Some contractors believe if they encounter conditions during construction for which they did not plan, they can obtain relief under the differing site conditions clauses of contracts.
The typical DSC clause does not work that way, instead requiring a contractor to prove all of the following:
- The conditions indicated in the contract differed materially from those actually encountered during performance.
- The conditions actually encountered were reasonably unforeseeable based on all information available to the contractor at the time of bidding.
- The contractor reasonably relied upon its interpretation of the contract and contract-related documents.
- The contractor was damaged as a result of the material variation between expected and encountered conditions.
Contractors often can meet one of the requirements, such as showing that the conditions encountered were materially different from what was indicated in the contract. However, they then fail to demonstrate that they relied upon those contract indications in bidding for the job or that the alleged condition is what caused their damages.
There is a plethora of reported cases that describe scenarios where contractors make a DSC claim and how the courts view these claims. This edition’s case, Appeal of David Boland Inc., involves a decision by the Armed Services Board of Contract Appeals finding that the contractor failed to prove all the elements required to obtain DSC relief.
The case
The U.S. Army Corps of Engineers awarded a contract to David Boland Inc. for construction on the Lake Pontchartrain and Vicinity Hurricane Protection Project in New Orleans. Among other things, the contract’s scope required Boland to design and install a cofferdam to facilitate construction of a floodwall tie-in at a box culvert that was subjected to surges from the lake. Boland subcontracted the cofferdam work to Target Construction.
Further reading:
- What happens when the contract is silent on site condition?
- Liability caps may not be as enforceable as you think
- One-sided arbitration clause declared unconscionable, unenforceable
Target encountered a number of challenges as it installed the cofferdam’s sheet piles and attempted to dewater the cofferdam. It attributed these challenges to the presence of voids under the box culvert that caused the cofferdam to flood after Target started to drive sheet piles. Target also alleged that the presence of undisclosed timber piles created much more difficult driving conditions than expected.
It claimed each of these as being a DSC. The USACE disagreed that Target met the standards for claiming a DSC. The USACE attributed the cofferdam installation problems to Target’s failure to plug the gap between the box culvert and cofferdam sheet piles with concrete, as required by the design documents. Boland filed a claim on behalf of Target and, after it was rejected by the USACE, appealed to the ASBCA.
The holding
The ASBCA addressed the requirements of the DSC clause and concluded that Boland and Target failed to meet any of the four requirements described in the introduction to this article.
As to the first requirement, Boland was to show that what was indicated in the contract documents materially differed from what it encountered. Boland argued that the contract failed to indicate the presence of a void under the existing box culvert structure and timber piles in the area near the existing box culvert. However, the ASBCA cited longstanding precedent that “the Government’s mere silence is insufficient to establish the absence of unfavorable site conditions.”
Moreover, the ASBCA found that the contract documents warned Boland of the possibility of the void and timber piles. This was evident in, among other places, a specification that stated, “The Contractor is advised that buried stumps or similar debris may be encountered periodically on the sheet pile wall alignment and appropriate consideration should be given to hard driving conditions should they occur.” Given this, the ASBCA determined that what Boland said it encountered during performance was similar to what was described in the contract.
As to the second element, Boland was required to prove that the conditions it encountered were reasonably unforeseeable based on all information available at the time of bidding. However, Boland presented no expert or fact testimony on whether the void or timber piles were foreseeable. Instead, it argued that these conditions were unforeseeable because they were not disclosed in the contract documents and were not observed during its pre-bid site visit. The ASBCA not only found that the respective drawings and specifications should have put Boland on notice that debris was expected in the work area and could cause difficult driving conditions, but that timber piles were depicted in several photographs of the cofferdam work area taken before the bid.
As to the third element, Boland was required to establish that it reasonably relied upon its interpretation of the contract and contract-related documents. Boland offered no evidence demonstrating its review of the contract’s soil-related data before bidding, thus failing to establish reasonable reliance. The ASBCA was also influenced by the fact that Boland bid $1,161,000 to perform the cofferdam work, whereas Target only bid $276,925 to perform the same work. The ASBCA stated: “The disparity between these bids indicates that Target and Boland did not have the same interpretation of the contract documents.”
As to the fourth and final element, Boland was to demonstrate that it was damaged as a result of the material variation between expected and encountered conditions. However, the ASBCA found that Boland had not met this burden of proof, given that Target failed to plug the gaps with concrete as required by the design documents. Consequently, as to the flooding, even if there were unexpected voids, there was a question as to whether these would have been a problem had Target followed the design documents.
The takeaways
While this case presents the many ways that a DSC claim can be denied, there are a couple of particular points that we wanted to note. From experience, the authors find that contractors often do a poor job of explaining the third element of the DSC test – i.e., what did they rely upon in bidding and why?
They often have no contemporaneous records to prove this or lack witnesses who can explain what actually happened. As noted in this case, it is particularly challenging when a subcontractor has the claim, as both prime and subcontractor presumably looked at the bidding documents to form their conclusions about site conditions.
The other takeaway relates to “cause and effect” of the alleged DSC, which is the fourth element of the DSC test.
This case provides a great example of the need to do this, as there is a strong indication that the problems with the cofferdam flooding would have been mitigated or eliminated if Target had used a concrete plug. However, imagine that the contractor has proved that the first three elements of the DSC are valid, but the primary impact claimed for the DSC is delay.
The contractor needs to show that the DSC is what actually delayed the project to meet the fourth element of the DSC clause. As anyone who has been involved in a construction delay dispute knows well, there are always arguments over what is the real cause of delay.
