ConstructionPro Week, Volume: Construction Advisor Today - Issue: 119 - 08/04/2011

Reasonable Reliance on Affirmative Site Condition Information

Contractors preparing to bid on contracts are frequently forced to rely on the site condition information provided by project owners. There is neither time nor money for an independent evaluation of conditions that cannot be readily observed during a pre-bid site inspection. Bidders are entitled to reasonably rely on affirmative representations in the contract documents. But when is a representation sufficiently affirmative and when is reliance reasonable?

In a recent case, a project owner provided soil test boring logs indicating the presence of hydrostatic groundwater. The contract documents, however, prohibited the contractor from “interpretations of or conclusions drawn” from objective technical data. A contractor calculated anticipated groundwater flow rates using a well-recognized formula. When the contractor later asserted a differing site condition claim, there were problems with both an affirmative representation by the owner and reasonable reliance by the contractor.

 

There is no question that project owners and contractors alike overreach when it comes to site condition information. Owners provide data in order to encourage tight bidding then disclaim responsibility for the accuracy of that information or restrict its use. Contractors have been known to make some rather sweeping conclusions based on limited amounts of site data. What is your opinion? I welcome your comments.

 

Featured in Next Week’s Construction Claims Advisor:

  • Prime Had No Duty to “Facilitate” Sub’s Shop Drawing Submittal
  • Federal Appeals Court Addresses Organizational Conflict of Interest
  • Contract Mods May Not Have Waived Labor Inefficiency Claims

 

 

Want to learn more about Differing Site Conditions? Don't Miss These Two Upcoming Webinars . . . Attend Both and Save!  For details, click on the titles below: 

 

The Role of Soils in the Construction Process: From Site Investigation to Claims 

 

Differing Site Conditions: The Big Game of Shifting Risk

 

 

Comments

The design should be to the extent to counter KNOWN conditions. Often, that is inadequate. THUS, the Architect provides contingency allowances: 1.Pumping 2. rock obstructions by yardage 3.Cubic yardage for replacement select fill, 4.Limit of profit on direct costs, etc. Such that it restricts the runaway change order extra.

The bidding documents often use contingent unit prices to "competitively bid" unknown conditions, but in and of themselves they don't restrict runaway change orders. (I would argue that a lump sum allowance in the bidding is adding a guess on top of an unknown.) As an owner my bid form ALWAYS requires that the bidder identify the quantity that has been included based on his/her reasonable reliance. For instance, "Contingent unit price 1, removal of unsuitable soils and replacement with specified fill material: For each cubic yard of material above ________ CY, add $_____ per CY." That way we know when we start paying extra AND we can have a discussion about how the identified quantity compared to other bidders' calculations. (I like to ask for add/deduct, too, but contractors HATE that.)

 

On a recent project we ordered test probes of each pier location so that the elevation of competent rock was known at bidding. This eliminated variation from an "average depth" as often specified, and by physically testing the rock the pier sizes were drastically reduced. The savings in concrete and rebar alone was over $2 for each $1 of probing cost, and we eliminated the risk of unexpected conditions. The owner who doesn't think he/she can afford extra investigation DEFINITELY can't afford the potential surprise.

(If you go with probing, have the geologist visually inspect the drilling spoils. We were looking for rock and overlooked some unacceptable soil conditions that did add cost.)

It seems from your example that the owner/contractor relationship started from an adverserial stance from the language in the contract documents. I thouroughly believe, and has been extremely beneficial to a successful project over my 40years in the business that full disclosure and shared responisbility for interpretation of data is the best approach to a partnership arrangement. This approach allows successful mitigating of circumstances discovered after goundbreaking. Both contractor and owner acknowledge prior to bidding that there are issues that may impact scope and cost. My approach has always been to control the risk without risking control.

 

If it's just a matter of quantifying, then the above suggestions are all sound. However, I find that owners and contractors, alike, try to redefine "unknown conditions", and there lies the problem.

 

 

COMMENTS

 









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