What Is Practical Completion in Construction? 

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Navigating the complexities of construction projects can be challenging, especially when understanding key milestones that signal progress. Among these milestones, Practical Completion (PC) stands out as a critical phase that allows Project Owners to begin using their new spaces, even if some minor tasks remain.  

This blog explains what practical completion in construction entails, and how to progress to the project’s official completion. We will also highlight the importance of engaging project management services and professionals such as a Client-Side Project Manager or  Owner’s Representative and a Superintendent, which is the key role in achieving practical completion in construction. 

Note: In this post, the terms “Client”, and “Project Owner” are used interchangeably, as they often are in the industry. 

What is Practical Completion in Construction?

Practical completion (PC) in construction refers to the stage in a project where the work is deemed sufficiently complete according to the contract, allowing the Project Owner to take possession of the property. At this point, the work can be used for its intended purpose, although minor tasks and finishing work may remain.  

Practical completion in construction simply means the project meets initial contract requirements, allowing the Project Owner to start utilising the space. Once PC is achieved, attention shifts towards final completion, which is the next milestone in the project lifecycle. 

The Contractor-Side Project Manager will often collaborate with the Client-Side Project Manager to undertake this process. Once the PC is reached, the Project Owner can take possession of the project and begin preparing the space to be used for its intended purpose. 

Substantial Completion vs. Practical Completion

Substantial Completion is a key milestone in a construction project. At this point, all major building systems are working, and the structure is considered safe to occupy, even if there are minor issues or unfinished tasks. The remaining tasks are listed by the Superintendent in a “punch list” to be addressed as soon as possible. 

Practical Completion, on the other hand, means the project is fully operational and fit for its intended purpose, despite the existing minor defects. It indicates that the work has been completed to a satisfactory standard and that the space is ready for its intended use. At this stage, the Superintendent issues a certificate of practical completion to make it official. 

How is Practical Completion in Construction Determined?

Determining practical completion involves a formal inspection process, usually led by an architect, engineer, or project manager. This inspection verifies that the completed work aligns with contractual and technical requirements.  

When a contractor expects to reach Practical Completion, they must submit a Notice of Practical Completion to the Superintendent at least 14 days before the planned completion date. This triggers a detailed inspection of the construction site to confirm that the project meets all plans and specifications. Any defects or unfinished work will be noted during this process. 

If the project meets all required standards, the Superintendent will issue a Certificate of Practical Completion to formally confirm that the contracted work is complete. If there are any issues or unfinished tasks, the Superintendent will provide a detailed list of what needs to be addressed to reach PC.  

Importance of Practical Completion in Construction

Practical completion carries significant legal, financial, and operational weight for the Owner and all other stakeholders involved in a construction project: 

  • Operational Readiness: Achieving practical completion means that the building can be used for its intended purpose. This allows businesses or Project Owners to officially move in or start operations. 
  • Warranty Periods: At this stage, maintenance responsibilities transfer from the Contractor to the Project Owner. However, this does not mean the contractor’s work is finished. In most contracts, this is when retention is released, allowing the contractor to be paid for their work. The Defect Liability Period (DLP) also begins at this point, during which the contractor is responsible for fixing any defects to ensure the building meets quality standards.  
  • Financial Implications: For Project Owners, achieving practical completion can significantly impact cash flow management. It marks the point where operational revenue can begin to be generated, which is particularly crucial for commercial ventures and Capital Works. Furthermore, it allows for the potential release of funds that were withheld as retention, providing increased liquidity.  

Does Practical Completion Start the Defect Liability Period?

Yes, Practical Completion signifies a critical milestone in the construction process, marking the start of the Defects Liability Period. During this phase, the contractor assumes responsibility for addressing and rectifying any defects identified at the handover stage. To ensure the project meets the required standards for Practical Completion, a thorough inspection is typically conducted by a Superintendent. This process provides a clear framework for resolving outstanding issues during the Defects Liability Period. 

The Role of the Client-Side Project Manager in Achieving Practical Completion

The Client-Side Project Manager acts as a single point of contact between the Project Owner and key stakeholders like architects, engineers, contractors, subcontractors, suppliers, and regulatory authorities. Their role begins way before construction even starts, leading the team in setting clear project goals, design specifications, a well-planned construction budget, and a comprehensive project schedule. They also develop a detailed project plan to ensure all requirements for substantial completion and practical completion are met. 

Unlike a Contractor’s Project Manager, who is employed by the builder and focuses on the builder’s interests, the Client-Side Project Manager represents only the Project Owner, ensuring that every aspect of the project aligns with his/her expectations and interests. You may learn more about the distinctions between the two roles in this article. 

Practical Completion serves to protect both the Project Owner and the Contractor, signifying that all contractual obligations have been fulfilled. It also marks the commencement of warranty periods under the defect’s liability framework. In Australia, standards such as AS4000 and AS2124 define the roles and responsibilities of parties in construction contracts, including provisions governing Practical Completion. 

Understanding practical completion is essential for owners and investors involved in construction or land development and marks a significant milestone that allows stakeholders to move forward with their plans while ensuring compliance with legal obligations. Contact us or request a proposal via our website to see how we can help you achieve your construction goals in and around Sydney and Australia. 

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