There’s no sugarcoating it. Encountering a differing site condition (“DSC”) on a jobsite can be a real headache. But whose headache is it in the end? The precise language contained in the contract documents, and whether the owner was truthful about the site conditions, are critical issues to evaluate in determining who may be legally responsible. For example, an owner may be responsible for the DSC if they mislead the contractor or misrepresent any of the jobsite conditions. However, a contractor may be responsible if it fails to perform a pre-bid site inspection when allowed, or fails to properly notify the owner and assert a contractual claim. This article will generally discuss DSCs and some of the common issues associated with them.
What is a Differing Site Condition?
Differing site conditions are unknown, concealed, and/or latent physical conditions that are discovered only after work has started on a jobsite. Differing site conditions are not described in the contract or bidding documents, nor are they reasonably expected to be at the jobsite. Some examples of common differing site conditions are as follows: (1) unexpected boulders at an excavation site; (2) asbestos being found during a demolition; or (3) finding an unsound structural support wall that was supposed to form part of a new structure.
What are Type I and Type II Differing Site Conditions?
There are generally two types of differing site conditions a contractor may experience. “Type 1” differing site conditions are subsurface or related physical conditions at the jobsite that differ materially from those indicated in the contract documents. “Type 2” differing site conditions are unknown physical conditions of an unusual nature at the jobsite, differing materially from those ordinarily encountered and generally recognized as inherent in the work provided for in the contract documents.
“Type I”
- Water level or water pressure differs from what was originally indicated.
- Greater density of rocks, or an unexpected type of rock is encountered on a site.
“Type II”
- A contract does not provide any subsurface information and when work commences on the project the contractor encounters these subsurface conditions that it reasonably did not and/or could not expect to be there.
What California Laws Apply to differing site conditions claims on public works of improvement?
Pursuant to California Public Contract Code section 7104 et seq., any public works contract of a local public entity which involves digging trenches or other excavations that extend deeper than four feet below the surface shall contain a clause which provides the following:
- The contractor shall promptly, and before the following conditions are disturbed, notify the local public entity, in writing, of any material that the contractor believes may be material that is hazardous waste, as defined in Section 25117 of the Health and Safety Code, that is required to be removed to a Class I, Class II, or Class III disposal site in accordance with provisions of existing law;
- The local public entity shall promptly investigate the conditions, and if it finds that the conditions do materially so differ, or do involve hazardous waste, and cause a decrease or increase in the contractor’s cost, or the time required for, performance of any part of the work shall issue a change order under the procedures described in the contract; and
- In the event that a dispute arises between the local public entity and the contractor whether the conditions materially differ, or involve hazardous waste, or cause a decrease or increase in the contractor’s cost, or time required for, performance of any part of the work, the contractor shall not be excused from any scheduled completion date provided for by the contract, and shall proceed with all work to be performed under the contract. The contractor shall retain any and all rights provided either by contract or by law which pertain to the resolution of disputes and protests between the contracting parties.
When is a Contractor Responsible for a Differing Site Condition?
In some instances, the contract documents may allow the contractor to perform a pre-bid site inspection. This may create a duty upon the contractor to discover whatever site conditions would be discoverable by a reasonably prudent contractor who is experienced in the work being bid. If the contractor fails to perform the pre-bid site inspection but would have reasonably discovered the site conditions at issue by such an inspection, the contractor may be precluded from prevailing on its DSC claim. Additionally, if the owner did not mislead the contractor about the conditions, or if it included a specific disclaimer of the conditions, the contractor may bear responsibility for what it believes to be a differing site condition.
When is a Contractor Entitled to Additional Cost and Time for a Differing Site Condition?
Whether on a public or private work of improvement, the contract documents will generally determine who is liable for a DSC. However, there are certain exceptions. For example, if the owner provided the contractor with defective plans and/or specifications that contain misleading or false statements about the site conditions, the contractor may be entitled to recover its increased costs and time, even if the contract documents assigned responsibility for DSCs to the contractor. In some instances, an owner’s nondisclosure of material facts concerning the site conditions can also entitle the contractor to additional cost and time necessitated by the unforeseeable conditions.
What Should a Contractor Do if it Discovers a Differing Site Condition?
Construction contracts generally contain some form of a DSC provision. However, each contract is unique, and, therefore, the DSC provision must be critically analyzed. The contractor must strictly comply with the DSC provision before performing any extra work to remedy the DSC. The contractor will generally be required to: (1) notify the owner of the DSC; and (2) obtain a change order for the additional cost and time. If the owner refuses to approve a change order for the DSC, the contractor must make a formal contract claim for the additional cost and time pursuant to the contract documents’ claim procedure. If the contract claim is denied, the contractor must initiate litigation in order to recover the additional cost and time caused by the DSC.
It should be stressed that the contractor’s failure to promptly give notice of a DSC, and specifically before it is disturbed, may constitute a waiver of all the contractor’s claims in connection therewith, including additional project time and cost. Therefore, strictly complying with the contract’s procedural requirements for making a DSC claim is critical in order to preserve the contractor’s DSC claim.