Differing Site conditions in a typical en

Contract document

1. CONSTRUCTION CONTRACTS
DIFFERING SITE CONDITIONS

Chapter – 15

2. THE FEDERAL DIFFERING SITE
CONDITIONS CLAUSE
•Type I Differing Site Conditions
–Refers to physical conditions encountered in work that differs
materially from a condition indicated in contract documents
–Two facts must establish a type I differing conditions
•The contract document must have indicated a physical
condition in a certain way
•When condition encountered during actual performance-
found to be materially different
–Example: Finding wet, sticky clay at a location in an excavation
where soil boring logs indicated that material would be damp
sand
–In absence of this clause, it constitutes misrepresentation on
owner’s part if differing site conditions are found

3. THE FEDERAL DIFFERING SITE
CONDITIONS CLAUSE
•Type II Differing Site Conditions
–Refers to a physical condition encountered during work that
differs materially from conditions normally expected in the type
of construction work
–Here difference is not between encountered conditions &
indicated conditions but between encountered conditions & the
conditions considered normal or usual for the construction work
–To establish Type II differing site conditions contractor must
prove that condition encountered is truly unusual and thus not
anticipated when contract was signed
–Example: Finding a material in an excavation that, even though
identified correctly on the soil boring logs, behaves in a manner
materially different from the material’s usual behavior

4. THE FEDERAL DIFFERING SITE
CONDITIONS CLAUSE
•Duty of contractor to give notice
–Contractor must notify promptly whenever differing site
conditions are encountered and “before such conditions are
disturbed”
–The purpose is to provide an opportunity for the
government to view and investigate the condition to verify
that the condition is, in fact, a differing site condition
–No claim for relief after final payment on the contract
–A secondary purpose is to provide the government the
opportunity to direct the actions to be taken by contractor in
dealing with differing site condition

5. THE FEDERAL DIFFERING SITE
CONDITIONS CLAUSE
•Duty of government to promptly investigate
–Once notified, the government has a positive duty to
investigate the condition and make determination that it is,
or not a differing site condition
–Failure to investigate promptly and make a determination in
good faith is a breach of contract
–If government determines the condition not a differing site
condition, contractor may accept the decision or with any
other contracting officer’s decision, dispute the
determination under provisions of dispute resolution clause

6. THE FEDERAL DIFFERING SITE
CONDITIONS CLAUSE
•Equitable adjustment provided
–If contracting officer finds that condition is a differing site
condition that increases or decreases the cost or time for
performance of work, an equitable adjustment will be made
to contract price and time
–This promise is indisputable and cant be overridden by
other contract provisions
•Differing site conditions and Government liability
–Differing site conditions clause is not an exculpatory clause
–In type I conditions, clause does partially exculpate, or
remove, the stigma of fault or blame associated with a
breach of contract by government, but it does not operate to
relieve the government from liability

7. THE FEDERAL DIFFERING SITE
CONDITIONS CLAUSE
–It explicitly establishes government’s liability for costs and
contract time to overcome the condition
–Provides an orderly process by which contractor may claim
and recover costs through an equitable adjustment to the
contract
–This clause provides contractual remedy
–
Without contractual remedy contractor’s only avenue is to
sue the government for breach of contract, alleging
misrepresentation (in Type I condition) or non disclosure of
superior knowledge (in type II condition)

8. OTHER DIFFERING SITE CONDITIONS
CLAUSES
•The right to relieve based on differing site conditions is not an
implied right of contract
•No right of relief unless contract contains this clause
•In some contracts analogous clause is titled “Changed
conditions” or “Concealed conditions” - important to read
them carefully
•Does the clause cover both Type I and Type II conditions?
–Wording of clause is important in determining whether
both type I and type II differing site conditions are included
–
Type I is generally included; some differing site conditions
don’t include Type II

9. OTHER DIFFERING SITE CONDITIONS
CLAUSES
•Does the contract contain conflicting exculpatory clauses?
–Example
•If contract contains soil boring logs and a differing site
conditions clause, the contractor is clearly protected if
adverse soil conditions different from those indicated in
the boring logs are encountered
•If the contract also contains a clause stating that the
owner will not be responsible for the accuracy of soil
boring logs, an obvious conflict has been created
–Current judicial and administrative trend is to favor
differing site conditions clause over exculpatory clauses- on
basis of “precedence of contract documents clause”

10. OTHER DIFFERING SITE CONDITIONS
CLAUSES
•What are the notice requirements?
–When differing site conditions are encountered contractor must
notify promptly to “before such conditions have been disturbed”
–If “lack of notice did not prejudice rights of government” in
anyway then recovery under clause not barred
–Prejudice- caused by both denying opportunity to make
investigation & by precluding the opportunity to direct and
control course of action to be taken to deal with the condition
–In federal contract clause- failure to furnish is not necessarily
fatal
–In other contracts-prompt furnishing of notice is a “condition
precedent” to recovery
–Courts inclined to give full force to literal interpretation of
clauses rather than “no prejudice to the rights of owner standard”

11. OTHER DIFFERING SITE CONDITIONS
CLAUSES
•What are the owner’s responsibilities under the clause?
–Government’s contractual duty to investigate and determine
whether the conditions encountered are differing site
conditions
–Contractor has legitimate right to know whether owner
agrees with conditions encountered and whether cost &
time adjustment will be forthcoming
–If time extension is not forthcoming then, the rate of
performance has to be accelerated, a costly undertaking
–Federal clauses imposes the duty of making prompt
investigation and determination on government
–In other contracts if no contractual duty is imposed on
owner then contractor is in a very disadvantageous position

12. REASONS FOR DENYING DIFFERING SITE
CONDITIONS CLAIMS
•Lack of notice
–Most differing site conditions clauses require contractor to
furnish prompt notice, sometimes (as in federal clause)
before conditions are disturbed
–Lack of notice can bar an otherwise valid claim if prejudice
to the owner’s interests can be shown
•Difference not material
–To qualify as either Type I or Type II differing site
conditions, the difference must be material
–
Marginal differences are not sufficient

13. REASONS FOR DENYING DIFFERING SITE
CONDITIONS CLAIMS
•Failure to conduct an adequate pre-bid site inspection
–If pre-bid site inspection is conducted- site conditions
discovered- additional costs could be included in bid
–Most bid documents strongly suggest to conduct pre-bid
site inspection
–Contractor’s failure to make an adequate pre-bid site
inspection can be effective in barring the different site
conditions claim
–
On other hand contractor will not be held responsible for
discovery of latent conditions or be held responsible for
failing to make “a critical analysis of the plans and
specifications”

14. REASONS FOR DENYING DIFFERING SITE
CONDITIONS CLAIMS
–
Latent condition is one that is hidden or not obvious

–Patent condition is obvious

–Generally bidding contractors are only expected to note
patent conditions in pre-bid inspections

–If condition is not patent - contractor’s failure to discover
them will not bar a later claim for a Type I condition

15. DEALING WITH DIFFERING SITE
CONDITIONS
•Prompt written notice
–The importance of prompt written notice to owner cannot
be overemphasized
–Notice should be given before conditions are disturbed
–Although constructive notice may have occurred, written
notice is far preferable
–Example for constructive notice: contractor encountering a
differing site condition during excavation when owner’s
inspector was present
–Written notice should also request owner for proper
investigation and to issue a determination that differing site
conditions have been encountered

16. DEALING WITH DIFFERING SITE
CONDITIONS
•Request for owner’s instructions
–The contractor should request the owner’s instructions or
directive on how to deal with encountered conditions
unless there is only one possible course of action
–
Contractor should advice that contract performance will be
delayed if instructions or directive from owner is not
received within reasonable time

•Failure to receive determination or receipt of adverse
determination
–If owner fails to make determination or determines that
encountered condition is not differing site condition-
contractor must assume no cost or time adjustment will be
there

17. DEALING WITH DIFFERING SITE
CONDITIONS
–Unless contractor is prepared to concede the matter, owner
should be advised in writing that contractor disagrees with
determination and is reserving all rights under contract
–A claim should be then filed under disputes resolution
provisions for later adjudication
–In the interim, contract work must be continued according
to owner’s instructions with no guarantee that an equitable
cost or time will ever be received

18. DETERMINATION OF THE EQUITABLE
ADJUSTMENT
•Adjustment in contract price and time-determined by
agreement between contractor and owner
•Equitable adjustment may also be determined by others as per
dispute resolution clause
•In either case, contractor must prove the performance cost
increases and impact of overall contract performance time
extension
•Differing site condition clauses in many contracts provides
that price and time adjustment be determined by provisions of
changes clause
•Force account provisions should be employed only to
determine the direct cost portion of equitable adjustment to
which demonstrable indirect costs & reasonable profit added