What Lies Underneath: A Guide to Differing Site Conditions. Ryan Klein (719)
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1 What Lies Underneath: A Guide to Differing Site Conditions Ryan Klein rklein@shermanhoward.com (719)
2 What are Differing Site Conditions? Photo: Raiders of the Lost Ark (1981)
3 Definition of Differing Site Conditions Unanticipated physical conditions at the site that differ materially from those set forth in the contract or ordinarily encountered in work of the same nature Means Illustrated Construction Dictionary
4 Purpose of Differing Site Conditions Clause Allow contractors to submit more accurate bids How Eliminate the need for contractors to inflate their bids to account for contingencies that may not occur Who Benefits Contractors Protection for unanticipated conditions Government More accurate bidding
5 What Law Federal Federal Acquisition Regulations ( FAR ) Interpreting law State Colorado No statutes or regulations, except for CDOT Limited case law Private Contract Applicable law
6 Types of Differing Site Conditions Two types (1) Type I Differing Site Conditions Conditions materially different from contract documents (2) Type II Differing Site Conditions Unknown and unusual conditions
7 Type I Differing Site Conditions FAR (a)(1) [S]ubsurface or latent physical conditions at the site which differ materially from those in this contract AIA A , Section [S]ubsurface or otherwise concealed physical conditions that differ materially from those indicated in the Contract Documents
8 Type I Differing Site Conditions Elements (1) The contract documents affirmatively indicated or represented the subsurface conditions that form the basis for the claim (2) The contractor acted as a reasonably prudent contractor in interpreting the contract documents (3) The contractor reasonably relied on the indications of the subsurface conditions in the contract (4) The subsurface conditions actually encountered differed materially from the subsurface conditions indicated in the contract (5) The actual subsurface conditions were reasonably unforeseeable (6) The contractor s claimed excess costs were solely attributable to the materially different subsurface conditions
9 Type I Differing Site Conditions Element (1) Contract Documents Expansive definition Includes solicitation documents and referenced documents Affirmative Indications Need not be explicit or specific Express or implied If no indication, no Type I DSC
10 Type I Differing Site Conditions Element (2) Element The contractor acted as a reasonably prudent contractor in interpreting the contract documents
11 Type I Differing Site Conditions Element (2) A contractor must act as a reasonable contractor under similar conditions A contractor presumed to have the general skills of a reasonable contractor Factor in actual skills and knowledge Interpretation does not have be the only reasonable interpretation just must be a reasonable interpretation Not reasonable where patent ambiguities or problems
12 Type I Differing Site Conditions Element (3) Element A contractor must reasonably rely on the indications of the subsurface conditions in the contract Usually an easier element to satisfy Not satisfied where a contractor does not review or consider the contract indications Not satisfied where a contractor has knowledge from prior experience
13 Type I Differing Site Conditions Element (4) Photo:
14 Type I Differing Site Conditions Element (5) Objective reasonableness standard Fact specific Interacts with Site Investigation and Conditions Affecting the Work Clause (FAR ) Summary Contractors must take all steps reasonably necessary to ascertain the nature and location of the work and to satisfy themselves as to the local conditions affecting the work No time-consuming or costly technical investigations No experts If the Government requires a greater level of inspection, must specify it in the solicitation
15 Type I Differing Site Conditions Element (5) Exculpatory Clauses Photo:
16 Type I Differing Site Conditions Element (5) Exculpatory Clauses Example While the sizes and materials included on the utility maps are generally accurate, the exact location of underground systems cannot be guaranteed and must be verified by the Offeror through site investigation prior to submitting an offer... The Government does not assume responsibility for subsurface conditions Generally disfavored by courts and boards Strictly interpreted Upheld where clear and ambiguous
17 Type I Differing Site Conditions Element (6) Element The contractor s claimed excess costs must be solely attributable to the materially different subsurface condition Another easier element to satisfy Excess costs caused by concurrent causes not permitted Establish through damage calculation methods
18 Type II Differing Site Conditions FAR (a)(2) Unknown physical conditions at the site, of an unusual nature, which differ materially from those ordinarily encountered and generally recognized as inhering in work of the character provided for in the contract AIA A , Section [U]nknown physical conditions of an unusual nature, that differ materially from those ordinarily found to exist and generally recognized as inherent in construction activities of the character provided for in the Contract Documents Often misunderstood Heavy burden
19 Type II Differing Site Conditions Elements (1) The recognized and usual physical conditions at the work site (2) The actual conditions encountered (3) Whether or not the actual conditions encountered differed materially from the known and usual conditions (4) The actual conditions caused an increase in the cost of performance
20 Type II Differing Site Conditions Element (3) Key as where often fails Unknown A condition that one could not have reasonably anticipated from the contract documents, inspection of the site, or a contractor s general experience Unusual Must differ from what is expected in geographic area Does not have to be a geological phenomenon
21 Type II Differing Site Conditions Differing site condition Demolition debris while installing underground electrical conduit on Army base in Colorado Sewage during excavation project to build parking garages for Congressional buildings Tremendous amount of muck while building softball fields on Air Force base in Florida
22 Type II Differing Site Conditions Not differing site condition Expansive clays while constructing ductbanks at DFW Airport Excessive groundwater while building levees near the Missouri River Bed of conch shells while dredging near a Navy base in Georgia
23 Type II Differing Site Conditions Photo:
24 Type II Differing Site Conditions Photo:
25 How Determine if a Differing Site Condition Type I Review contract documents Review site investigation observations Review contract language Type II Consider locale Consider typical geological conditions Hire a consultant Hire a construction attorney
26 Notice
27 Notice FAR (a) The Contractor shall promptly, and before the conditions are disturbed, give a written notice to the Contracting Officer of (1) [Type I DSC] or (2) [Type II DSC] AIA A , Section [T]he Contractor shall promptly provide notice to the Owner and the Architect before conditions are disturbed and in no event later than 21 days after first observance of the conditions Purpose Allow the Government (1) an opportunity to investigate and (2) to exercise some control over the costs and effort expended in resolving the differing site condition
28 Notice Notice, Notice, Notice
29 Notice Notice of what Differing site condition No need cost impact right away When give notice ASAP Delay may cause loss of rights How give notice No specific format required Written notice recommended (See FAR )
30 To whom give notice Notice Federal Contracting Officer State or Private Check statute, regulation, or contract Duty to proceed Contractor must proceed
31 Government s Duty After Notice
32 Government s Duty After Notice FAR (b) The Contracting Officer shall investigate the site conditions promptly after receiving the notice AIA A , Section The Architect will promptly investigate such conditions...
33 Government s Duty After Notice Implied Duty of Good Faith and Fair Dealing Implied in every contract, even government contracts The duty requires each party to: (1) Avoid actions that unreasonably cause delay or hinder contract performance by the other party (2) Do whatever is necessary to enable the other party to perform Should apply to the Government s obligation to investigate alleged differing site conditions If the Government does not investigate, a contractor may claim a breach of the implied duty good faith and fair dealing
34 Photo: Return of the Jedi (1983) Failure to Give Notice
35 Failure to Give Notice FAR (c) No request by the Contractor for an equitable adjustment to the contract under this clause shall be allowed, unless the Contractor has given the written notice required; provided, that the time prescribed in paragraph (a) of this clause for giving written notice may be extended by the Contracting Officer FAR (d) No request by the Contractor for an equitable adjustment to the contract for differing site conditions shall be allowed if made after final payment under this contract
36 Failure to Give Notice Courts and ASBCA/CBCA hold that written notice requirements are not construed so technically as to deny legitimate claims where the government is otherwise aware of the operative facts Two Requirements (1) Actual or constructive knowledge No notice required if actual or constructive knowledge by the Government Example Government s Daily Reports (2) No prejudice to the Government See Next Slide
37 Failure to Give Notice Prejudice Burden of proof on the Government Types of prejudice to the Government (1) Notice might have minimized extra costs if proper notice had been given (2) The passage of time obscured the elements of proof
38 Photo: Paramount, Disney Seeking Relief
39 Seeking Relief Federal FAR (b) If the conditions do materially so differ and cause an increase or decrease in the Contractor s cost of, or the time required for, performing any part of the work under this contract, whether or not changed as a result of the conditions, an equitable adjustment shall be made under this clause and the contract modified in writing Submit Request for Equitable Adjustment and/or Certified Claim Litigation Must first get CO s Final Decision Timing Venue ASBCA/CBCA vs. COFC
40 Seeking Relief AIA AIA A , Section Pre-Litigation Resolution [I]f the Architect determines that they differ materially and cause an increase or decrease in the Contractor s cost of, or time required for, performance of any part of the Work, will recommend an equitable adjustment in the Contract Sum or Contract Time, or both If the Architect determines that the conditions at the site are not materially different from those indicated in the Contract Documents and that no change in the terms of the Contract is justified, the Architect shall promptly notify the Owner and Contractor in writing, stating the reasons
41 Seeking Relief AIA Disputes Subject to Section 15 Section 15 Mediation first Then arbitration or litigation
42 Colorado Law
43 Colorado Law Source No statutes Not in Colorado Procurement Code CDOT Regulations Limited case law Makes it harder to understand applicable law
44 Colorado Law Case Law Not much applicable or relevant case law Kiewit W. Co. v. City & County of Denver, 902 P.2d 421 (Colo. App. 1994) A contractor must follow the contract provisions before commencing litigation URS Group, Inc. v. Tetra Tech FW, Inc., 181 P.3d 380 (Colo. App. 2008) Cited to numerous differing site condition principles based on federal law However, applied New Jersey law Unclear if Colorado courts will rely on this case
45 Colorado Law CDOT Source Standard Specifications for Road and Bridge Construction, Section Types I and II Similar to FAR Notice Prompt written notice before site is disturbed and work begins The Engineer investigates and determines if a change order is warranted
46 Best Practices To Avoid DSC Understand contract documents Solicitation Referenced documents, especially subsurface reports and boring logs Conduct a thorough site investigation Document Ask questions Hire a local geotechnical consultant Consider conducting independent investigation Understand contract provisions on differing site conditions Exculpatory language
47 Best Practices After DSC Investigation Get help if needed Notice, Notice, Notice Written Timely Submitted to right person Document Photos Cost records Claim management Preparation Follow through
48 Questions?
49 What Lies Underneath: A Guide to Differing Site Conditions Ryan Klein rklein@shermanhoward.com (719)
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