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Differing site conditions claims

Construction projects require site surface and subsurface condition assessments to develop a construction schedule for the best methods in order to bid and complete a project on time. When differing site conditions are encountered, they usually result in delays, increased cost, design changes, and possibly unsafe working conditions. Disputes can arise between the owner and contractor over who is responsible and how to apportion the risk.

The Federal Highway Administration (FHWA) developed the system for classifying claims referred to as Type I and Type II claims primarily for the transportation sector in design-bid-build projects. Type I is when actual conditions are different from how they were represented in the contract. The pre-bid representation is crucial in establishing a claim based on this type of condition. The conditions must have been reasonably unforeseeable based on information available to the contractor at bidding time. An example is when boring logs showed only soft soil, but the contractor finds hard rock that must be excavated.

Type II happens less frequently so has less history of opinion for contractors to receive recovery in claims. It is when actual conditions differ from what is ordinarily expected for the area. If nothing was promised in the contract, then there is no difference and contractors may have to absorb a loss. Either owners do not make a representaton or owners may disclaim responsibility for accuracy of data in the contract. In the latter, the contractor has a good chance for recovery. An example is when an area was thought to be only dirt, but a structure is uncovered.

Steps a contractor can take to avoid differing site condition issues:

  • In preparing a bid, a contractor should know if there are boring logs or other geotechnical data as part of the contract, if there is a differing site condition (DSC) clause in the contract, if there is a DSC notification requirement and if there are clauses in which the owner denies responsibility for incorrect data on subsurface conditions. Laws on site conditions vary by state so consult a construction attorney before bidding in an unfamiliar location.
  • A pre-bid letter can be sent to the owner requesting all site information available to the owner.
  • A site inspection must be done in an attempt to find reasonable actual subsurface conditions for a better chance of recovery if they differ.
  • Provide timely notification so the owner can investigate an issue and have a chance to possibly modify requirements to minimize the issue and avoid a claim.
  • Keep accurate separate cost records for those from DSCs.

Other types of DSC's are finding higher water tables than were in the geotechnical study or imagined, unexpected buried rubble, undisclosed gas or water lines, toxic waste at the site or removal material containing contaminants, swamps that bog heavy equipment, low water such that barges could not be used, sinkholes, and unmapped landslides.

Subsurface data made available to prospective bidders but not part of the contract is non-contractural data, non-representation, and a bidding contractor should not rely on such data. An owner should disclose knowledge of site conditions when the owner knows the contractor has no knowledge or reason to obtain the information or contract specs are misleading.

This is for informational purposes only and is not to be considered legal advice. Consult a construction attorney for more information.

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