Substantial completion

Usable for its intended purpose — as this contract defines it

The concept substantial completion expresses is practical usability: the works can be used for what they were built for, and the items still open are minor enough not to interfere with that use. Everything past that sentence is negotiated. Which tests must have passed, whether a defined capacity result is a condition, how large the punch list may be, what value is withheld against it, and who certifies — all of it lives in the specific agreement.

The forms differ visibly. A FIDIC contract issues a taking-over certificate and then runs a defects notification period that closes with a performance certificate. A US-style lump-sum turnkey EPC uses substantial completion followed later by final completion. An owner's own form may add conditions neither of those contemplates. So the honest statement is that substantial completion means what your contract says it means; there is no statutory definition to fall back on, and importing one from the last project is how two parties end up arguing about a milestone they both believed was standard.

What actually transfers on the certificate

Care, custody and control of the plant pass from the contractor to the owner. Risk of loss moves with them — from that point a fire or a storm is the owner's exposure, not the contractor's, which is why the insurance handover has to be aligned to the same milestone the policies themselves name. On a financed BESS the construction all-risk policy and the operational policy commonly hand over at the commercial operation date; if that is not the milestone at which care, custody and control moved, someone has left an uninsured window in between. Check it with the broker, not only with counsel.

Two clocks change direction on the same day. The contractor's workmanship warranty and defects-liability period start running, which is the owner's reason not to let the certificate be issued early — an early certificate spends warranty on a plant that is not yet in service. Delay liquidated damages stop accruing, which is the contractor's reason to push the other way. The certificate is adversarial by construction, and the owner's engineer earns their fee deciding which punch items are genuinely minor.

Delay LDs and performance LDs price different failures

Delay liquidated damages price time. They accrue per day from the guaranteed completion date — derived from the NTP date plus whatever extensions of time the contractor has established — until substantial completion is certified, and they are a pre-agreed estimate of the owner's loss from lateness: revenue not earned, debt serviced on a plant that is not running, an offtake or interconnection deadline drawing closer.

A cap exists, it is negotiated, and what drives it is how much of the owner's real exposure the contractor's balance sheet and price can absorb. Above the cap, the loss stays with the owner, insured or not. The EPC entry carries the ranges commonly seen on this asset class.

Performance liquidated damages price capability. They buy down a plant that arrives on time and short — capacity below the guaranteed figure, round-trip efficiency below guarantee, availability below the demonstrated threshold — usually as a lump sum computed from the shortfall against a stated rate per MWh or per efficiency point, under its own separate cap, with an aggregate cap sometimes sitting over both pots.

They are separate pots because the failures are independent: a plant can be on time and short, or late and perfect, and one should not exhaust the other. On a BESS the performance pot attaches almost entirely to the capacity test result, which makes the test protocol the real subject of the negotiation — which MWh figure, measured at which boundary, at what ambient and SOC window, over how many cycles, with auxiliary load netted or excluded.

There is also a tail the payment does not settle: the energy demonstrated at test becomes the warranted beginning-of-life baseline that the degradation table counts from, so a buy-down pays once for a plant that stays thinner for its whole life. Most contracts therefore set a floor below which the owner can require correction or reject the works rather than accept money.

Substantial completion and COD: read the documents, not the convention

In some contracts they are the same event. Substantial completion is defined to require the capacity test, permission to operate and market registration, and the certificate and the COD declaration land together. In others substantial completion comes first: the contractor has finished, the owner has accepted, delay damages have stopped, and the plant still cannot sell because market registration or the offtaker's own notice conditions are outstanding. Both are normal arrangements. Neither is the rule.

What is common and is not normal is a project where the EPC contract and the offtake define their milestones independently and run separate LD clocks against them. The contractor achieves substantial completion and stops paying delay damages; the owner goes on paying the offtaker's delay damages for another six weeks while an ISO test slot is found. That gap is less a drafting accident than a failure to reconcile two documents negotiated by different teams. Reconciling them is cheap before signature and expensive after.

Final completion, and what is left

Substantial completion is not the last certificate. Final completion — or final acceptance, depending on the form — comes when the punch list is closed, as-builts and O&M manuals are delivered, spare parts are handed over, in the US lien waivers are collected, and the remaining retention is released.

It is administratively dull and financially real: retention withheld through construction is typically released in stages, part at substantial completion and the balance at final completion, and that outstanding balance is the owner's last practical leverage to get the punch list finished. Once it is paid, the only remedy left is the warranty.