ConstructionPro Week, Volume: 1 - Issue: 21 - 09/24/2012

When Do Site Conditions Actually Differ from Contract Representations?

By Bruce Jervis

A so-called “Type 1” differing site condition exists when the actual conditions in the field differ materially from the representations in the contract. This is easy to state but frequently difficult to apply. What conditions are represented in the contract? Is the contractor’s interpretation of that information reasonable? And what if contract site data are accompanied by limiting or exculpatory language?

All of these issues came into play in a recent case involving subsurface soil conditions. One test boring log indicated that soft clay turned to hard shale at 31.5 feet. The next boring log indicated shale at 12 feet. A note cautioned that soil conditions between boring locations might differ significantly from those encountered at the boring locations.

The contractor assumed the soil profile of the transition from clay to shale would be a straight line drawn from 31.5 feet to 12 feet. Was this assumption reasonable? According to the Armed Services Board of Contract Appeals, it was not.

Do project owners try to have it both ways, providing site information to encourage tighter bidding while disclaiming the accuracy of that information? Are contractors reasonable and responsible in the conclusions they draw from site data? What should a contractor do when presented with detailed site condition information accompanied by language limiting reliance on that information? I invite your comments.

COMMENTS

Interesting case. I was involved in one involving an EPA building several years ago. I think contractors must assume the worst, especially dealing with the federal government, and calculate with the potential exposure in mind. Because you can't truly determine what will and will not be considered a Type I condition.
Posted by: Melissa Brumback - Monday, September 24, 2012 10:53 AM

I have bid and managed work for over 40 years, for Govt. agencies and private sector, as a contractor. Generally the "reasonable" assumption(s),in competitive bidding is excepted. A straightline between exploratory hole is reasonable, barring any other published data. A "Board of Appeals" decision should have been sought.
Posted by: Terry Johnson - Friday, September 28, 2012 5:43 PM

Having worked for the FAA I can attest to what you describe. It is here that the form of delivery method is key to the successful completion of a project to all parties satisfaction.

Chosing "Partnering" from the beginning as the delivery method, it takes into consideration that "unknowns" will occur and as such the cost to cure should be anticipated and shared in an equitable manner. A jointly developed agreement between all partities to the contract for construction will clarify and empower field personele to determine the equitable cost impact of unanticipated occurances. We know that a sites underlying strata is not uniform and that Acts of God can and will occur. Equipted with this knowledge, plan accordingly.
Posted by: James V. Vitale, AIA, LEED AP, CASp - Friday, September 28, 2012 5:45 PM

The contractor should have prepared its bid docs to show exactly how it bid. The owner or CM should have reviewed the bid docs to insure that the bid was a responsive bid. So did the site condition vary from what the contractor bid? What did the other contractors' bid assume? If the Owner/CM did not perform its due diligence on the bid review then shame on them. Did the contractor take a risk, yes? If you bid the worst case senerio what would that be. You wouldn't know worst case until it is discovered. I find for the contractor.
Posted by: Will Weber - Friday, September 28, 2012 5:52 PM

Interesting case. Mine is even more interesting: On a marina project designed for working in the dry, the soils engineer issued 4 addendums to the original soils report, each showing a few more borings. The last addendum (issued a few days before bid opening) contained one boring considerably deeper than any previous and just off the limits of the project. Upon investigation, the one boring indicated a gravel layer which extended throughout the entire site. Water in the gravel layer travels about a million times faster horizontally, and therefore if the top burden of clay soil above is removed....floods the entire site...which it did causing liquification. Was the excavation contractor responsible for understanding this condition and taking the risk? Absolutely not according to the pHd expert I hired who is a national expert in geotechncial engineering. The contractor won the case, and his bankrupcy was adequately compensated. There are other issues of course, but the contractor is not expected to have knowledge of hydraulic gradients and lateral flows to make that kind of determination.
Posted by: Paul Gogulski - Friday, September 28, 2012 7:06 PM

It comes down to the proven adage

Treat others as you want to be treated

The owners should tell the contractors exactly what parameters their bids should be base on.

Then if those parameters increase the owner should be willing to pay more and if they decrease the contractor should be willing to provide an equitable credit.

We need to return to the only honest way of doing business, equally shared risk.

Posted by: Steven Rowe - Friday, September 28, 2012 11:51 PM

I see the owners point. Interpolating between boring logs should be done carefully with consideration for the spacing of the logs and other site specific factors and in this case the owner even said in the contract that conditions between the logs differ significantly. It seems the contractor took a risk. It does not appear to be a differing site condition claim.
Posted by: Mohammed Nasim - Monday, October 1, 2012 1:12 PM