Introduction:
Towards the end of a construction project, it is common practice to develop a list of all the aspects still left to be completed. This is commonly called a punch list inspection as the appropriate parties walk through the project and check off the list those items successfully completed and those remaining to be done correctly. Until the punch list is passed, the project is not considered finished, and the final payments will not be made.
This should not be confused with passing building department inspections or engineering inspections. The punch list often contains items not central to the safety or engineering portion of the project, simply matters that the owner wanted to be installed and completed.
As an example, an interior stairway must meet specified safety requirements imposed by the engineer and the local authority, such as the height of the railing and the strength of the steps. Those must pass building inspections. But if the owner wanted carvings on the railings made of fine wood, the completion of the carvings properly installed would be on the punch list.
Normally, the general contractor prepares the punch list that lists any work that has not been completed, satisfactorily or has not been installed correctly. The punch list, also known as a snag list, a deficiency list, or a punch-out list, is created before the final inspection to outline all remaining work, and the contractor, project owner, and any other key stakeholders can add to it. This normally includes the owner, the architect, and any interior designer whose work is part of the project. If there is a construction agent for the owner, he or she is also involved.
A construction punch list normally follows the terms of the original construction contract and its change orders. Before completion, the contractor and customer will reach a mutual agreement before considering the project complete and ready for final payment. Typically, the contract includes the right to withhold payment until all the items have been completed correctly.
Usually, these are “minor” matters in terms of the larger construction project. It is seldom foundation, roofing, walls, or windows, but instead the painting, cabinet work, detail work, etc.
A construction punch list will typically include the following items:
Interior or exterior issues
Incorrect installations, as with flooring or cabinetry
Mechanical issues related to thermostats, ductwork, and appliances
Anything additional that was damaged during the course of the project, such as a cracked driveway, broken plumbing, or flawed drywall
Any unaddressed items outlined in the original contract
While many other things can be added to a punch list, essentially, punch lists are normally limited to small or minor fixes that must be completed before a project is officially closed out. Since no building project will ever be perfect, contractors may make a distinction between reasonable flaws (minor, insignificant flaws that still meet contract specifications) and more serious flaws (errors that must be fixed). A punch list identifies unreasonable flaws for correction. Larger issues are usually addressed through a change order.
The Basics of Punch Lists:
Punch lists help to justify retention, which is the amount of money that is deliberately withheld at the end of a construction project to ensure the contractor follows up on the punch list and completes all work. Additionally, retention also helps to ensure that all work conforms with everything that was outlined and agreed upon in the construction contract and change orders. Usually, the retainage accounts are around five to ten percent of the original contract price and both the owner and the architect normally sign off on the release of retention.
There are two main tasks in the punch list process: creating the punch list and, second, correcting the deficiency or agreeing on a resolution. A contractor will create a punch list to address both minor flaws and major fixes and set up a walkthrough with key stakeholders (project owner, architect, construction consultant, and other subcontractors).
During the walkthrough, all stakeholders point out any issues they notice and want to address before closing out the project. Typically, designers and architects join the walkthrough to review any changes to the original project and note items that must be changed or fixed. At this point, the contractor and relevant tradespeople address all variations or updates from the original specifications.
Once they outline all punch list items, everyone develops a plan to address the remaining tasks. The contractor provides a general time estimate as to when the project owner can expect the project closeout.
Construction Punch List Roles
There are many core people involved in the construction punch list process, including the project owner, the general contractor, subcontractors, and architects and designers.
Here’s a brief overview of each of the key roles in the construction punch list process:
Project Owner: The project owner is responsible for inspecting any completed work and assessing it against what was outlined in the contract. They can pose questions about how specific parts of the project were done and can add line items to the punch list. The project owner also uses the punch list to track project progress to ensure things keep moving. If there is a construction consultant for the owner, he or she accompanies the owner.
General Contractor: The general contractor’s main responsibility is to examine all key details and tasks associated with the project to ensure the project is complete thus far. The contractor reviews and prioritizes its items and creates a plan of action for the subcontractors to address the fixes and make the proper corrections.
Subcontractors: The subcontractors are responsible for addressing the items on the list that they have been assigned by the general contractor. The subcontractor is also responsible for following up and communicating changes in the project as they occur to keep the general contractor in the loop, so everything can be appropriately reflected in the final checklist.
Architects and Designers: The architects and designers are responsible for confirming that all designs were built and followed through, based on the original contract specs.
Construction Consultants: These are usually the Project Owner’s representative and agent and interact with the construction professionals to protect the Owner’s interest. That would include engaging in the punch list process.
Typical Punch List Procedures on a Properly Performed Project:
Maintain a Rolling Checklist: Instead of waiting until the end of the project to start a punch list, add potential tasks as the project progresses. Use this running list to create workflows and set project standards so you can improve accountability across the team. Consider holding daily check-ins to run through this checklist and ensure work is staying on track and that you’re addressing all questions.
Document and Photograph Everything: As the project continues, be sure to document every part of the process - and even take photographs, when necessary. This way, one can prevent having to redo work and justify why things were done the way they were.
Perform Regular Inspections: Throughout the life of the project, perform routine inspections to ensure the highest quality work is being performed. Use the punch list format for the inspections so one can check in on all safety and quality measures during each job visit. That way, one can make fixes as issues arise, instead of waiting until the end to create a massive punch list.
Use a Cloud-based Punch List: It is extremely hard - and outdated - to track punch list items on paper. Using pen and paper leads to too many inefficiencies and errors, and severely hinders collaboration among stakeholders. Instead, create, track, and manage all of the punch lists using a cloud-based tool that enables real-time conversations in the context of the work being done, as well as immediate updates that keep everyone informed. One should be able to store all documentation in a central location that everyone can access. As the project progresses, all contractors, subcontractors, designers, and project owners will have visibility into progress.
Assign People Specific Items to Manage: To ensure that all work gets done, assign every task on the running list to a specific team member and note deadlines to keep everyone accountable. One person (usually the general contractor) should be responsible for assigning line items and detailing exactly what needs to be done.
Set a Budget: Construction projects are known to run over budget, so make sure to set a budget from the beginning. Staying on track leads to benefits, including fewer cut corners and unnecessary scrambling, a reduction in conflicts, and easier and faster project completion.
Be Open to Feedback and Suggestions: Before one can check an item off of the punch list, every construction professional and the owner and owner’s agents must agree that it is complete and ready to go.
Pitfalls to Avoid When Creating and Completing a Construction Punch List
Complication with Lien Rights: Keep an eye on this date and keep the punch list manageable and doable within the specific timeframe. If necessary, get waivers on deadlines in writing.
Lack of Open Communication: Communication is essential throughout the entirety of a construction project. When one runs into an issue or roadblock that interrupts the original project plan, alert the contractor, project manager, and project owner immediately. That way, one can address problems as they arise, instead of leaving all of the fixes for the end of the project, which can delay it even further.
Lack of Written Documentation: Having documents, contracts, and photos of work helps prove that there is follow-through on promises and prevents additional work that was not originally outlined in the contract specifications. Keep photographic proof of work in case any unexpected damages or hiccups occur that cause pushback.
Lack of Understanding: Familiarization with every detail outlined in the contract is vital. This can prevent having to do extra work or paying for items that are outside of the original scope of work. The wise builder will understand the entire project.
An Unclear Budget: Construction projects are notorious for going over budget, and this usually happens because of unforeseen difficulties and change orders interfering with smooth construction deadlines. To avoid going over budget and accruing unforeseen expenses, set a clear budget from the start and stick to it as closely as possible. Allocate a certain portion of the budget to the punch list to eliminate unnecessary spending and keep the punch list moving quickly.
Improve Punch List Tracking and Collaboration with Good Software: From pre-construction to project closeout, keep all stakeholders in the loop with automated updates so one can anticipate problems and make better, more informed decisions. Such software is readily available and as central to the modern company as any other tool.
Maintain a Rolling Checklist: Instead of waiting until the end of the project to start a punch list, add potential tasks as the project progresses. Use this running list to create workflows and set project standards so to improve accountability across the team. A good idea is daily check-ins to run through this checklist and ensure work is staying on schedule.
Document and Photograph Everything: As the project continues, be sure to document every part of the process - and even take photographs, when necessary.
Perform Regular Inspections: Throughout the life of the project, perform routine inspections to ensure the highest quality work. Use the punch list format for inspections so one can check in on all safety and quality measures during each job visit.
From pre-construction to project closeout, keep all stakeholders in the loop with real-time collaboration.
Material Breach of Contract and Punch Lists
Legal dictionaries and common law decisions define a “breach of contract” as a violation of one portion of a contract that does not excuse the non-breaching party’s performance but gives the non-breaching party the right to recover damages. Conversely, a “material breach of contract” is a substantial breach of a significant term or terms of a contract that excuses the non-breaching party from further performance under the contract and gives the non-breaching party the right to recover damages.
Most courts and arbitrators will not consider a very minor breach of a contract as a material breach allowing the injured party recovery. What is material versus too minor a breach is a matter of fact, given the size and scope of the contract or is often described in the construction contract.
As an example, assume a contractor installed fixtures that were as operable as the ones specified in the contract but from a different manufacturer. If the fixtures formed an inherent part of the aesthetic design of the project, most triers of fact would consider that material if the look of the fixtures was different than the ones specified. However, if the project was the restroom on a coal mining site, the trier of fact might consider that breach “nonmaterial.” If the contract itself defined the brand of fixture and stated any deviation is a material breach, the contract would prevail.
Most construction contracts and subcontracts define what events of default constitute a material breach that would permit the non-breaching party to cancel the contract and recover breach of contract damages. Punch list items, by their very definition, are usually minor matters that must be corrected or repaired, thus the issue of whether a punch list item is ignored or not fixed becomes often a question of whether it is a material breach of contract.
While the wise contractor or sub will take steps to correct punch list items, some have moved on to new jobs and simply will not take the time. That’s when the retention fund held by the owner comes in handy; for the owner will simply hold back from retention enough to cover all punch list items and let the contractor or sub commence action to claim it and explain why the punch list failure was not their fault.
Thus, the wording of the contract as to the material definition and use of retention fund withholder are the usual methods to handle disputed punch lists in the world of construction.
Conclusion:
A wise old contractor once told the writer that seventy-five percent of the problems that arise on construction projects stem from relatively minor issues, such as those that exist on punch lists. He commented that this was particularly true for residential projects.
Most homeowners will not know if the conduit is perfectly installed or if the plumbing is a half inch off in gravity feed, but all will note a window that does not open easily or paint that is off-color. Punch list items may seem minor to builders but almost always matter a great deal to owners and if one wants access to full retention, the process must be as carefully managed as the initial foundation work.