It may be prudent here to clarify what evaluation is. Evaluation is basically a process which:

Two complete, half size, sealed, and signed sets of the plans and specs itemized below are forwarded to the Consultant. Plans are to be an exact duplicate set of those submitted to the Department of Buildings and the Lender. A list of the drawings from the architect’s office should accompany the drawings forwarded to the Lender’s representative, which references each drawing as to the date of preparation and last revision date. If one of the sets is not stamped “Approved” by the Building Department, a letter should then accompany the plans from the architect’s office confirming that the documents are an exact duplicate set of those approved by the Building Department. Copies of all revised drawings (with revisions indicated) and specification addenda should be forwarded as issued. One (1) complete set of existing building plans and specifications (as-builts if available) should also be forwarded. The documents should include the following:

But prior to conducting normal site visits, one of the first and most important steps in the design phase is a design kickoff or orientation meeting. This is usually scheduled by the Project Manager at or about the time that the contract with the Design Professional is executed and approved, depending upon the project. The main attendees at this meeting generally include the main stakeholders and participants with an interest in the project, including the design team, cost estimator, commissioning agent, and owner. The agenda generally includes introduction of personnel involved in the project, discussion of administrative procedures, discussion of project scope, budget and schedule, and a site visit and walk-through. The Design Professional/Project Manager should record attendance and prepare and distribute an agenda and minutes of the design kickoff meeting. The Design Professional should also prepare a project directory of all participants, including name, title, address, e-mail address, phone, and fax.

The preconstruction phase of a project is probably just as important as the actual construction phase. During the preconstruction phase, the rules and boundaries of the project are determined and defined, including the overall scope of work. This phase also allows us to identify any potential problems and to create a complete building plan. By having a complete plan, the project’s estimated cost can be determined as well as its schedule for completion, permitting, and other factors. The most important goal of comprehensive drawings is to make sure that the project is completed on time and within budget.

Upon awarding the project and the contractor commences work on site, the project Consultant or Administrator representing the Lender shall periodically visit the site and walk the entire project to observe the construction progress in conjunction with and for the purpose of reviewing each monthly construction draw application for payment throughout the entire duration of the construction project, unless notified otherwise by the Lender. At the time of the regular monthly site visit the Consultant/Administrator shall conduct a separate walk-thru of the project, to determine the percentage of completion and subsequent to review of the draw application for payment. The purpose of this walk-thru will be to observe and determine, in detail, the quality of workmanship and materials, and conformance to the contract documents.

Prior to the advent of digital photography, site progress photos were typically Printed to 3½ × 5 in. formats for inserting into standard reports. However, today digital cameras have transformed the industry and are now almost exclusively used to document construction progress (although video is also sometimes used). The objective of photographing a project whether an existing building or one under construction is to document representative conditions and use reasonable efforts to document typical conditions present including material or physical deficiencies, if any. There are several formats that can be used, but Consultants most often use one of two templates depending on the Lender’s needs. These consist either of two photos per page or six photos per page (Fig. 4.4). Captions explaining each photo are helpful to more clearly explain and convey relevant information regarding the project. It is also sometimes helpful to add an arrow pointing to the particular item of interest in the photograph for maximum effect.

During the scheduled site meetings the Borrower’s payment requisitions are reviewed and evaluated by the Consultant/Administrator usually on the basis of accurate quantities of work in place and approved. Following the on-site inspection the results are compared with the Borrower’s requisition for funding for work in place up to the time of the inspection. Any discrepancies should be promptly resolved, preferably prior to submission of the requisition to the lending institution. The main purpose of closely monitoring the flow of construction loan dollars is to ensure that, at any given time during the life of the loan, that sufficient funds remain in the undisturbed portion of the loan to complete the project. Any delays in the work should be promptly reported to the Borrower and Lender.

The Lender has the final say on whether or not stored materials will be funded, and if so, how? In many cases, lenders have indicated their willingness to negotiate this item. However, the Lender must exercise great care and ensure that the funding procedures for stored material comply with the Building Loan Agreement (BLA) requirements. So unless specifically authorized by the Lender, the Consultant/Administrator has no contractual authority to approve stored materials. This should be clarified in the general conditions or supplemental conditions. If funding for stored materials is requested, the Consultant/Administrator will note and report to the Lender how the materials are protected from theft, the elements, and vandalism. The Consultant/Administrator should inspect the insurance certificates for the same to ensure that the Lender is named as a co-insured. Likewise, the Consultant should inspect the invoice, bill-of-sale, a Uniform Commercial Code statement or a contract verifying the cost of the materials in question.

Although we often may not be able to escape them, we can try to minimize the hassle and anxiety they can cause by employing the correct procedures. Change orders are in fact changes to the contract (a legal document) and are themselves legal documents. Once a change order is executed, it becomes part of the contract, and cannot be reversed. The only way to make further modification to a contract is to process another change order. The owner is required to provide a schedule and copies of all approved change orders as well as a schedule of pending change orders. Change orders should not be approved unless they have been previously approved by the owner, and there are sufficient funds within the contingency budget to absorb them. After the Owner completes the review of the Proposal Request and approval for the Change Order is obtained, the Administrator shall prepare a Change Order, as outlined in the Contract Documents, utilizing AIA Document G701 or its equivalent. The Change Order will be produced in (3) three copies and forwarded to the Contractor for signature. The Contractor’s signature on the Change Order request acknowledges that the work will be completed as described in the Change Order for the stated amount (Fig. 4.6). Any additional time, if requested, for the Change Order work will be incorporated into the Change Order. Failure by the Contractor to request additional time for the Change Order work will prohibit the Contractor from doing so at a later date. The need for contract changes may be the result of many causes. Among the most common are:

Retainage is the withholding of certain portions of monies due a contractor for work in place or monies withheld from each progress payment earned by a contractor or subcontractor until a construction project is complete. It acts as an incentive to complete the work, and is one of the line items identified on the contractor’s application for payment. It has been the subject of considerable discussion over recent years and it is quite apparent that many lending institutions do not have a uniform practice on either the amount of retainage or the manner in which it is collected. It is routinely called for in both private and public construction contracts. On public projects, state laws often require the use of retainage and specify the amount and the conditions for releasing it. Otherwise, retainage is governed by contract.

Many standard General Conditions have been developed by numerous trade and professional organizations, but perhaps the most widely used general conditions are those published by the AIA, AIA Document A201 2007 form of General Conditions and the ConsensusDOCS 200 form of General Conditions. Of note, ConsensusDocs just released an entirely updated standard IPD agreement and new IPD Joining Agreement (ConsensusDocs 300). One of the advantages of using the AIA standard is that most contractors and architects are familiar with it. However, many state organizations and universities, etc., have their own standard general conditions depending on the project.

The Supplemental Conditions amend or supplement the Standard General Conditions of the Construction Contract and other provisions of the Contract Documents, and whereas general conditions can apply to any project of the type being designed and built, supplemental conditions or special conditions usually deal with matters that are project specific and beyond the scope of the standard general conditions and although they generally augment them. These sections may either add to or amend provisions in the general conditions. Below are examples of project-specific information that may appear in this section:

Project closeout is the final action to be taken in the construction process. Yet before the Designer of Record (DOR)/Administrator is able to sign off and the owner takes possession of the building, certain requirements need to be met. For final completion and before final payment can be made a number of issues need to be addressed including the following:

The Consultant needs to conduct an inventory and review of construction documents which include, but are not limited to:

A lien is a “hold” against your property that, if unpaid, allows a foreclosure action, forcing the sale of your property or home. It is recorded with the County Recorder’s office by the unpaid contractor, subcontractor, or supplier. Sometimes liens occur when the prime contractor has not paid subcontractors or suppliers. Legally, the property owner (Borrower) is ultimately responsible for payment—even if they have already paid the prime contractor. The Borrower (owner) is required to provide copies of all partial/full waivers of lien from subcontractors, vendors, etc., to the Administrator, normally on a monthly basis, usually with the payment application (Fig. 4.7). These partial waivers are to accompany each general contractor and subcontractor requisitions on a monthly basis. While most borrowers execute them on a monthly basis as the project progresses, some prefer to wait until the project is completed and submits them with the final request for payment. In some cases the borrower may request that upon signing the contract the subs waive their right to lien the job. Waivers should be properly organized, stating what trade they are for and included as exhibits in the report. As a project approaches completion, copies should be obtained of all lien waivers. For any that are not forthcoming, recommend to the Lender that they be obtained or deducted from the retainage. The four main types of lien waivers are:

The review of testing results should normally be undertaken on a monthly basis. A set of Contract Documents should be submitted to the construction testing agency for their review prior to the commencement of any construction. The testing agency will provide a copy of their current rate schedule for types of test work and also provide a budget estimate for the specific project for the Owner’s review and to make a determination. Upon the owner’s acceptance and approval, the owner and/or Administrator will authorize the testing agency in writing to proceed with required tests. After the administrator reviews the billing with the owner and/or architect, it is given to the owner for payment. The contractor’s is responsible for coordinating and scheduling required testing activities for the project. The different types of testing reports received (concrete, mortar, timber, etc.) should be recorded and whether or not they’re in compliance with the design specifications. Any test results that fail should be brought to the attention of the owner requesting an explanation before deciding what action is to be taken. A letter may be sent to the DOR noting the failed test and requesting comment, depending on the test’s significance and its impact on the project.

The day-to-day activities that take place on the job site are generally monitored with the use of daily work logs. The owner should provide a copy of a typical page from the project’s daily work log for the day prior to the Administrator’s site visit and meeting. The contractor’s daily log will normally be submitted to the Administrator on a weekly basis. It will typically contain:

Project Schedules are to be provided which consist of monitoring the progress of the contractor and subcontractors relative to established schedules and making status reports to the owner. Upon reviewing them, the Administrator may discuss how the project stands with respect to the owner’s construction schedule and/or the target date for completion. Any factors contributing to delay or progress should be mentioned (e.g., good weather, a strike, tight management, etc.). If the initial construction schedule is revised, the owner should submit a copy of the revised schedule to the Administrator. Fig. 4.8 is a construction schedule to monitor how the work is progressing in relation to the contractor’s schedule. The Project Construction Schedule shall be prepared in accordance with the Contract Documents in either PERT, BAR, GANTT, or C.P.M. format. The Project Construction Schedule shall be updated each period by the Contractor and verified by the Administrator to ensure that the schedule is always up to date and accurate. The updated Project Construction Schedule shall form part of each monthly Application for Payment and shall also be included in the Administrator’s monthly PSR.

Periodically and depending on the project, various meeting will take place at the job site throughout the construction process, most of which are well scheduled in advance. Depending on the type and size of project and the agreement between the Lender and the Administrator, these meetings are usually held at regular intervals, usually on either a bi-weekly or monthly basis unless an unscheduled special meeting is called to address special issues. The main purpose of these meetings is to discuss and review the project’s progress and to provide a forum in which the main participants (administrator, contractor, subcontractor, architect, engineers, and others) can discuss their concerns as well as a submitted application for payment. These meetings are usually chaired by the project Administrator and can be fairly formal in nature with a written agenda. Meetings are normally recorded and the minutes are distributed to all the participants within a week of the specified meeting.

It is necessary for all materials stored on site be in a secured area. Where the contractor is requesting funds for stored materials, a stored materials schedule for such materials should be delivered to the PM and the Application for Payment and Sworn Statement of General Contractor (AIA Document G702) or equivalent document must list the dollar amounts of all stored materials. All such items must be verifiable by the Consulting Professional.

Subcontracts and purchase orders are typically signed during the general course of construction, and thus copies of these should be provided to the Administrator. If this is a general contractor built project where subcontracts are not to be made privy to the owner, then the Lender usually requires copies of all major subcontractor trade payment breakdowns prepared on a percentage of completion basis instead of a dollar amount.

To assure the owner that the contractor will complete all obligations set out in the contract, a Performance Bond is often stipulated in the general conditions provided that no action by the owner or the owner’s agents prevents or inhibits the contractor from the implementation of the contract requirements. However, it appears that lending institutions have started to lessen their emphasis on “bonded” contracts. A number of lenders have been disappointed to find they are involved in extended litigation after invoking the very bond they looked to for protection. Moreover, bonding companies often will not bond an owner-builder. Although a number of title companies previously offered a “completion guarantee” designed to assure interim lenders that their project would be completed, but due to suffering extensive losses these title companies have largely withdrawn such policies. Indeed, the most perilous and defining phase of the delivery of a new project is the actual construction. The construction phase, due to the infinite number of inherent risks associated with the activity, rises far above the other phases of the project delivery when claims, failures, problems, and defaults are taken into consideration.

The contractor will sometimes issue RFIs to the Administrator or owner for clarification of design information or to present any other questions; it includes a summary log containing the status of each request. It is a formal procedure and each inquiry and response should be tracked and documented. To avoid potential litigation, it is critically important to get a quick response. They often originate from a subcontractor, vendor or craftsmen who need certain information to continue working. Most contractors have a standard format that they use to keep the RFIs consistent throughout the contract.

Prior to the commencement of any building construction, the owner is required to apply and receive a building permit for the project from the local authority. This may be the single most critical aspect of the preconstruction process; sometimes it is acquired prior to the bidding process. A delayed permit can cause considerable hardship and project complications. Building permits also contain inspection schedules and zoning ordinance for the project. A copy of the ordinance under which project was approved as well as copies of all variances, approvals and declaration, and any other zoning information or approvals pertinent to the project should be in the possession of the owner, DOR, and the Administrator. Other permits and approvals need to be provided such as:

Contractor must furnish as-built record drawings made from the Architect/Engineer’s Contract Drawings, or subsequent updates thereof, annotated and with actual as-built conditions. Most contracts stipulate that the contractor maintains a set of As-Built (sometimes erroneously called record drawings) as the project progresses. As-built drawings record actual dimensions, locations, and features that may differ from the original contract documents and must show all changes in the Work relative to the original Contract Documents; as well as additional information of value to Owner’s records but not indicated in the original Contract Documents. When the drawings are in an electronic format, the contractor may be required to correct the drawing files and highlight the modifications. An example of this is the location of underground utilities which differs from the original drawings. In such cases, the contractor would be directed (normally in writing) to make the change, whereas the design professional fails to make the necessary modification as they are the responsibility of the general contractor. It is usually stipulated that the contractor submits a final complete and accurate set of as-built drawings to the owner prior to receipt of final payment. As-Built plans represent the existing field conditions at the completion of a project. Accurate project plans are sometimes needed for possible litigation involving construction claims and tort liability suits.

Certificates of Compliance can apply to various issues such as discrimination and affirmative action, subcontractor work, etc. The general contractor must agree and certify compliance with applicable requirements of the contract documents. The Certificate of Compliance is valid for a limited time, say, 180 days, and it is the responsibility of the contractor to renew the Certificate prior to the expiration date, while the project is still in the construction phase. Temporary Certificate of Compliance may often be issued for a portion or portions of a building that may safely be utilized prior to final completion of the building. In this respect the contractor also agrees to obtain compliance certifications from proposed subcontractors prior to the award of subcontractors exceeding an agreed sum as per contract documents. Furthermore, the Contractor is required to coordinate the efforts of all subcontractors and obtain any required letters of compliance from the Administrator or Owner’s consultant. The Owner is usually required to pay any fee associated with these letters. However, the Contractor shall reimburse the Owner for any costs resulting from failed tests or inspections conducted to obtain a letter of compliance. This reimbursement procedure is spelled out in the contract documents, and should be made as part of a credit change order.

The Contract Documents will define the date of Substantial Completion and is considered to be the date which the Administrator, Owner, and/or Architect will certify that the work, or designated portion of the work, may be beneficially occupied or utilized by the Owner for its intended use. For this purpose, the AIA G704 standard form is used for recording the date of substantial completion of the work or a designated portion thereof. This process takes off when the Contractor considers the work, or designated portions of the work as previously agreed to by the Owner, is substantially complete; The contractor then prepares and submits to the Administrator a punch list of items which remain to be completed or corrected. The AIA G704 form provides for agreement the time to be allowed for completion or correction of the items and the date when the owner will be able to occupy the project or designated portions thereof. The form will also designate responsibility for maintenance, heat, utilities, and insurance. If the Administrator concludes that the work is substantially complete, the AIA form is then prepared for acceptance by the contractor and owner. The failure of the contractor to include any items on the list will in no way alter his responsibility to complete or correct these items per the Contract Documents. Likewise, where there is no architect to certify substantial completion, the AIA Document G744–2014 can be used which requires the owner to inspect the project to determine whether the work is substantially complete in accordance with the design-build documents and to identify the date when it occurs. The AIA Document G744–2014 is a variation of AIA Document G704–2000 and provides a standard form for the owner to certify the date of substantial completion.

The Contractor’s final punchlist will be given to the Administrator for review of the list and the completed work to determine whether the list is both accurate and complete. Items which require correction and/or completion, that are not included in the contractor’s punchlist, shall be supplemented by the Administrator. The Owner should be informed that the items on the punch list shall be rectified and/or completed within the time limit set forth in the Certificate of Substantial Completion. The Contractor shall also be advised that any correction and/or completion of punch list items shall be conducted in a manner so as not to adversely affect or disrupt the Owner’s occupancy of the facility.

A CO is a document issued by a local government agency or building department certifying that the building in question complies with all applicable building codes, safety codes, health code requirements, and other laws, and basically stating that the building is in a condition suitable for general occupancy. The procedure and requirements for the CO vary widely from jurisdiction to jurisdiction and on the type of structure. In the United States, obtaining a certificate is generally required whenever a new building is constructed, or when a building built for one use is to be used for another (e.g., an industrial building is converted for residential use). Likewise, a certificate is required when the occupancy of a commercial or industrial building changes, or ownership of a commercial, industrial, or multiple-family residential building changes. The purpose of this certificate therefore is to document that the use is permitted, and that all applicable safety code and health code requirements have been met.

Once the project in hand is finished, the contractor is usually required to complete a final lien waiver (Fig. 4.10). The general contractor is also required to obtain conditional final waivers from each subcontractor, vendors, and certain individuals prior to final payment being released. A final lien waiver is basically a document from a contractor, subcontractor, material supplier, equipment lessor, or other parties to the construction project stating they have received full payment and waive any future lien rights to the property. It should be noted that in the United States, liens cannot be filed against public property. Moreover, some states only use a conditional waiver on progress payment and an unconditional waiver on final payment.