Differing Site Conditions

by Allan H. Goodman, J.D. Course Number: 1004

Course Description - This one hour course will teach the basic principles of differing site conditions. Contractors often encounter unexpected conditions that are not indicated in the contract documents or those that are generally not contemplated in the type of work to be performed. The risk of encountering these unexpected conditions may be dealt with by contractual clauses that allocate risk to the owner or the contractor. This course will discuss how contracting parties deal with differing site conditions, giving actual and hypothetical examples, including references to actual court decisions describing the principles discussed. Learning Objectives ● To understand the definition of differing site conditions. ● To review the contractual methods used to allocate risk of differing site

conditions. ● To understand how a contractor and owner react to the discovery of differing

site conditions. ● To assess the need for giving notice of differing site conditions and the circumstances that determine the adequacy of such notice. ● To understand the role of the contractor, owner, and design professional in dealing with differing site conditions.

Note: This course is for educational purposes and discusses legal principles and concepts with references to court opinions. It is not to be construed or relied upon as legal advice. The views expressed in this course are solely those of the author in his capacity as a private citizen, and do not represent the views of any entity by which the owner is or has been employed. Contents I. The Concept of Contractual Relief II. Differing Site Conditions - Definition

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III . Contractual Relief Clauses for Differing Site Conditions IV. Types of Differing Site Conditions A. Type One B. Type Two V. Conditions that are Not Considered Differing Site Conditions VI. The Contractor’s Duty to Investigate before Bidding VII. Notice Requirements A. Compliance B. Exceptions VIII. The Contractor’s Duty to Proceed IX. Owner Claims Against the Engineer X. Disclaimer Clauses XI. Claims for Differing Site Conditions XII. Summary XIII. Quiz I. The Concept of Contractual Relief Before we discuss our topic of differing site conditions we need to understand the general concept of contractual relief. Contractual relief is used often in construction contracts to allocate risk of specific contingent events to one of the contracting parties. This is done by including a clause in the contract that states the type of contingent event, the risk that is allocated, the conditions under which the risk is allocated, and the party to whom the risk is allocated. If the contingent event occurs, the party to whom the risk is allocated bears the cost and compensates the other party for the cost the other party incurs. As we will see, differing site conditions, also referred to as changed, unknown, or concealed conditions, is a contingency whose risk is often allocated to the owner under certain circumstances. Other risks that are often the subject of contractual relief are changes in the work, owner-caused delays, owner-caused suspensions of work, weather delays, and others. Contractual relief clauses usually afford the contractor relief in the form of an equitable adjustment - an increase in time to perform the contract and contract price, if the contingency encountered delays performance and increases the cost to perform. It is beneficial both to the owner and the contractor to include contractual relief in construction contracts. Contractual relief allows contractors to base their bid on information contained in the solicitation for work without including additional amounts in the bid for

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unknown conditions or occurrences. The owner then receives bids that are based solely on known conditions without additional amounts included for contingencies and theoretically the owner therefore receives bids that are all based on the same assumptions. II. Differing Site Conditions - Definition Differing site conditions, often referred as changed, concealed, or unknown conditions, are subsurface or other latent physical conditions at the site of the work which a contractor’s investigation or owner-prepared reports have failed to disclose. Such conditions make performance more difficult and usually cause the contractor to incur greater costs. For purposes of our discussions in this course, we will refer to these conditions as differing site conditions. Differing site conditions are not only conditions that exist in nature, such as unexpected soil conditions. They may be man-made conditions in existing structures that are not discoverable by a visible inspection, such as unexpected duct work, electrical wiring, and the presence of asbestos or other hazardous materials. III. Contractual Relief Clauses for Differing Site Conditions AIA Document A201- General Conditions of the Contract for Construction- 2007 edition contains the following clause:

Concealed or Unknown Conditions If the Contractor encounters conditions at the site that are 1) subsurface or otherwise concealed conditions that differ materially from those indicated in the Contract Documents or 2) unknown 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, the 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. The Architect shall promptly investigate such conditions and, if 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

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Architect shall promptly notify the Owner and Contractor in writing, stating the reasons. If either party disputes the Architect’s determination or recommendation, that party may proceed as provided in Article 15.

Most construction contracts with the federal government contain a Differing Site Conditions clause substantially similar to that below: Differing Site Conditions

(a) The Contractor shall promptly, and before such conditions are disturbed, notify the Contracting Officer in writing of: (1) subsurface or latent physical conditions at the site differing materially from those indicated in this contract, or (2) unknown physical conditions at the site, of an unusual nature, differing materially from those ordinarily encountered and generally recognized as inhering in work of the character provided for in this contract. The Contracting Officer shall promptly investigate the conditions, and if he finds that such conditions do materially so differ and cause an increase or decrease in the Contractor's cost of, or the time required for, performance of any part of the work under this contract, whether or not changed as a result of such conditions, an equitable adjustment shall be made and the contract modified in writing accordingly. (b) No claim of the Contractor under this clause shall be allowed unless the Contractor has given the notice required in (a) above; provided, however, the time prescribed therefor may be extended by the Government. c) No claim by the Contractor for an equitable adjustment hereunder shall be allowed if asserted after final payment under this contract.

Note that the purpose and the language of both of these clauses is substantially the same. The contingent risk of differing site conditions is placed upon the owner. The contractor need not and should not include contingent amounts for encountering differing site conditions in its bid, as the contractor will receive an equitable adjustment in contract time and price if a differing site condition is encountered. The purpose of this clause is to allocate risk based not upon “fault” of either party, but based upon a recognition that neither party can accurately foresee the existing conditions with absolute certainty, and therefore the assumption of risk by the owner keeps the bidding process from turning into a guessing game by the contractor. Upon encountering a differing site condition, the contractor is required to give notice to the owner, and the owner’s representative will investigate and make a determination as to whether the condition encountered entitles the contractor to an equitable adjustment.

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IV. Types of Differing Site Condition There are two basic types of differing site conditions. These two types appear both in the AIA A-201 General Conditions for the Contract of Construction (2007 Edition) and the Standard Government Contract Differing Site Conditions clause. The two types of differing site conditions arise from dissimilar circumstances. As discussed below, the first type results from a variance from what is actually encountered and that which is indicated in the contract documents. The fact that there is a variance between the conditions indicated and the existing conditions does not give rise to a claim of misrepresentation on the part of the owner. There is a recognition that the owners knowledge as to actual existing conditions is not all-encompassing and that is the reason to provide for contingencies such as actual conditions that vary from those indicated in the contract documents. The second type of Differing Site Conditions are not dependent on a variance from those indicated in the contract documents, but rather are unusual conditions which differ from those ordinarily encountered and generally recognized as occurring in the work of the character provided for in the contract. A “Type One” is easier to prove than a “Type Two”, because the objective criteria as to what is indicated in the contract is usually easier to ascertain than the more subjective issue as to whether or not the work differs from that ordinarily encountered in the type of work performed. A. Type One The first type of differing site conditions are subsurface or latent physical conditions differing materially from those indicated in the contract. Note that these are not limited to subsurface conditions, but include all latent physical conditions at the site. Although differing materially from those conditions indicated in the contract, Type One conditions are nonetheless conditions which the contractor might ordinarily expect to encounter at the site, had not the contract indicated otherwise or been silent as to these conditions. Examples of Type One conditions include: ● Ground water at a deeper level and in greater quantities than indicated.

● Instability caused by rocks and boulders below the surface whose higher moisture content results in difficulty in excavation.

● Unexpected hard rock of greater thickness than Government borings indicated.

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● Bedrock at higher elevations than indicated. ● A need for a substantially greater quantity of roofing material than indicated by the invitation for bids.

● Existence of a swampy area requiring construction of drainage ditches. ● Duct work in existing structures not shown on as-built drawings ● Asbestos or other hazardous materials not indicated in the plans or specifications B. Type Two The second type of differing site conditions includes those conditions which differ materially than those you would normally expect to encounter at such a site. Remember, Type One conditions can be conditions which you would expect to encounter at the site, but are simply not indicated in the contract documents. Generally, there are four primary questions you should consider in respect to Type Two conditions: ● What were the recognized and usual physical conditions at the site of the work? ● What physical conditions were actually encountered? ● Did they differ from the known and the usual? ● If so, did they cause an increase in the cost of performance? Examples of Type Two conditions include: ● Buried timber on the site. ● Owner insistence on the use of inappropriate construction methods. ● Muck-like soil preventing the use of heavy equipment. ● Unusually hard contract in areas to be demolished. ● Unsuitable borrow pit material. Type Two conditions are more difficult to prove than Type One. However, one need not prove that the existence of the conditions was a freak occurrence, but only that one could not reasonably have anticipated the unusual condition. V. Conditions that are not Considered Differing Site Conditions

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Certain conditions which occur frequently are usually not considered to fall within the Differing Site Conditions Clause. They are: ● Weather conditions - hurricanes, severe storms, excessive rainfall and snowfall. Weather conditions are generally held to be excusable delays which entitle the contractor to additional performance time, but no increase in the contract price. This is because neither party has control over the weather, nor does the owner agree to increase the contract price in the event of severe weather. Unlike subsurface conditions which increase work to be performed, usually severe weather conditions merely cause delay and disruption, but do not increase the amount of work to be performed. ● Floods ● Economic conditions - failure to obtain material, inflation in price of material and labor. Economic conditions are man-made conditions that are not within the control of the owner or contractor and are generally not considered differing site conditions. ● Delays caused by other contractors. ● Owner delay in approving plans or providing access to the site. There have been instances when relief has been granted under the differing site conditions clause when weather conditions combine with site conditions to produce unanticipated problems. For example, rains combining with unusually plastic soil resulting in quicksand-like conditions; or heavy rains flowing through an unknown subterranean river bed, flooding the site. VI. The Contractor's Duty to Investigate Before Bidding Usually the contract documents will require bidders to make a pre-bid site investigation. Even so, this does not require a contractor to find all hidden conditions at the site. Rather, the contractor is under a duty to discover only those conditions which would be ascertainable by a reasonable investigation. What is reasonable will depend upon the circumstances, and if a condition occurs which could have been discovered by a proper investigation, in all likelihood the contractor will be denied relief under the clause. If the owner's documents make express representations which cannot be readily verified, the contractor can rely on them without conducting an independent investigation. In such a case, the discovery of a condition different than those represented should allow relief under the clause. For example, if there is rock 30 feet below the surface, and the contract documents prior to bidding contain a test-drill result which makes no mention of the rock, a failure to discover the rock would not deny a contractor relief under the clause. The scope of a reasonable site

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investigation would not have included a test-drill, and the contractor was entitled to rely on the owner's express representations which you could not readily verify. Also, if an investigation is not made, and a condition is discovered which would not have been found even if an investigation would have been made, the contractor may still be entitled to relief under the clause. A note of caution concerning the duty to make a reasonable site exam--there have been instances where contractors have been held to have general knowledge of conditions prevalent in the geographic locale where the contractor works, even if such conditions are not indicated in the contract documents. For example, a contractor in Alaska may be charged with knowledge that in certain locales it is common knowledge that permafrost is always encountered 20 feet below the surface through the year, even if the contract documents do not indicate the existence of the permafrost. VII. Notice Requirements A. Compliance In order to qualify for an equitable adjustment under this clause, a contractor must give notice of the differing site condition. This enables the owner to investigate the site before the conditions are disturbed. If the contractor does not give notice of a differing site condition, and proceeds to correct the situation, the owner is prejudiced in that it has not been afforded a reasonable opportunity to review the situation and to have its engineer or other design professional suggest corrective measures. After receiving notice and determining the nature and extent of the condition, the owner then is able to suggest corrective measures and price adjustments. There is no detailed format prescribed for your notice to a private owner or government owner. A letter of notification to the owner as to the encountered conditions, and a general description and location of the condition is appropriate. Here is a sample notice letter:

Mr. John Smith Owner

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Re: Differing Site Conditions Encountered in Performance of Contract Dear Mr. Smith:

In excavating the site of the above-mentioned contract, we have encountered subsurface conditions not indicated in the plans and specifications. The plans indicated that the water table was 40 feet below the surface throughout the entire site. We have encountered water in the northwest corner of the site at 20 feet below the surface, making it necessary to employ added manpower and equipment, and thereby incurring additional costs.

Accordingly, we request that you investigate this situation promptly and adjust our contract price accordingly before we proceed with work on this portion of the site.

Very truly yours, George Brown Contractor This letter contains a request for additional costs. However, usually the contractor has until the time of final payment to assert a quantified claim for increased costs, and it need not be included in the initial notice letter. B. Exceptions There are circumstances when your failure to give the owner written notice may not bar you from asserting an equitable adjustment. Such exceptions may arise:

● If the owner had actual notice of the conditions encountered, either by oral notice from the contract or direct knowledge of the owner's representative; or

● If the owner was not prejudiced by your failure to give written notice. For example, if the owner’s representative is present on the job site when differing conditions are encountered and discusses them with the contractor, he had actual notice by personal knowledge and the owner may not assert that you failed to give notice.

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Also, suppose the contractor fails to give notice promptly, making it more difficult for the owner to investigate the condition. Courts are reluctant to deny your right to assert your claim under these circumstances, if the increased difficulty of investigation does not actually prejudice the owner. In any event, the best way to protect yourself is to give prompt written notice of a differing site condition, regardless of whether you know the owner or its representative has actual knowledge of the conditions. VIII. The Contractor’s Duty to Proceed Even if you have a valid claim for an equitable adjustment as the result of encountering differing site conditions, you must diligently proceed with the work that is not impacted by the differing site condition pending resolution of the issue of whether the condition encountered is a differing site condition. In Government contracting, this is a statutory requirement under the Contract Disputes Act. In private construction contracting, the smart owner usually negotiates a clause which requires the contractor to proceed in the event of a dispute. IX. Owner Claims Against the Engineer When differing site conditions are encountered, the owner may blame the design engineer for failure to discover the differing site conditions and to include indications of same in the contract. The question arises as to whether or not the owner has a claim against the engineer, if the owner is found liable to the contractor for a differing site conditions claim. The answer to this question will depend upon the scope of the engineer’s duties to the owner, both as to its contractual obligations and its requirements with regard to professional responsibility. One argument the engineer can make on its own behalf would be that if the engineer had provided accurate information and if the owner had been able to append this correct information to the contract documents, then this information would have been relayed to the bidders, whose bids, in reliance on this information, would have been higher. Thus, arguably, the cost to the owner would have been the same whether it paid the contractor its original contract price plus the differing site conditions cost (if the incorrect information were contained in the contract) or whether it paid the contractor a greater contract price if the correct information had been

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included in the contract. This argument, of course, assumes a direct relationship between the information contained in the bidding documents and the bidder's price. It ignores the fact that despite the inclusion of the correct information, there is no way of assuring that the contractor’s bids would have been higher. Still, the engineer’s argument would be that despite the incorrect information, the engineer did not create the existence of a differing site condition, but merely failed to report its existence. Thus, the engineer did not proximately cause the differing site conditions. This was the result in Lisbon Contractors.Inc.v. Miami-Dade Water and Sewer Authority v. Post-Buckley. Schuh and Jernigan,Inc.,United States District Court, Southern District of Florida, Docket No. 81-2585-CIV-EPS (unpublished decision, May 30, 1986). The engineer on the project was found to have breached its contract with the owner and also was negligent in providing faulty subsurface information to be included in the bidding documents. The contractor filed suit against the owner, and the jury rendered a verdict in the contractor’s favor. The owner then proceeded with its third party action against the engineer, under the theory that the actions of the engineer caused the owner to pay the increased costs. The court held on this issues as follows:

With respect to the first request by [the owner] for an award of damages in the amount of the settlement with [the contractor], this court finds that [the engineer's] negligence did not proximately result in any damages in this regard. As a result of the subsoil conditions . . . [contractor] was indeed required to expend additional sums.The fact that additional costs were incurred is not in dispute.

An attempt, however, to ascertain damages as the difference between the costs of the pipeline absent any negligence or breach of contract by any party and the cost of the pipeline with such negligence or breach of contract present yields a cost differential of zero. If [the engineer] had provided accurate information and if [the owner] had accordingly been able to append this correct information to the contract documents, then this information would have been relayed to Lisbon whose bid, in reliance on this, would have been higher. The bid would necessarily take into account the sums the bidder would have had to expend to satisfactorily complete the job. The settlement . . . paid by [the owner] to [the contractor] compensates the contractor for the additional costs incurred due to the actual conditions encountered at the site. These were conditions that would have been contended with anyway. In sum, had [the engineer] provided the accurate

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information, the final costs would also be based on the actual conditions at the site, or would be the amount [the owner] paid in settlement pursuant to the Differing Site Conditions clause in the contract.

An interesting side note in this action was that even though the engineer was not found liable for any dollar amount to reimburse the owner for the amounts the owner paid the contractor for the differing site conditions claimed, the engineer was found liable to the owner for its legal fees and expenses incurred in prosecuting its third party claim against the engineer. The court’s reasoning was since the contractor's action against the owner was proximately caused by the engineer’s breach of contract and negligence, the owner was entitled as a matter of law to recover from the engineer its costs and expenses including reasonable expert and attorney's fees incurred in defending the action of the contractor. The court cited the case of Canadian Universal Insurance Company v. Employer's Surplus Lions Insurance Company,325 So.2d 29 (Fla. 3d DCA 1976). This case held for the general principle that if a party causes another party to defend a lawsuit or other type of action brought by a third-party, then the cost incurred in defending that action are recoverable from the party responsible. X. Disclaimer Clauses What if your contract does not have a differing site conditions clause which allocates risk to the owner? Unless the contract has a clause which offers the contractor contractual relief in the form of an increase in the contract price and time of performance, thereby placing the liability for differing site conditions upon the owner, the contractor is generally held to assume the risk of encountering conditions which are not specified in the contract. However, the owner often includes contract language which disclaims responsibility for the information which it attaches to or includes in the contract concerning subsurface conditions. These are known as disclaimer or exculpatory clauses. An example of this is Cruz Construction Company v. Lancaster Area Sewer Authority,439 F. Supp. 1202 (E.D. PA 1977). The following disclaimer clause concerning subsurface conditions was contained in the specifications. SITE CONDITIONS

Where information as to soil conditions, test borings, test piles and existing underground and overhead locations is shown on the Engineer’s plans, specifications or drawings, or in preliminary reports prepared by the Engineer, such information is for the Owner. The correctness of such information is not guaranteed by the Owner or the Engineer, and in no event shall be considered as a

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part of the contract, an inducement to bidding or as a factor for computation of bids. If such information is used by a bidder in preparing his proposal, he must assume all risks that conditions encountered in performing work may be different from the approximation shown. If any bidder so desires, the Owner will afford him an opportunity, at his own expense, to make borings or soundings, to drive test piles or to dig test pits properly refilled to the satisfaction of the Owner.

The Contractor shall satisfy himself, by careful examination, as to the nature and location of the work, the character of the equipment and facilities needed preliminary to and during prosecution of the work, the general and local conditions, and all other matters which can in any way affect work under this contract.

The Court held under applicable Pennsylvania law that in order for the contractor to recover for encountering subsurface work at much higher levels than indicated on the test borings shown on the plans, he would have to show that the representations of the City were knowingly and falsely made. In finding against the contractor, the court held:

In the instant case, there is no indication that the Authority or its agents knew of the level of subsurface rock. It is alleged that some of the agents knew of the unreliability of test borings, but knowledge of that sort is insufficient. As the Court noted [previously] possibility of error is insufficient to show misrepresentation, much less fraudulent misrepresentation. That Court noted that where the borings accurately represent the subsoil conditions where the borings are made, there is no misrepresentation. Therefore, even if the Authority knew that the test boring data was unreliable because of the nature of subsurface rock in Lancaster County, such knowledge is insufficient.

439 F. Supp. at 1207. Thus, without a clause which places the liability of subsurface conditions on the owner, the owner is generally able to include a disclaimer clause in the client contract which places the liability upon the contractor. Another example of a contract that does not contain a Differing Site Conditions clause placing the obligation on the owner is illustrated in the case of Jerome Bradford Construction Company. Inc. v. Pinkerton & Laws Company,332 S.E.2d 26 (Ga. 1985). In this instance, the

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dispute arose not between an owner and a contractor, but a general contractor and a subcontractor. Bradford, the subcontractor, alleged that Pinkerton, the prime contractor, breached the subcontract by refusing to allow a change order to the contract based upon an alleged material change in the condition of the construction site. In essence, the material change was the amount of rain which fell over several months which made achievement of the contract specifications more difficult and more expensive. The pertinent findings of the trial court in regard to the dispute are as follows:

Under the subcontract agreement between Pinkerton and Bradford, Bradford agreed to furnish and supply all the necessary labor, materials, tools, equipment and supervision to clear, grade and fill the site, and to install complete sanitary and sewer and storm drainage systems. The specifications pertaining to the placement of fill material -- which were incorporated into the subcontract agreement -- required the fill material to be compacted to a minimum densityof ninety-five percent (95%) of maximum laboratory dry weight as determined by AASHTO Test Designation T-180 (modified proctor). Compaction of fill material to a standard ninety-five percent (95%) modified proctor density is substantially more difficult to achieve that compaction of fill material to a standard ninety-five percent (95%) standard proctor density. Although the subcontract specifications stated that the applicable standard was ninety-five percent (95%) modified proctor, Bradford submitted its bid and entered into the subcontract agreement without any of its representatives having read the specifications.

Bradford commenced work in November of 1981 and initially achieved the requisite degree of compaction in performing the fill work. However, it encountered substantially greater difficulty in achieving the requisite degree of compaction in the early spring of 1982 as the result of additional rains which occurred during this period of time. The Purchase Order executed by Pinkerton and Bradford -- which was made part of the subcontract agreement-provided that all subsurface soil conditions are the responsibility of the subcontractor as it relates to his work described above. The subcontract specifications provided in part: that Bradford was required to visit the site, inform itself of the conditions and make its own estimate of the facilities and difficulties attending the execution of the work; that the material for the fill work would consist of the material found on the site; that it would have no claim for any extra payment due to the nature of the material to be excavated; and that the fill material was to be compacted plus or minus three percent (3%), and the moisture content of each lift was to be adjusted by either

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aeration (to dry the material)with a disk harrow or sprinkling as might be necessary to facilitate proper compaction. The record further shows that the subcontract called for Bradford to finish the work by February 1982. In July 1982, with the work substantially incomplete, Bradford abandoned the job site and refused to complete the work as specified in the contract. From these facts, the trial court concluded that the responsibility for subsurface conditions and the obligation to aerate the fill material in order to arrive at optimum moisture for compaction was specifically imposed upon Bradford by the agreement. The trial court also found that the contract did not provide a “differing site condition or changed condition” clause. For these reasons the trial court concluded that Pinkerton could not be liable to Bradford under the agreement. The Appeals Court upheld this ruling of the trial court holding:

Parties laboring under no disabilities may make contracts on their own terms, and in the absence of fraud or mistake or terms that are illegal or contrary to public policy, they must abide by the contract. The fact that it is unwise or disadvantageous to one party furnishes no reason for disregarding it. Yon v. City of Atlanta, 201 Ga. 800, 804, S.E.2d 516 (1947). Bradford argues that the rain made it ‘economically impossible’ for it to comply with the contract specifications. Yet there is no evidence that its president stated that had the contract called for the lesser standard of 95% standard proctor density rather than 95% modified proctor density, Bradford could have met the requirements easily. There is also evidence that Bradford entered into the agreement without full knowledge of the requirements of the job. The basis for Bradford’s claim against Pinkerton is that Pinkerton did not allow a modification of the contract. Yet, as the trial court found, the contract does not place any obligation upon Pinkerton to allow such a change. This fact, coupled with the circumstance that the job proved more difficult than anticipated, affords no basis for recovery by Bradford against Pinkerton.

Thus, one can see that between owner and contractor, and contractor and subcontractor, the absence of a differing site conditions clause can result in the lower tier contracting party assuming all the risk for subsurface conditions. XI. Claims for Differing Site Conditions What happens if the owner determines that the conditions that you have encountered are not differing site conditions and you are not entitled to additional time and money? Note that the

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Concealed or Unknown Conditions clause in AIA Document A201- General Conditions of the Contract for Construction- 2007 edition states “If either party disputes the Architect’s determination or recommendation, that party may proceed as provided in Article 15.” This is a reference to the Claims and Disputes Article of the contract. This article of the contract contains procedures to contest the initial determination, including non-binding mediation or binding procedures. Contracts with the federal government are governed by the Contract Disputes Act of 1978, which has specific disputes procedures that can be pursued at government Boards of Contract Appeals and the United States Court of Claims. XII. Summary Differing site conditions are subsurface or other latent physical conditions at the site of the work which a contractor’s investigation or owner-prepared reports have failed to disclose. Contract clauses are generally used to allocate the risk of differing site conditions, usually allowing the contractor an equitable adjustment of contract time and price if the impact of the conditions is such that additional time is required for performance and additional costs are incurred to rectify the situation. There are two types of differing site conditions - those not indicated in the contract documents and those of an unusual nature generally not contemplated in the type of work to be performed. The contractor has a duty to give notice of differing site conditions and allow the owner and the design professional to investigate and suggest solutions. While awaiting direction from the owner, the contractor has a duty to proceed with unaffected work. If the owner determines that the condition that you encountered is not a differing site condition, you usually have the right to contest this decision under the disputes procedures in your contract. You should also be aware that if your contract does not have a differing site conditions clause that allocates this risk to the owner, you as the contractor bear the risk of encountering these conditions. XIII. Quiz 1. The concept of contractual relief

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a) Gives the contractor the right to sue the owner immediately in court if a contingent event occurs b) Uses a contract clause to allocate risk for contingent events and usually allows the contract additional time for performance of the contract and an increase in the contract price if the contingency delays performance and results in increased costs. c) Is a mechanism that used to renegotiate a contract if one party thinks the contract is not fair.

2. Differing site conditions, sometimes referred to as unknown conditions or concealed conditions

a) Are the fault of the owner because the owner failed to adequately investigate the site and accurately depict the conditions. b) Are those conditions known to the owner that the owner intentionally does not reveal to the contractor. c) Are subsurface or other latent physical conditions at the site of the work which a contractor’s investigation or owner-prepared reports have failed to disclose.

3. Differing site conditions a) May be natural conditions or man-made conditions in existing construction. b) Are only natural conditions. c) Are only found under the surface of the construction site. 4. If you have a differing site conditions clause in your contract that allocates the risk of these conditions to the owner:

a) You should increase your bid to provide for an increase in price in case your encounter a differing site condition. b) You should not include any amount in your bid as a contingency for differing site conditions. c) The owner will automatically add an amount to your bid for differing site conditions when your bid is evaluated.

5. Type one differing site conditions

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a) Are man-made conditions that are unexpected. b) Are those that differ materially from what is indicated in the contract documents.

c) Are those for which you receive additional contract time but no additional costs even if you incur additional costs.

6. Type two differing site conditions

a) Are conditions which differ materially than those you would normally expect to encounter in the type of work being performed.

b) Are natural conditions. c) Are those for which you receive additional contract time and additional costs.

7. If the contractor is required to conduct a pre-bid investigation a) Any conditions that are later found are considered not to be differing site conditions.

b) The contractor is under a duty to discover only those conditions which would be ascertainable by a reasonable investigation. c) The contractor must inform the owner of the results of the investigation so the owner can inform all other bidders.

8. The contractor is required to give the owner notice of a differing site condition.

a) So that the owner can order the contractor to accelerate performance by adding manpower to meet the original completion date.

b) To allow the owner to determine who drafted the faulty contract documents. c) To allow the owner to investigate the conditions and determine what corrective measures, if any, the contractor should perform.

9. If you fail to give notice of a differing site condition as required by the clause in your contract a) You are not entitled to contractual relief under the clause. b) It does not matter, because the owner is still liable and will pay you anyway.

c) You may still be entitled to relief if the owner or its representative already has actual knowledge of the differing site condition.

10. Once you give notice of a differing site condition

a) You should wait until the owner investigates the condition and directs you how to proceed to deal with the differing site condition, but you must continue all other unaffected work. b) You should immediately stop all work and keep records of your costs of idle equipment.

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c) You should hire your own engineer to make an independent investigation.