemptively issue a punch list. For example, before substantial completion, which is a good milestone or transition point to mobilize for punch list work. That’s because the primary focus is on substantial completion – not the punch list. In order for that to happen, there has to be consensus on the substantial completion of individual activities.
Design teams and ownership prefer to develop their own lists, however, best practice is for a contractor to generate his own, regardless of third-party lists. However, there has to be consensus on the prevailing document or conflict will be likely. Design teams and owners frequently issue preemptive punch lists in an attempt to push a job, or merely to gain leverage. This causes a lot of unstarted work to erroneously be posted on the list.
Another phenomenon that bedevils contractors is the tendency of design teams and ownership to continually add to the list; tantamount to ‘moving the goalposts.’ This action is typical when a list has been issued too soon. For this reason, I like to notify ownership in advance when the time for punch list issuance is near. I also warn them that there is only ever one working list in sway – the original.
The trouble with overly burdensome punch lists is that they delay contractor payment. That’s because it’s improbable to valuate a punch list in a way that reflects the true cost of all renaming work, therefore, line items are left hanging at 95 or 99% – often for months on end. I offer as a strategy that a punch list having a value between 1-5% would be more accurate and effective in closing out line items and work in place: once distinct scopes of work are ready for the list, they are marked as 100% complete less their share of value. However, it is the non-consensus of the value of remaining work that makes this calculation tricky, and even harder to gain ownership buy-in.
