By Bruce Jervis
It’s a common scenario. The contract documents include a geotechnical report which makes a clear representation. Test borings indicate the material to be excavated does not involve hard rock. But there are disclaimers. The report says it is for the exclusive use of the project owner and cannot be used for purposes of bid preparation. The construction contract says bidders must familiarize themselves with physical conditions at the site. The owner does not warrant the accuracy of any site condition information in the contract.
What is a bidder to do? Ignore the geotechnical report, carry a large contingency for rock excavation, and quite possibly submit an uncompetitive bid? Or, trust the report is accurate, hone the bid price accordingly, and hope there will be some remedy if rock is encountered?
Aren’t project owners trying to have it both ways? They provide information regarding latent conditions at the site – conditions which cannot be observed during a reasonable site inspection. The intention is to reduce contingencies and encourage tight, competitive bidding. But they then disclaim responsibility for the accuracy of that information, indicating there will be no remedy if actual conditions differ from the representations.
What is your opinion, and how do you handle this situation? I welcome your comments.
Featured in Next Week’s Construction Claims Advisor:
- Arbitration Clause Applied to Subsequent Settlement Agreement
- Site Preparation Work Was Improvement to Property
- Claim Sufficient Based on Totality of the Documents
we commonly include soil boring reports in our bid documents and they are always listed as informational only. Soil borings are after all only a small 'snap-shot' of what may or may not be encountered during excavation. We do however ask for unit prices for additional excavation on the bid form so if we do encounter bad soil in isolated spots the contractor knows there will be some recouse and the owner knows that the contractor is held to a predetermined price for such additional work. This arrangement typically works fairly for all parties and avoids having an owner who feels as though the contractor has been given a 'blank check' for extra work after excavation starts. I would assume that something similar could be arranged for stone removal (in my area we rarely have bedrock or large stone issues to deal with)
Posted by: Scott Piper | 03/02/2012 at 01:50 PM
The general case law, at least on the federal level, is that the "differing site conditions" clause trumps any exculpatory language in the contract. Any contractor worth his salt will not bid a project that does not contain a differing site conditions clause.
Posted by: Charles Choyce | 03/02/2012 at 01:51 PM
Reports are generally written as recommendations and not in contract language. the factual information contained in the reports is correct. You will notice that even the Geotechnical Engineer who signs the report states that the factual information for each boring is only correct at the boring location and that conditions may differ at other locations. Why should the Owner or the design professional be held to a greater level of accuracy than the actual author of the report? Geotechnical reports, by the nature of the material they are investigating, can not be accurate over the whole site, unless, of course, someone pays to have borings located over the entire site at some minute increment. Who would pay for this? The contractor is usually admonished that if he feels that the information included in the report is not adequate for his purposes, he can conduct further investivations at his own expense. Further, you will find that the language describing the offering of the geotechnical report in the Project Manual is for information purposes only, and is not part of the Contract Documents.
Posted by: Terry Alexander | 03/02/2012 at 01:51 PM
Keep in mind that the geotechnical report gives observations (what is found in the bore of their drill or within the volume of their test hole) and recommendations (as opposed to requirements). The number and location of the samples is critical to the accuracy of the contractor's educated guess as to what is hidden beneath the soil, but it is still a guess. Also whether the excavation is classified or unclassified is critical. If unclassified, whatever is encountered is the contractor's problem. So carefully check the spec! No one benefits from a bankrupt grading sub.
Posted by: W. Scott Anderton, CCS, AIA, CSI, SCIP | 03/02/2012 at 01:53 PM
Perhaps it would be to everyone's advantage to simply not issue the geotech report as part of the documents going to bid? Require instead a statement that the GC is to coordinate and execute their own geotechnical survey upon awarding of contract and to carry allowances for the report and unit prices for dealing with soil conditions. Use the original report that is done by the owner to generate the design.
Posted by: Tim | 03/02/2012 at 01:59 PM
I'm not sure, but it appears that Terry is saying that the contractor should be responsible for whatever hidden subsoil problems the Owner's site contains. Question: Who should be responsible for the conditions existing on the site before the contractor sets foot on the site? Most reasonable people would agree that it is the Owner. The Owner owns what is under the soil, and is free to spend as little or as much as the Owner wants to conduct a soil investigation. If the Owner wants to avoid the potential for extra work caused by differing site conditions, the Owner is free to conduct a thorough subsoil investigation with soil borings taken over the whole site. Such investigations are for the Owner of the land to do, not the Contractor, unless the Owner wants to pay the Contractor to conduct whatever investigations the Contractor deems necessary to ensure there will be no extras for differing site conditions. If the Owner would rather take a chance that claims for differing site conditions may arise, then they may choose to conduct a bare-bones subsoil investigation. The choice is up to the Owner on how to mitigate the risk of claims for differing site conditions, and is not a risk they should attempt to foist onto the Contractor with conflicting contract language.
Posted by: Mark B. | 03/02/2012 at 02:06 PM
The owner IS trying to have it both ways. This is setting up the project to either be a large financial gain for the contractor (one that the owner is paying for), or a highly contentious project where the contractor is trying to squeeze a profit out of a bad risk. Neither of these scenarios are desirable for the owner. The chances that it will work out equitable for both parties is left to chance.
The Owner and his architect should look for a fair and equitable system for bidding the work; one that provides competitive prices for the base bid as well as a fair and equitable methodology for potential, unforeseen work.
The strategy we like to employ at SHP Leading Design is one where we control the method of bidding this risk. We would establish a specific elevation at which a contractor shall expect to encounter rock. This elevation is based upon our best estimate and the advice of the geotechnical engineer, but we select a specific elevation. We then get a unit price for an add or deduct for rock excavation above or below our selected elevation. If rock is encountered above this elevation, the contractor is entitled to a unit price add. If rock is not encountered below this elevation, the Owner is entitled to a credit. This forces the contractor to bid to a defined set of circumstances, and to bid a unit price that could be used as an add to him or a deduct against him, forcing him to honestly bid the unit cost as well. We have used this strategy with great success for both rock excavation and for removal of unsuitable soils.
It also places the risk for the site conditions where it belongs...with the owner, where appropriately allocated contingency funds should be used. Transferring this unforeseen risk to a bunch of bidders and then selecting the LOW bidder is a recipe for conflict.
Posted by: Ronald Hicks, SHP Leading Design | 03/02/2012 at 02:22 PM
We have a kickoff meeting with the Owner and ask the question" If the excavator digs dowm and uncovers a bunch of diamonds, who do you think ownes those diamonds?" Followed by the obvious question "If the excavator digs down and finds a pile of garbage not indicated on the borings, who do you think ownes that garbage?" The Owner will often provide different answers to the questions. That sparks meaningful discussions that bring the Owner to a better uderstanding that the process is set up to keep bids competative and in the bidding the Owner benifits in the competitive bidding. If a change in unknowns occure the Owner better understands the need for a contract modification. Specifications could be more clear as to the remedy of those conditions. Even so, the Owner needs that understanding because most think that unknown conditions are the contractor's responsibility.
Posted by: Wayne M | 03/02/2012 at 03:02 PM
The owner should be held accountable when providing ANY erroneous information that a reasonable bidder would foreseeably rely upon. Intentionally or not, the act of providing defective information about latent conditions is, in essence, a form of fraud (wrongful deception intended to result in financial gain) which unjustly enriches the owner at the expense of the contractor.
Posted by: David E. | 03/02/2012 at 03:29 PM
After readinig the wide variation of these comments, it is a reminder that we all live in a bit of a vacuum and need to occasionally remind ourselves of the big picture. I will preface my comments by identifying myself as a specialty subcontractor who routinely deals with subsurface conditions. One of the fundamental elements of contracting is the accuracy and thoroughness of bid document information, especially soil and subsurface information. Owners that embrace this will get the most competative pricing and have the least amount of dispute and unforeseen changes. Owners who think they can be crafty by limiting the bid information provided to contractors are setting themselves up for a project wrought with conflict, cost overruns, schedule overruns, and disputes that the Owner will likely lose (unless the contractor contractually accepts the risk of unforeseen conditions). Simply stated, the Owner owns the ground, controls the budget for site investigation, controls the procurement method, and therefore owns the risks that come with each of these. A case with limited information provided handcuffs the conractor and forces guessing, not estimating. A case where the Owner holds back information in hopes of getting better bid pricing is criminal. In fact I think there is a specific term for that called "superior knowledge", which is a fight I can win every time. I encourage industry to beat the drum for more adequate soils investigations. I have never seen a job yet where someone looked back and said "we did not need to spend that much on the soils investigation", but unfortunately I know of far too many jobs where it was reflected "if we only spent another $5k or $10k for some more borings and testing, we could have avoided this lawsuit" or "could have saved $100" during construction. Changes made during the work cost a lot; changes made during preparation before the work do not.
Posted by: Robert C. | 03/02/2012 at 05:05 PM
why in these situations is the design firm never considered as having a share of the liability. they are the ones who decide the bore locates and do the design work, therefore they should carry responsibility as well as if the contractor is expected to. if they were considered to have a liability concern and were not allowed to write their responsibility out of everything they would be more fair on handling this issue. quite often they are the one guiding the owner on how specs are written. i dare say most owners never read the specs before they are sent out for bidding.
Posted by: Pete L. | 03/02/2012 at 08:33 PM
The contractor is still responsible for soil condition discovery since dependency on the soil report may be questionable at times. As a deign/build firm we took it on our responsibility to verify subsoil condition.
Posted by: PATRICK ANTHONY ROY, AIA | 03/03/2012 at 07:20 AM
In our practice, soil borings and geotech investigations are usually done by the Owner at the request of his consulting engineers to provide information to the site and structural engineers for designs of pavement and foundations. The geotech reports contain recommendations for the engineer's work. They do not contain project specifications for site work. The boring and geotech reports are made available to bidders for their information, but typically do not require an obligation on the contractor's part.
In my opinion, whoever prepares the bidding documents needs to review the reports and provide a mechanism in the contract documents to handle the removal of unsuitable soils, rock, etc. whether they are known in advance, or should they be discovered. This can be unit prices, allowances, or negotiated cost plus. (another discussion) These unsuitable materials belong to the Owner, and the Owner should not be shifting this risk and expense onto a contractor without compensation. Any Owner who claims that the contractor "owns" something that is not clearly delineated and biddable should be avoided at all costs, by the design team, and by the construction team. That Owner is heading to court.
Posted by: Phillip Zemke | 03/05/2012 at 06:41 AM
Simply put, Owners need to step up and own what is their responsibility. Subsurface site investigation is done by the Owner during the design, own it and avoide blaming contractors for your work product.
Posted by: Mike M | 03/06/2012 at 09:58 AM