Capital and Infrastructure Improvements:


Failure to Prosecute Work (Failure to Perform)


When a Contractor fails to diligently pursue the work, the Construction Administrator and the Director/AVP should call a meeting with the Contractor, identifying a lack of diligent pursuit or non-compliance of the work. The Construction Administrator should present to the Contractor a clear list of items and issues; and emphasize to the Contractor the seriousness of the situation. Give the Contractor an opportunity to correct these issues and to exhibit diligent pursuit (3 to 4 weeks), but notify the Contractor that failure to correct will bring into play Public Contract Code Section 10843(a), a five-day notice. Written documentation of the discussions and agreements in this meeting shall be sent to Contractor. The Director/AVP is encouraged to discuss the situation with the Chief of Construction Management, CPDC, and the campus attorney of the Office of General Counsel. Construction Administrator may proceed with PCC Section 10843 subsections (a) or (b) as warranted. The Construction Administrator should copy the bonding company on all such correspondence.

Punch lists: Campuses may use Public Contract Code Section 10843(a) to force completion of a punchlist. Document issuance of a complete and detailed punchlist. At the end of each week review and document the progress on the punchlist. A punchlist, even on a large project, should be completed in four to six weeks. If at the end of four-to-six weeks, you have a documented case of lack of diligent pursuit, issue a five-day formal notice to the Contractor under Public Contract Code Section 10843(a). Be prepared to take over completion of the punchlist if the Contractor continues to fail to diligently address the punchlist, and deduct the cost of completion from the Contract amount. This process gives you the ability to take control of the project and to file completion.

Bankrupt Contractor:  When a Contractor goes bankrupt, send a five-day notice to the Contractor, pursuant to Public Contract Code Section 10843(b), with a copy of the letter to the bonding company. The bonding company needs to enter into a takeover agreement, and assign a takeover Contractor. This may take as long as two to three months.



Occupancy / Completion / Release of Retention


Insurance for Completed Projects:  Copy the Campus Risk Manager on the Notice of Completion so that the Risk Manager may arrange to put the project into the CSU Property Insurance Program.

Occupancy:  CGC Article 4.09 allows CSU to occupy all or a portion of the project prior to completion. The Construction Administrator should require that a detailed punch list be produced prior to any occupancy, and also a written certification of occupancy should be obtained from the State Fire Marshal's Office. If the elevators are to be used the State Elevator Inspector must also sign a certificate of use. The detailed punch list is required at this stage so as to properly determine the responsibility for any work remaining.

To document occupancy: The Contract General Conditions require the Construction Administrator to issue a field instruction to the Contractor, noticing the Contractor that the campus will be taking beneficial occupancy of all or portions of the project on a specific date at a specific time, to be followed up with a change order.

The change order should contain: punch list documenting the state of completion; a list of all warranties started upon occupancy; notice that the project is being added to Campus property policy; any other terms and conditions of occupancy. If the Contractor's insurance premiums are increased due to liability for occupancy, the change order should include these additional costs. Normal procedure is to assume liability for occupancy and place the building and occupants in the State's property insurance program. The Trustees may reduce liquidated damages on all or a portion of the project, in accordance with Contract General Conditions, Article 7.02.


  • Such occupancy shall not constitute acceptance;
  • Does not relieve Contractor of responsibility for correcting deficient work found at any time before formal acceptance and during the guarantee period
  • Does not necessarily stop liquidated damages, but may cause them to be modified.Unless the contracting parties agree in writing to start warranty early, the minimum 12-month warranty period starts upon the acceptance date as stated on the Notice of Completion.

Liquidated Damages:  Liquidated damages may be assessed on projects that are not completed within the contract time. Notify the Contractor that the contract time has expired and that liquidated damages are in effect. Request the Contractor submit reasons, if any, why the contract date should be extended. Liquidated damages cease on the date of acceptance on the Notice of Completion.

Contractor Evaluations:  Construction Administrator shall file a Contractor Evaluation with the Trustees (CPDC) for all major projects, which aids in the Contractor prequalification process. As part of the prequalification standards, the Prequalification Coordinator is retrieving a minimum of three references for every contractor requesting prequalification. If you are called upon to submit a reference for a contractor, please do so timely.

Retention Payment: Process the contractor’s final payment request (retention payment) timely. Public Contract Code Section 7107(c) requires release of retention within 60 days of completion. Completion is defined by statute with four different meanings. Public Contract Code Section 10851 partially defines completion as a cessation of labor.  Cessation of labor is the single most important factor for completion.  A Notice of Completion must be filed within 10 days of cessation of labor to be valid. PCC Section 7107(f) describes a charge of two percent per month that may be assessed against a public entity for not making timely payments in accordance with the provisions in the section. The retention payment should be processed at the end of the 30-days Stop Notice period following recordation of the Notice of Completion, holding funds as necessary for incomplete work or Stop Notices.

Retaining Project Records:  It is strongly recommended that project records be retained a minimum of five years and preferably 10 years to assist in any latent defect claim. Retainage of approved submittals and shop drawings, plus inspection and testing records, are invaluable for latent defect claims. Prior to destruction, the Construction Administrator shall make a copy of the contract and bonds, notice to proceed and completion. Also make a list of the service agreements (inspection, testing and design) for that project. Retainage of as-built plans and operations and maintenance manuals should be for the life of the building or equipment as applicable.


  • SUAM Sections 9830-9832, 9834-9835 
  • CM Procedures Manual, Section 30 Public 
  • Contract Code, Sections 7107, 10853