James Bessey ‘Practical completion’, like beauty, is in the eye of the beholder, but if you get it wrong on a PFI project then things can turn very ugly indeed…
The concept of practical completion (or PC as it is commonly known) will be familiar to most people in the industry, particularly contractors seeking to achieve that objective at the conclusion of a project. Over the years there have been many arguments as to what is and is not PC and when exactly it is achieved. However, on any basis PC, under the standard forms of contract such as the JCT, is something less than an absolute completion of all elements of the work. The very word “practical” admits that certain things are still to be done, albeit in their nature minor or not so significant as to prevent the building from being taken over or used.
However, it is an unwise contractor that assumes the same rules apply to various other forms of contract, such as PFI. With projects of this kind, the contractor must invariably fulfil a form of completion that is recognised by a process of certification and is linked to design and construction standards that are akin to “fit for purpose”. This frequently involves an independent third party in the role of a tester or certifier.
There are a number of reasons why contractors would be well advised to be wary of completion and its implications in relation to PFI projects. First, there is the problem of definition of the works and their completion. It is vitally important in any PFI project to be clear as to exactly what is going to be presented as “complete” at the conclusion of the works. This is especially important where the project involves a mix of refurbishing an existing building and new works. The danger is that the end user will require the old works that have been refurbished to be of the same standard as the new. In practice, this is often incredibly difficult to achieve.
Second, having carefully decided what is going to be provided to achieve certification under the contract, there is the issue of achieving that to the standard required by the end user. The problem with PFI projects is that frequently the end user can be defined a little bit wider than the trust or general public. Typically, there is another effective “user” for the contractor’s end product, which is the facilities manager of the building in question. A facilities manager normally wants to be presented with a pristine building. If not, he will be worried that his costs will be substantially higher in providing the service he is obligated to under his agreement.
The contractor therefore has to be careful that he does not hand over a building that does not meet the approval of the independent tester or certifier or that can be objected to by the facilities manager.
Normally the facilities manager does not have a direct right of objection. He does however have an effective influence because he can object to the commencement of his services on the basis that the building is not the one that he contracted to service.
There are a number of reasons why contractors would be well advised to be wary of completion and its implications in relation to PFI projects
Again, it is an unwise contractor that overlooks the influence that the facilities manager can bring to bear on the certification process.
The third issue is really that of time and takeover, remembering that under a PFI concession the unitary payment does not flow from the authority until the project is “available” for use in the manner contemplated by the project agreement. Of course, not all projects run to time and indeed are frequently late.
One of the great risks in PFI projects is either letting the end user in, to placate their complaints, or being forced to agree that they can take partial possession under contract.
Why is this a risk? Well, it may have been difficult to get the project to certification level when it was empty, but that can become nigh on impossible when the building is occupied. Painting a hospital that is in use is a difficult, time-consuming and thankless task. The reality therefore is that there is a substantial practical risk in not completing on time in a PFI project. Once the end user can take a form of possession under the contract things can get very difficult indeed.
So what is PC for one contract is irrelevant on another. Being practical about it, if it is PFI then just “complete” will do nicely.
James Bessey is a partner in the construction department of Cobbetts