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Are you negotiating Project completion-related clauses comprehensively in SITC Contracts?

  • Writer: Arvind Dang
    Arvind Dang
  • Apr 2
  • 6 min read

This article includes the following aspects.

  1. What are the implications in case project completion checklists are non-

          Comprehensive?

2. What are nine key activities that must be carried out  before initiating the project sign off

3            Five types of  Checklists to be negotiated by the contracts team

         i) Checklists for Risk Avoidance

         ii) checklists for Critical Design & Documentation to Collect

         iii) checklists for Regulatory Compliance & Approvals

         iv ) checklists for Final Payment Release

         v ) checklists for change management & contract adjustment

4.   Common pitfalls in negotiation related to project completion clauses

5.    What must be included in the Agreement to make it robust ?

1. What are the eight implications if project completion checklists are non-comprehensive?

In SITC contracts, the completion of the project isn't just about installation—it’s about ensuring the system is fully functional, tested, and commissioned as per agreed performance parameters 

Therefore, project completion-related clauses must be drafted comprehensively. With each contractor

Listed below are eight  adverse  implications in the case of the inadequacy of clauses

✔️ 1 Unverified Installations – Equipment may be improperly installed, leading to breakdowns, costly rework, and penalties

✔️ 2 Testing & Commissioning Gaps—If systems are not tested under real operating conditions, failures may emerge after completing the project.

✔️ 3 Payment Disputes with contractors  – Delays vis-à-vis project completion milestones

✔️ 4 Legal & Warranty Issues – Missing clauses & their documentation can weaken contract enforcement and void warranties.

✔️ 5 Unresolved Snag Lists – Small pending issues can escalate into major operational failures.

✔️ 6 Post-handover failures leading to financial losses.

✔️ 7 Non-compliance with contract terms

✔️ 8 Legal liabilities due to incomplete documentation  and non-compliances


2 What are nine key activities that must be carried out  before initiating project sign off

  1. Obtain the project completion checklist and 13 types of as-built drawings (soft copy + 3 original hard signed copies )from the SITC contractor.

  2. Takeover of Catalogues of the equipment under the scope of the  contractor  for operations & maintenance purposes

  3. Takeover of Subcontractor’s and vendor’s  purchase orders/contracts or agreements signed by the principal  contractor for the client’s project for future reference

  4. Obtain list and physical availability of tools, essential spares, documents & reports in relation to SITC-work  under the scope of the contractor

  5. Collect All Warranty certificates with validity periods

  6. Collect Annual maintenance contracts if awarded

  7. Obtain Statutory certifications & payments made/returns filed

  8. Physical  handover of the project to the client

  9.  Training of the Facility management for equipment operations & maintenance, etc

To accomplish the above, the Contract team must negotiate with each contractor ,5 types of checklists and incorporate these as essential clauses as per the following details.


3–Five types of  Checklists to be negotiated

Five Checklists to be prepared (containing 24 aspects) for

  1.  Risk Avoidance (6 aspects)

  2. Critical Design & Documentation collection  (3 aspects with  13 types of design/drawing documents)

  3. Regulatory Compliance & Approvals (4 aspects)

  4. Final Payment Release (8 aspects)

  5. Change management & contract adjustment-related aspects (3 aspects)

 

3(i) Contents of checklists for risk avoidance



6 aspects

Negotiate  & incorporate the below clauses in the agreement  with each contractor as per the scope of work in the SITC Contract

✔️1 Physical completion verification

✔️ 2 Bill of materials/quantities approval

✔️ 3 Testing & commissioning approval

✔️ 4 Final inspection & snag list clearance

✔️ 5 Warranty liability confirmation for supplies related to the contract

✔️ 6 Defect liability confirmation for activities  related to installation, testing, and commissioning

3(ii) Contents of checklists for critical Design & Documentation to be  collected

3 aspects



Negotiate  & incorporate the below clauses in the agreement of each contractor vis-à-vis the scope of work in the SITC Contract

✔️ 1 As-built drawings & system layouts (13 types identified )

✔️ 2 Equipment manuals & O&M guidelines

✔️ 3 Spare parts & inventory lists

The suggested 13 types of designs & drawings to be collected are listed in the next slide.

13 types of designs & drawings

The suggested 13 types of designs & drawings to be collected from a Principal contractor ( for a manufacturing project) are listed below, subject to applicability as per the scope of work.

  1. General Arrangement (GA) Drawings

  2. Process Flow Diagrams

  3. Piping and Instrumentation Diagrams:

    1.  Piping,

    2. Valves,

    3.  Instruments,

    4. Control systems for processes like cooling, lubrication, and compressed

    5. And so on

  4. Electrical Layout Drawings:

    1.  Power distribution diagrams,

    2. Lighting layouts,

    3. Control panels,

    4. Cable routing,

    5. Power requirements for machinery and utility systems.

    6. And so on

  5. Structural Drawings for laying heavy equipment, including material handling

  6.  Mechanical Equipment Layouts

  7.  HVAC and Ventilation Drawings

  8.  Utility and Service Drawings

  9. Material Handling Drawing

    1. Conveyors

    2. Robots

    3. Automated guided vehicles etc

    4. And so on

 

  1. Control System Drawings

  2. Fabrication and Assembly Drawings for: a)Custom-built equipment/SPM

        b)Jigs & fixtures c) Tooling and so on

  12. Safety and Compliance Drawings

   13. Detailed 3D Models (Optional & if possible)

3(iii) Contents of checklists for Regulatory Compliance & Approvals (subject to applicability



4 aspects

Negotiate  & incorporate the below aspects in the agreement of each contractor vis a vis the scope of  work in the SITC  contract .

✔️1 Design & Plan Approvals – Ensure all drawings, layouts, and specifications are sanctioned by relevant authorities.

✔️ 2 Work-in-Progress (WIP) Approvals – Obtain necessary stage-wise inspections and compliance certificates during project execution as per local regulatory bodies

✔️3  Statutory Returns & Fees Paid – Verify payment of government levies and local authority fees.

✔️ 4 Final Regulatory Sign-Offs – Ensure occupation & completion certificates, fire safety approvals, pollution control compliance, environment clearances and other aspects  are secured.

 

3(iv) Contents of checklists for Final Payment Release



8 aspects

Negotiate  & incorporate the below aspects in the agreement with each contractor vis a vis the scope of SITC work.

 

 ✔️1 Recovery of liquidated damages for late completion

✔️ 2  Retention of a  portion of the payment until the final acceptance is confirmed

✔️ 3 Availability of Performance Guarantees with appropriate extended period towards works/ package performance and warranties/defect liabilities  post-installation

✔️ 4  Ensure Payment reconciliations

✔️ 5  Carry out  client-supplied material reconciliations✔️ 6  Recovery of insurance claims lodged  by a contractor on behalf of the client

✔️ 7  Availability of formal signing off of the measurement books for works accepted.

✔️8 Complying with all contract obligations

3(v) Contents of checklists  for Change Management & Contract Adjustments

The contract team must carry out the following 3 activities related to change management, in consultation with the project team



  1. Evolve  Procedures for handling changes in scope, design, or schedule.

  2. Determine the Approval process for change orders.

  3. Methodology to assess the Impact assessment of changes on cost and timeline

Once the above has been done, change management-related check list/clauses need to be developed and incorporated as mentioned in the following slide 

3 aspects

Negotiate  & incorporate the below clauses in the agreement. of each contractor vis a vis scope of the SITC contract

 

✔️1 Approved variation orders-methodology

✔️ 2 Regulatory compliance approvals

✔️ 3 Updated computation for the amount payable towards changes in :

  1. Design of the project

  2. Scope of work,

  3. Associated bill of materials

  4.  Installation, testing & commissioning services,

  5. Associated equipment & manpower

  6.  Substitute materials,

    vii Excess authorised consumption of the bill of materials

    4.  Four Common pitfalls in negotiation related to project completion clauses

     

    ✔️1  Vague wording of clauses

    ✔️ 2 Responsibilities  of contractors not defined explicitly✔️ 3 Timelines for each milestone—supply, installation, testing, commissioning & handover of completed project not defined clearly in the agreement

    ✔️ 4 Exact procedures, criteria, and authority for acceptance not  defined completely/clearly in the agreement

     

    5. What must be included in the Agreement to make it robust? -90 clauses

    The negotiating team must ensure a comprehensive agreement containing

    1. Capturing of  approved scope  at each line item level for supply as well as SITC

    2. Detailed bill of quantity with rates /Prices and approved brands and escalation methodology, pricing approach  for substitute items /extra items

    3. Duration of agreement, value, and validity period

    4. Quality standards applicable to BOM equipment & work in progress, and end product, inspection & testing requirements

    5.  Project milestones, coordination with other site contractors, and a monitoring mechanism

    6. Payment & other terms and prerequisites for RA  (running account) bill passing, and methodology for QS (quantity survey) /quantity measurements and certifications.

    7. Obligations of contractors and clients,

    8. Define clear escalation and dispute resolution mechanisms

    9. Tender  including drawing and specification, Clarifications (both technical & commercial)

    10. Quotes of this approved contractor with whom the agreement to be executed

    11. All communications, including those related to Negotiation

    12. Legal and statutory clauses and requirements, compliance updates, confidentiality, health & safety, jurisdiction, termination clauses

    13. Responsibilities for signing agreements,

    14.  Amendments  to the agreements (approving authority), and so on

    15. As per compilation by this author, overall, a robust agreement must cover 90 clauses related to Inspection, testing & commissioning based on the above aspects.(In addition to 50 clauses related to the supply of materials, domestic + Imports covered in my earlier YT presentations)

      Of course, more clauses can be added based on Industry-specific & Package specific considerations.

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