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Managing the project after practical completion

Learn how to transition a project following practical completion to the operations and maintenance phase.

Managing the project after practical completion is a key activity at the end of the delivery phase, before the project enters the operations phase. This stage involves key activities such as:

  • the defects liability period (DLP)
  • handover to the facilities team
  • post-occupancy evaluation (POE)
  • final payment or release of security, and
  • final completion.
  • The project has reached practical completion when:

    • works are complete in accordance with the contract, including any detailed drawings and technical specifications, with the exception of minor defects which do not reasonably prevent the completed works from being used for their stated purpose
    • all necessary commissioning tests have been carried out and passed
    • all certificates, warranties, guarantees, operational manuals and statutory sign-off have been received, and
    • essential documents and information have been provided to the superintendent (or project director depending on the procurement model).

    Note: Practical completion will also be triggered where the TAFE elects to take possession of the works before the works are fully completed in accordance with the drawings and specifications. As this also triggers the start of the defects liability period (DLP), the release of part of the security and the transfer of all project risk from the contractor to the TAFE, early occupation without regard to due contractual process, is strongly not recommended and should be avoided.

    The security is commonly split into two halves, with the first half released at practical completion and the remaining half released as the final payment at final completion.

    Final completion occurs at the conclusion of the defects liability period (DLP). Depending on the project's size and complexity, this may involve final payment or release of the remaining security, and will effectively end the contractual agreement between the TAFE and the contractor.

  • The defects liability period (DLP) is a period after practical completion and before final completion, which ensures the contractor (and where relevant, subcontractors) rectify any defects arising in their works. The DLP is governed by the contract and is usually twelve months in duration from the date of practical completion.

    The contractor (or where relevant, sub-contractors) will be responsible for rectifying defects that become apparent after the commencement of practical completion. These should not be confused with defects known at the time of practical completion, which the contractor should attend to within the period specified in the contract for the construction works, or defects caused by accidental damage, or normal wear and tear of the facility.

    For business-as-usual or low complexity projects – rather than a DLP, it is more common for the contractor to provide supplier warranties for the specified periods in the contract.

    As identified in the handover to facilities team checklist, you will need to understand:

    • which defects will require rectification by the contractor under the DLP, and
    • maintenance work that falls outside of the DLP.
    Handover to Facilities Team Checklist template

    Understanding the difference between a defect and maintenance requires you to understand the scope of works in the contract. Any item of work that was not included as part of the contracted works is not covered in the DLP. This work is therefore categorised as maintenance works to be undertaken as part of the TAFE’s asset management planning and is the responsibility of the TAFE, not the contractor.

  • After practical completion and during the defects liability period (DLP), the project team will hand over the project to the facilities team. To help facilitate a seamless transition, you should complete a handover to the facilities team checklist.

    Handover to Facilities Team Checklist template
  • Final completion occurs at the conclusion of the defects liability period (DLP) and involves a final inspection of the project works and the identification of any outstanding defects requiring rectification before the issue of the final completion certificate or documentation. Final Completion will trigger the contractor’s final payment, which effectively ends the contractual agreement between the TAFE and the contractor.

    The final payment is the remaining portion of the security held by the TAFE to guarantee the performance of a contractor and to safeguard against the cost of fixing defects in the event that the supplying contractor fails to satisfactorily rectify them.

    The structure of the final payment and its terms and conditions may be different, depending on the selected procurement model. The Department of Jobs, Skills, Industry and Regions (DJSIR) strongly recommends using unconditional bank guarantees in preference to other forms of security, including withheld (retained) cash or an insurance bond. This security is usually about 5-10% of the value of the works.

    At the end of the DLP, you should ensure the works are inspected and that all defects have been addressed before the balance of any securities is released.

  • What is a post-occupancy evaluation?

    A post-occupancy evaluation (POE) is a review of the project’s general performance, operations and normal maintenance activities (outside of the defects liability period). This is typically undertaken after the project has been operational for at least 12 months following practical completion. This allows a reasonable period to assess whether the asset or facility has met its intended function and its fitness-for-purpose. This review assists in planning for future similar facilities or projects.

    This differs from ‘lessons learnt’, which focuses on a review of how the project was run during the delivery phase to identify issues and improve the management of future projects.

    Objectives of the POE

    The objectives of the POE include to:

    • inform future service planning
    • confirm the fitness-for-purpose against the original intent of the project articulated during the project-need phase, and
    • identify any deficiencies in the operation of an asset and inform corrections, such as improving maintenance, minor works and operational decisions.

    Who should undertake the POE?

    As a POE is best practice asset management, quality management and quality assurance, it is recommended that the that:

    • cost of the POE is budgeted as part of the project, and
    • participation in the POE is included within the scope of any specialised consultants providing advisory services to the project during the procurement and delivery phases.

    The responsibility for initiating a POE rests with the TAFE. Depending on the project's size and complexity, a POE may be initiated by the:

    • project sponsor
    • project director
    • project manager, or
    • facilities team.

    Identifying stakeholders

    The stakeholders identified in the project brief will usually participate in the POE process. These stakeholders will likely include:

    When is a POE required?

    Whilst undertaking a POE is not a regulatory requirement, it is best practice. A POE may also be included as a requirement under the capital works funding agreement.

    There are mandatory requirements under the Asset Management Accountability Framework (AMAF)External Link that may be applicable to the project.

    Determining the scope and terms of reference for the POE

    The scope of POE will be dependent on the project’s size and complexity and the TAFE’s desired project outcomes.

    Considering the mandatory requirements under the AMAF, if applicable, the POE should include at a minimum:

    • evaluation of asset performance (Requirement 3.1.4 Evaluation of asset performance)
    • monitoring of asset performance (Requirement 3.1.4 Monitoring of asset performance), and
    • monitoring during operations (Requirement 3.4.2 Monitoring and preventive actions).

    High-value-high-risk projects

    As part of the gateway review process for high-value-high-risk projects, the Gate 5 reviewExternal Link (‘readiness for service’) is a mandatory review that occurs at the completion of the delivery phase, typically shortly after practical completion.

    This gateway review tests the project’s readiness to provide the required service by confirming the current phase of the contract is complete and documented, contract management arrangements are in place and current, and the business case remains valid.

  • A post-occupancy evaluation (POE) is a review of the project’s operational and maintenance activities and performance to determine if any lessons can be learnt; benefits realisation links directly back to the project need to examine the extent to which the project will deliver its intended benefits.

    High-value-high-risk projects

    As part of the gateway review process for high-value, high-risk projects, the Gate 6 reviewExternal Link (‘benefits realisation’). For OTCD projects, this typically occurs 12-18 months after practical completion; this can be confirmed with your OTCD representative.

    Gate 6 reviews are largely retrospective reviews that examine the extent to which the project has, or will, deliver its intended benefits. Specifically, the focus is on whether the project will deliver the benefits envisaged in the project-need stage. You should also examine potential risks in the operating phase which may impact the realisation of the project’s intended benefits.

    Business-as-usual, low complexity and medium complexity projects

    For projects which do not fall within the HVHR classification, a benefits-realisation review examines the extent to which the project has, or will, deliver its intended benefits.

    Similar to a POE, undertaking a benefits-realisation review will help inform future service planning and assess the success of the project envisaged in the project-need stage.

    For business-as-usual projects, it is not necessary to undertake a formal benefits-realisation review and instead, lessons learnt should be included in a lessons learnt register for future projects.

Reviewed 22 March 2023

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