Mastering the Project Closeout
It’s just as important to end strong as to start strong.
Wrapping up a project can seem like an uphill sprint at the end of a marathon. Between punch lists and paperwork, there’s always more to do than you expect, just when you’re ready to cross the finish line.
Dragging your heels during a project’s closeout — perhaps because you’ve already moved key personnel over to new projects or you weren’t doing your best during the project to eliminate punch list items — delays final payment, but that’s not all. A bad closeout execution is like missing the landing after a great gymnastics performance: It can leave a negative impression with the judges (in this case, the customer).
“Failure to observe the sanctity of closeout damages relationships and extends a firm’s risk profile,” wrote Gregg Schoppman, principal at FMI, in an article published in FMI Quarterly. Risk is extended because surety obligations aren’t released.
Here are some of Schoppman’s key pieces of advice for a more effective close-out, in a nutshell:
Use data to motivate teams to close faster
For example, analyze past projects and create a chart that correlates the number of punch list items at the end of a project with the length of time between substantial completion (the moment the project technically meets contractual obligations) and final acceptance. Seeing for themselves the impact of long punch lists on the timing of final payment can incentivize teams to keep a rolling punch list and tackle punch list items as they’re identified.
Another good metric to track, for some companies, is approved and outstanding change orders. Schoppman told Project Uptime, “The real issue is about waiting until the end to get the approval. If you are in closeout, it is important to compare approved/unapproved [change orders].” Analyzing the average margin for each project’s change orders may also be helpful in inspiring more effective change order management. Schoppman told Project Uptime, “If I have $250,000 of unapproved change orders and I wait until the end, it is highly likely I'll end up accepting 50 cents on the dollar or experience margin erosion.”
Change orders are a frequent cause of cost and schedule overruns. You usually can’t avoid change orders altogether, but you can take steps at the start of a project and during the project to reduce them.
RELATED: 5 Tips for Documenting Change Orders
Perfect your closeout processes
Just as some projects have a preconstruction phase with defined processes, Schoppman recommends having a “preconstruction phase for the last 10 percent.” The process for that phase should include an internal meeting to strategize the closeout and one or more external meetings with customers and/or trade partners. Agenda items might include the punch list and how to approach it, as-built status, final testing, owner training, equipment demobilization, and how the firm will handle any extra work orders that arise.
Some firms use dedicated closeout crews to swoop in at the end of a project and tackle punch list items, but according to Schoppman, that approach is fraught with pitfalls. When it works, it tends to be part of a well-reasoned strategy with clear rules of engagement. More important, noted Schoppman, successful closeout crew are formed “to drive superior customer service rather than serve as backstops for punch list costs.”
Remember that it’s the customer who decides when a project is done
“Many firms focus on their version of ‘done’ rather than the customer’s,” wrote Schoppman. The customer’s idea of ‘done’ “should be reinforced during the preconstruction phase as well as the closeout phase.” Define early and review often:
What documentation the customer expects, in what form, and the number of copies. They might include as-built documents, operations/maintenance manuals, etc.
The project’s punch list process.
Timelines for the owner’s vendors and suppliers. Often, a project can’t be considered “done” because a vendor that falls outside the purview of the GC wasn’t brought in early enough. It could be a kitchen equipment supplier or security contractor, for example. “The City or County or Permit Agency determines when a project is truly done, and if these outside vendors are not brought in early or not under the GC, a schedule could be delayed, which would impact everyone,” Schoppman told Project Uptime.
Project Uptime asked Schoppman for a few last words on successful closeouts.
“The last 10 percent is truly the most important time of the project, yet so many firms are preoccupied and focus on the first 10 percent. Consider the impact and image this has on the customer or end user. I heard one end user describe a construction firm this way: ‘They start like a thoroughbred but finish like a mule…’ This cringe-worthy comment is unfortunately more often the reality for too many firms.”
Marianne Wait is an editor and writer who creates content for Fortune 500 brands.