Regulation of Construction Completion Acceptance

One of the most important steps in the administration of a construction project is the granting of formal acceptance upon the project's completion (acceptance). It is important for project owners and contractors to understand the regulatory requirements of acceptance in order to define their rights and obligations in the acceptance process, particularly to avoid a mismatch or confusion between the contractual acceptance procedures and the regulatory requirements.

The two kinds of acceptance which must be given so that the project is legally complete and may be put to use: (i) specific regulatory acceptance granted by the relevant government agencies if the project has complied with government regulations, and (ii) the project owner's acceptance if it is satisfied with the work performed by its contractors.

Local and state governments have traditionally invested in most of China's construction projects and, up until five years ago, acceptance of construction projects was a government function. Before the State Council's Construction Project Quality Administration Regulation became effective in January 2000, acceptance of a construction project, depending upon the scale of the project, was either conducted by the relevant local government or by the State Planning Commission (the predecessor of the National Development and Reform Commission (NDRC)). Under this latest regulation, acceptance is organized by the project owner, while the local and state governments' roles are to ensure planning and zoning compliance, health, safety and environmental protection.

However, the government agencies still organize the construction project acceptance directly in projects where public interest, national security or state funding is of key concern, for example, in transportation infrastructure, public utilities, telecommunication projects and major national projects like nuclear power plants.

Regulatory acceptance

Normally, specific regulatory acceptance is conducted before the project owner's acceptance is granted. Specific regulatory acceptance must be conducted by the relevant government agencies in charge of planning, fire fighting, environmental protection and labour protection.

Planning acceptance is needed to confirm the construction project's compliance with planning requirements, while fire fighting acceptance is required to check the fire-fighting safety conditions and facilities. Environmental protection acceptance ensures environmental compliance and the readiness of environmental protection facilities. Labour protection acceptance is needed to check the working conditions and test the labour/health protection facilities at the workplace.

Project owner's acceptance

The project owner is responsible for arranging the completion acceptance for its construction project. The project owner's acceptance is granted if all parties are satisfied with the work carried out by the contractor(s), subject to regulatory supervision by the state and local government. Such regulatory supervision is effected through quality supervision and after-acceptance filing.

Throughout the construction, a government entity under the construction administration authority will carry out quality supervision through random inspections until the project's completion. When construction is complete, the project owner must notify the station in advance of its readiness for the project owner's acceptance. The station will then administer and record the conduct of the project owner's acceptance. The station is authorized to order the relevant parties in the project owner's acceptance to correct any non-compliance with construction quality regulations. The station is required to submit its quality supervision report to the construction administration authority within five days of completing the administration of the project owner's acceptance.

The project owner is required to file a list of items required by the government including its acceptance of the construction project and the specific regulatory acceptance with the construction administration authority within 15 days of these being provided. If the project owner fails to file the acceptances within the specified time, it will be subject to a fine (ranging from Rmb200,000 (US$24,800) to Rmb300,000) and may not be able to obtain the title registration document for any edifice constructed under the project.

The construction administration authority will review the project owner's acceptance and the specific regulatory acceptance filed by the project owner. If the authority does not find any non-compliance, it will accept the filing and the acceptance of the construction project will be legally complete.

Public interest projects

For the construction of projects affecting public interests, national security or state funding, the acceptance of a construction project is organized directly by the relevant government authority and its local counterparts in each sector. For example, the Ministry of Communications is the administrative authority for port and highway projects, the Ministry of Railway is in charge of railway projects and the NDRC is responsible for nuclear power plants. In these sectors, the acceptance is normally conducted in two steps: preliminary acceptance and official acceptance. In some of these sectors, the preliminary acceptance may be organized by the project owner, but the official acceptance needs to be conducted by the relevant government agency.