One of the primary risks facing construction contractors is subsurface or unexpected physical conditions discovered after the work begins (commonly known as a Differing Site Condition). When such conditions are encountered on a federal government project, contractors need to: (1) properly document the condition, (2) notify the government, and (3) preserve the right to bring a Request for Equitable Adjustment or Certified Claim.
Typically, any Differing Site Condition inquiry begins at Federal Acquisition Regulation 52.236-2. The regulation defines a Type I differing site condition as a subsurface or latent physical condition at the site that differs materially from those indicated in the contract. A Type II condition is defined as an unknown condition, unusual in nature, that differs materially from the conditions ordinarily encountered or typically expected of the work provided in the contract.
These definitions seem straightforward – either the conditions encountered align with the contract, or they do not. However, contractors should not take documenting or proving Differing Site Conditions lightly. There is still much room for disagreement.
One area where contractors and the government commonly diverge is whether the disputed site conditions were “reasonably foreseeable.” That is, should the contractor have anticipated the conditions based on all of the information available to the contractor when it bid the project.
This particular issue was recently litigated before the Armed Services Board of Contract Appeals (ASBCA) in a dispute over an Army Aviation Support Facility construction contract. In a nutshell, the contractor and the government disagreed about whether the soft, saturated soils encountered during excavation for the project constituted a Type I Differing Site Condition.
In discussing the issue of reasonable foreseeability, the Board specifically considered the government’s claim that the contractor had access to the site (during a pre-bid site visit) and, therefore, the ability to discover the condition. The Board disagreed. The site visit included a visual inspection only – no invasive investigation was permitted. While Type I Differing Site Conditions do not literally need to be below ground, that made a difference in this case.
The ASBCA concluded that the contractor proved – by a preponderance of the evidence – that the soil conditions at the site were unsuitable for construction. As a result, it awarded the contractor damages associated with the unexpected soil remediation costs.
Thinking specifically about Type I Differing Site Conditions, contractors should keep the following elements in mind:
- Is the condition encountered materially different from that indicated in the contract?
- Is the condition encountered reasonably unforeseeable based on the information provided by the government at the time of bidding
- Did your firm reasonably interpret the contract and the related documents provided by the government? and
- Did your firm incur actual damages due to the difference between the expected condition and the condition actually encountered?
If you can answer all of these questions in the affirmative, then your firm is likely entitled to an upward contract adjustment from the government.