ConstructionPro Week, Volume: Construction Advisor Today - Issue: 138 - 12/16/2011

Are Site Condition Claims Obsolete on Design-Build Projects?

It is self-evident that design-build contracts place much more responsibility -- and risk -- with the contractor than a traditional contract for construction only. The parameters of that risk continue to be defined in the courts. A recent federal case calls into question the ability of design-build contractors to recover for differing site conditions.

 

The government solicitation for a fixed-price design-build contract included a soil investigation report. It was marked as “preliminary information only.” In a contract for construction only, a broad disclaimer of this nature is usually not enforceable. The contractor is entitled to reasonably rely on the subsurface information provided by the project owner. In this design-build contract, however, the contractor was responsible for retaining its own geotechnical engineer and responsible for the design of the foundation.

The contractor encountered subsurface conditions which differed materially from conditions indicated in the government’s soil investigation report. The contractor spent $4.5 million remediating those conditions. The contractor was denied additional compensation under the Differing Site Conditions clause, however, because the contractor was responsible for its own subsurface investigation as part of its design responsibilities. The contractor could rely on the government’s report only “for bidding purposes.”

 

What is your opinion on this matter? If the project owner’s soil report couldn’t be relied on during contract performance, was it reasonable to provide it for purposes of submitting a fixed-price proposal? Must each prospective design-build contractor conduct its own independent subsurface investigation prior to bidding a contract? I welcome your comments.

 

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Comments

In our case we relied on the geological survey of the site to be performed as part of the contract where an existing commercial pool was located. Soil compaction were performed to meet soil bearing requirement for the proposed structure.

I don't get how a fixed price proposal can be provided in the absence of any pertinent data. What's different about a soils report that can be used "for bidding purposes," and one that can be used for construction purposes? Typically, the owner is responsible to provide the soils investigation, so the owner should provide it in this case too. It makes a lot more sense than having each bidder provide a redundant investigation.

Most geotechnical reports I have read are themselves, full of disclaimers. I don't think there is any escaping the chance that one may find the unexpected in an excavation without doing an investigation that represents a significant fraction of the actual work. And I don't think it matters who orders or pays for the report (or reports). If the bid (price) was based on information that was intended to be good enough for pricing, but conditions were later found to be otherwise (whether by further study or in the course of the work), then the basis of bid was faulty - not the bid itself. I disagree with the basic fairness of the court's decision. The owner should have either abandoned the site upon seeing the report done by the contractor's geotech consultant, or paid for the needed remediation.

There is really not enough information included in your introductory statement to make anything other than a WAG-level statement of opinion.

Some points:
Any information provided "for bidding purposes only" implies that site conditions which vary considerable from "preliminary" information or reports is just that "preliminary, not final". This, in and of itself implies that adjustments to the design and field adjustments by the contractor must be made in order to meet the performance standards expected. It also implies that such adjustments, when resulting in changes in schedule and must be fairly compensated via the change order process.

I don't believe Jarvis said this was a court ruling. I read it as a governmental turn down of the contractors request for compensation.

Unforeseen hidden conditions are always a basis for triggering the RFI/change order process.

Another point: Did the contractor do the required subsurface investigation, and did he bring the clearly substantially differeng site conditions to the attention of the client prior to proceeding? If not both, he screwed up.

Third, it would be insane to embark on a 4.5 million dollar "mitigation" for unforeseen hidden conditions without written acknowledgment by the client... and being well in to the RFI/ change order process...at least to the point where all principal parties to the contract had come to some written understanding of the problem as well as an estimate of final cost and delay to schedule.

Ray

I agree with the comments by Ray. The contractor should submit the bid after his Geotechnical Engineers investigation is complete or he should have an agreement that he can submit the bid subject to the condition that in case of differing site condition the owner must compensate for the additional cost that may incur due to the differing site condition

It is not reasonable to expect contractors to perform additional site investigations prior to bidding the project. However, the contractor should have forced the issue BEFORE spending $4.5 million dollars

The is a design-build contract. During design itself the contractor is involved and should have made sure a full geotechnical report is prepared (not pre-liminary) and make sure a conditonal statement is included in the bid as expressed by Ray and the comment following it.

An owner hires a contractor for his expertise. That being said if a contractor sees a "preliminary" report of any kind not thorough enough to make a bid then it is upon the contractors expertise to expressly convey that to the owner and refuse to bid without it. 
If your conditions are preliminary then of course your bid will be therefore preliminary. 
My vote is in favor of the courts ruling to turn down the contractor for compensation. I can think of 4.5 million reasons he should know better and the fact that he's a contractor ain't one of them.

As several othes have commented - there is not enough inforation to make an informed decison.

 

" preliminary " geotechnical report - Without the report to review I am not able to detemine how complete the report seems to be and if another report is necessary. Many bid documents state the same but the information is complete including foundation recommendations.

CONTRACT The articles of the contract is essential. Many require to contiinue the work with a final determination by the court or arbitration. at the end of the project. Was the Owner informed initially of the extensive problem?

CHANGES 54.5 million dollars is a sizeable amount of money. What were the cost for? New foundation system? Stabilazation of the soil?

COMMENTS
The bid doucments indicated you could rely on the imformation for biding only. A design bid includes a foundation system. The structural engineer must rely on the "preliminary" geotechnical report to engineer the foundation system. Therefore the geotechnical report MUST BE relied upon to complete the proposl. If the soil codition radically changes the foundaton may have changed.

As a part of the bid evaluation design build documents are usually submitted to the Owner to determine that the contractor met the bidding criteria. The structure would be a part of that submittal. The Owner has a basis for evaluating any changes caused by unknown radical soils conditions.

Design Build does not ELIMINATE changes orders.

 

 

COMMENTS

 









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