Construction projects rarely proceed as planned. In fact, anticipating potential problems might be the main function of a construction contract. But what if an unforeseen problem pops up after the contract has been signed – like if the site conditions are different than what was promised? Who bears the cost of the additional work needed? Let’s look at what constitutes differing site conditions and general best practices for contractors and subs.

What Are Differing Site Conditions?

Differing site conditions occur when a construction contractor encounters a concealed site condition (like, potentially, a subsurface condition) that differs from what was in the contract or from what would normally be expected. The difference in the site conditions is presumed to affect the work on the project, most often leading to a cost increase to the contractor that must now overcome the unexpected site conditions.

These conditions can describe just about anything. A few specific, hypothetical scenarios include:

  • rocks where soft soil was presumed
  • buried debris
  • unexpected utility lines
  • a higher than anticipated water table under the job site

…to name just a few.


Read the companion piece to this article that focuses on the contract: What You Need to Know About Differing Site Conditions Contract Clauses


The 2 Main Types of Differing Site Conditions

Typical differing site conditions clauses will provide that, as long as the contractor gives the owner timely notice of differing site conditions, then an equitable adjustment can be made to the contract price.

Most of these contract clauses identify two types of differing site conditions.

Type 1: Conditions Different from Contract

These are site conditions that differ materially from the conditions planned for the construction contract. This provides relief to the contractor who encounters a site condition not anticipated by the contract.

In order to prove a successful claim, the claimant must prove that:

  • The contract documents describe certain site conditions;
  • The description was reasonably relied on to price and schedule work;
  • Actual site conditions were different from those described in the contract documents; and
  • The difference in conditions increased the cost and/or the time required to perform the contract work.

Type 2: Conditions Different from Normal Expectations

These are site conditions that differ materially from those conditions that are “normally encountered.” This provides relief to a contractor who encounters unusual conditions on the jobsite itself.

To show a Type 2 condition, the following must be established:

  • What conditions are recognized as “known” or “usual physical conditions” at the site;
  • What physical conditions were actually encountered;
  • The actual conditions differed materially from the known or usual conditions; and
  • The actual conditions impacted the cost and/or time to perform the contract.

The Big Question: Are the Site Conditions Reasonable or Foreseeable?

Regardless of the “type” there’s a very important question to answer: Were the conditions reasonable or foreseeable? In other words, would a rational, experienced, prudent, and intelligent contractor in the same field have discovered or should have reasonably assumed about the site condition when submitting their bid? If the condition could have or should have been easily discovered, a differing site conditions clause might not be of much use.

Courts will resolve these conflicts by focusing on what information was available to the contractor, whether the contractor took reasonable steps to investigate the site conditions, and whether the contractor made reasonable assumptions in their bid. Reasonable, reasonable, reasonable! That’s the word of the day (every day!) when it comes to differing site conditions.

Best Practices Regarding Differing Site Conditions

Tips for Contractors and Subs

This seems fairly obvious, but read the contract! Make sure you know and understand every aspect of it, especially ones that involve risk allocation and notice requirements. Search the contract for any exculpatory clauses or language disclaiming the accuracy of the site information provided to you. If you are still unsure, you can probably perform your own site investigation prior to submitting your bid.

Excessive and expensive investigations aren’t necessary, remember… the keyword in all of this is reasonable! Spending some time and money early on can help save you both down the line. Even if the contract does indicate certain conditions, it won’t excuse the contractor from performing their own site investigation.

If you do encounter differing site conditions, stop what you’re doing and contact the owner, project manager, or whoever else is responsible for the job site. Be sure to follow any notice requirements. Missing a deadline or disturbing the condition could be problematic. After all, the owner should have an opportunity to investigate the condition for themselves. Once you have incurred extra costs due to a differing site condition, keep a good record of these costs in case a dispute arises later on.

No one wants to deal with unforeseen conditions on a project, but sometimes, the issue is inevitable. Differing site conditions increase costs for everyone. Since these conditions are usually unearthed early on in the project, they can cause a ripple effect on the overall project schedule and touch each party providing work – all the way down to the wage laborers. Including a differing site conditions clause could really help to avoid headaches. Meanwhile, a failure to do so could result in serious expense and few paths to recover damages.

Tips for Owners

First and foremost, disclose all the known conditions prior to accepting bid proposals. Transparency is your best friend in the construction industry. Trying to save a buck by having a contractor or sub fix some latent issue with the property is a great way to get off on the wrong foot.

If you do end up providing a geotechnical report for the project site, be sure to impose strict and clear cut notice requirements. You may also want to try and limit the amount of reimbursable costs to direct job site costs incurred by the contractor. For those including an exculpatory clause, it’s important to avoid making any representations about the site or subsurface conditions. If representations are made about the site, it may be hard to avoid liability if the site differs from those representations.

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What Are Differing Site Conditions? Best Practices for Contractors and Subs
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Differing site conditions can throw a wrench into the budget & schedule of even the best plans. Preparing for the worst and knowing how to react is crucial.
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levelset
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