Practical Completion

The contract administrator certifies practical completion when the contracted works have been completed. This certifies that half the retention can be released, liability for liquidated damages ends, and the defects liability period begins. There is debate around what constitutes minor incomplete works that do not prevent occupancy. The defects liability period is for rectifying post-completion defects, not incomplete work. The administrator must balance completing the project with outstanding defects to avoid liability issues.

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Practical Completion

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Practical completion

The contract administrator certifies practical completion when all the works described in
thecontract have been carried out.

Practical completion is referred to as 'substantial completion' on some forms of contract, particularly in

the United States.

Certifying practical completion has the effect of:

 Releasing half of the retention (an amount retained from payments due to the contractor to
ensure that they complete the works).
 Ending the contractor's liability for liquidated damages (damages that become payable to
the client in the event that there is a breach of contract by the contractor - generally by failing to
complete the works by the completion date).
 Signifying the beginning of the defects liability period.

Documentation that should be issued to the client on certification of practical completion might
include:

 A draft building owner's manual.

 A building user's guide.
 The health and safety file.
 The building log book.
 A construction stage report.

Once the certificate of practical completion has been issued, the client takes possession of
the works for occupation.

There is no absolute definition of practical completion, and case law is very complex. There is some
debate about when practical completion can be certified and whether it can be certified where there
are very minor (de minimis) items 'not affecting beneficial occupancy' that remain incomplete.

It is important to note however, that the defects liability period, which follows certification ofpractical
completion, is not a chance to correct problems apparent at practical completion, it is the period
during which the contractor may be recalled to rectify defects which appear followingpractical
completion. If there are defects apparent before practical completion, then these should be rectified
before a certificate of practical completion is issued.

This can put the contract administrator in a difficult position, as both the contractor and theclient may
be keen to issue the certificate (so the building can be handed over), and yetdefects (more than a de
minimis) are still apparent in the works. Issuing the certificate couldrender the contract
administrator liable for problems that this causes, for example in the calculation of liquidated
damages, the position in relation to performance bonds and the release of retention when it is not
certain that the works will be completed.
If the contract administrator is put under pressure to certify practical completion even though
the works are not complete, they might consider informing the client in writing of the potential
problems of doing so, obtaining written consent from the client to certify practical completionand
obtaining agreement from the contractor that they will complete the works and rectify anydefects. If
the contract administrator is not confident about the potential problems, they may advise the client to
seek legal advice.

On construction management contracts, a separate certificate of practical completion must be issued

for each trade contract. Once all trade contracts (or all trade contracts for a particularsection of the
works) have been issued, the construction manager issues a certificate orproject completion (or
sectional completion). The same is true on management contracts, where each works contract must
be certified individually.

Practical completion is not a term recognised in some recently developed contracts such asPPC
2000 and other partnering contracts which simply refer to 'completion'. This can put thecontract
administrator in a difficult position as to when the project becomes 'useable' by theclient.

If the project reaches a stage when the intended use by the client (either immediate use, such as
installing furniture or fitting-out, or actual occupation by the end users) is possible, safely and without
affecting warranties, then the project may be deemed 'complete'. The size and extent of the list of
outstanding works and defects requiring rectification will be the measure on which the contract
administrator judges whether completion has actually been achieved.

If practical completion is not certified by the most recently agreed completion date, then
thecontractor may be liable to pay liquidated and ascertained damages to the client. These are pre-
determined damages set at the time that the contract is entered into, based on a calculation of the
actual loss that the client is likely to incur if the contractor fails to meet thecompletion date.
Some contracts require that a certificate of non-completion is issued as a pre-requisite to
deducting liquidated and ascertained damages.

NB: Sectional completion refers to a provision within construction contracts allowing

differentcompletion dates for different sections of the works. This is common on large projects that are
completed in sections, allowing the client to take possession of the completed parts
whilstconstruction continues on others. Sectional completion differs from partial possession in that it is
pre-planned and defined in the contract documents.