Holloway Consulting are construction claim consultants providing construction contract claim services to all parties in the industry. Please see our Industry Sector Experience page.
Over the past 22 years, we have been certified as a construction expert before arbitration panels and courts in each of the 16 claim types shown at our page on Construction Claims, which we believe addresses every type of construction contract claim.
Construction Claims Consulting
Differing Site Conditions
This page continues our series on the services we provide to our clients as construction claim consultants, in this case, on Differing Site Conditions (DSC) claims.
THE CONTRACT ABSENT A DSC CLAUSE
The debate as to whether or not a DSC clause should be incorporated into the contract has a long history. Contracts predating the 1950’s often failed to include any information regarding subsurface conditions. Because of this, contractors were at financial risk and frequently contingencies were added to bids to cover the risk. In order to reduce the extent to which contingencies were priced in the bid, subsurface conditions expected to be encountered were incorporated into the contract. While a step in the right direction, an owner’s representing subsurface conditions gave rise to liability for incorrect data.
Use of a DSC has done much to resolve this problem. The DSC clause has also helped considerably to minimize the “gambling” aspect of bidding underground work and therefore has resulted in lower prices to the owner.
Engineers Joint Contract Documents Committee
Use of DSC clauses has spread well beyond just federal contracting. The Engineers Joint Contract Documents Committee, which had previously employed a Standard Form 23A type of DSC clause, has evolved even further. For instance, the extent to which an owner may be held liable for subsurface facilities has been altered by distinguishing between such facilities from other physical conditions. In the case of underground facilities which were not disclosed or represented in the contract, the contractor may recover monetary compensation. On the other hand, if the underground facility is indicated in the contract but is inaccurately indicated, the risk shifts to the contractor.
In a contract which does not contain a DSC clause, an increased level of complexity regarding a contractor’s potential recovery for “changed conditions” exists. In general, a contractor will not have an implied right to extra costs because of a differing site condition if there is no specific contract clause addressing DSC or changed conditions. In a case in which the owner provides subsurface information and a contractor actually encounters materially different conditions, the legal basis for recovery is along the lines of either breach of contract, misrepresentation, superior knowledge or breach of implied warranty.
Underground work has always been a high risk type of construction. In an effort to secure more realistic bids by eliminating contractor contingencies to cover the unknown subsurface conditions, owners have become more willing to make positive representations as to expected subsurface conditions. Simultaneously, they also seek to avoid liability for deviations by disclaiming accuracy of subsurface data and by failing to employ a DSC clause. As a result, a dichotomy is born within the contract. While providing subsurface conditions on which a contractor will likely rely, should such information be incorrect, the owner will also wish to avoid liability.
In general, this approach may not protect the owner. When the owner fails to provide representations which are factual, exculpatory contract language may not preclude contractor recovery. In such an instance, however, the contractor must show that (1) he relied on the factual subsurface data provided, (2) the actual conditions were not reasonably discernable by a site investigation, and (3) the data actually provided by the owner was materially different from conditions encountered.
An interesting variation on the reliance issue is noteworthy. In the case in which subsurface data is made available to prospective bidders but is not made part of the contract, to what extent will the contractor be held to rely on said data? The current trend views such “non-contractual” data as a non-representation. Because of this, a contractor will not be expected to predicate a bid on such information, and a bidder will have no duty to examine or rely upon data which is not made part of the contract.
The Holloway Consulting Group, LLC
Construction Claim Consultants – Construction Claims Experts
12081 W. Alameda Pkwy., #450
Lakewood, CO 80228-2701
Denver Phone: (303) 984-1941
International : (888) 545-0666
Fax: (303) 716-0432
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