One of the major issues that arises in differing site condition claims is how to deal with situations where the contract documents do not include specific representations of expected conditions.
Many battles have been fought over how to interpret geotechnical conditions between boring holes. Contractors might assume for bidding purposes that the area between boring holes is consistent with what was represented in the geotechnical reports for those holes. Owners might argue that those assumptions were wrong or that there was no representation of conditions between the boring holes.
Further reading:
- Contractors can prevail if conduct overrides strict change order requirements
- Emails can define the legal standard of care, leaving design-builders at risk
- What are contractors’ legal options when public agencies claim immunity?
The legal literature is rich in assessing these arguments, and a recent decision from the U.S. Court of Appeals for the Federal Circuit, Hamp’s Construction LLC v. Secretary of the Army, adds to the body of knowledge. The case specifically addressed a DSC claim in areas not directly covered by boring logs or other prebid information for the contractor and ultimately affirmed the denial of the contractor’s claim.
The case
The Army Corps of Engineers issued a solicitation on July 12, 2012, for construction of a flood control project at the Trapp Canal in Jefferson Parish, Louisiana. The solicitation included 10 boring logs taken at various places along the canal in 2008 – eight from the east side and two from the west side. Hamp’s was awarded the contract on Sept. 4, 2012, and began work shortly after.
The worksite consisted of four quadrants: northwest, northeast, southwest, and southeast. The canal divided the site between east and west, and a local road divided the site between north and south. The first phase of the project involved the northern quadrants, and Hamp’s did not encounter any major problems while working in those areas.
However, while preparing for work on the southern quadrants, Hamp’s discovered that part of the bank of the southwest quadrant had collapsed and that there was a large depression measuring about 100-200 feet by 25 feet in this area. Hamp’s ultimately found additional areas of failure in this quadrant.
Concluding that the bank was too unstable to operate loaded construction trucks, Hamp’s changed its construction plan and operated its equipment from barges. This resulted in major costs and delays, prompting Hamp’s to submit a request for equitable adjustment of approximately $3.9 million and an extension of 237 calendar days.
After the project’s contracting officer denied the REA in March 2019, Hamp’s converted the REA to a certified claim under the Contract Disputes Act, which was also denied. Hamp’s then appealed to the Armed Services Board of Contract Appeals.
In February 2024, the board found that Hamp’s “undoubtedly encountered conditions on the southwest bank of the Trapp Canal that it did not expect and which caused it delays and increased costs.” However, it denied the claim on the grounds that Hamp’s had failed to prove a necessary element for a Type I DSC – i.e., that the conditions found were contrary to the representations in the contract documents.
The board found that there were no representations in the contract documents for the area where Hamp’s encountered its problems. Hamp’s appealed this decision to the Federal Circuit.
The ruling
The Federal Circuit’s decision reviewed longstanding case precedent to assess what was needed for a contractor to recover on a Type I DSC claim. As a threshold matter, the contractor must prove that the contract contained some indication of the conditions to be encountered at the site.
The court emphasized that while the indication “need not be explicit or specific, the contract documents must still provide sufficient grounds to justify a bidder’s expectation of latent conditions materially different from those actually encountered.” Critically, there must be “reasonably plain or positive indications in the bid information or contract documents” regarding subsurface conditions.
Hamp’s argued that this requirement was met by the boring logs provided by the Corps. While only two of the 10 boring logs were taken from the west side of the canal, Hamp’s argued that those two borings were essentially identical to the rest of the boring logs and amounted to an “implied representation” that indicated necessary soil strengths to support the operation of construction equipment on the top of the southwest bank.
The Federal Circuit was unconvinced by this argument, finding substantial evidence supporting the board’s determination that a reasonable contractor would have determined during bidding that conditions on the west bank of the Trapp Canal were substantially worse than those on the east bank.
The board supported its finding with several categories of evidence:
- Reports and testimony from Hamp’s own geotechnical expert, who identified a “soil void filled with a thin slurry” at one of the west bank boring logs and stated, “The soil conditions/stratification are markedly different on the east and west sides of the Trapp Canal.”
- Cross-sections provided with the solicitation showing a “relatively steep” drop-off on the western banks compared with the eastern side.
- Photographic evidence taken by Hamp’s subcontractor during prebid site visits that reflected the southwest bank “was the kind of place that such slope failures could happen and had happened in the past.”
Given the board’s finding that conditions on the southwest bank were visibly different and worse than in other locations, the Federal Circuit concluded that the boring logs that Hamp’s possessed did not constitute indications to a reasonable contractor as to the conditions on the southwest bank.
The Federal Circuit was also influenced by testimony from Hamp’s geotechnical expert that the Corps “did not present any boring log information in the contract documents for the west side canal region,” where Hamp’s alleged unsafe conditions existed for land-based construction operations.
The Federal Circuit noted the board’s finding that there were “real problems on the southwest bank” and that Hamp’s made a “strong case that it was surprised” by the conditions there. However, the board’s decision rested on its determination that Hamp’s failed “in its request for relief because it cannot prove that the government provided misleading information in the contract documents.”
Because the Federal Circuit agreed with this threshold determination – that the contract contained no indications as to subsurface conditions on the southwest bank – it affirmed the denial of Hamp’s Type I DSC claim.
Takeaways
The most important takeaway from this case should be clear: a Type I DSC needs to be based on some indication in the contract documents as to what would be reasonably expected for site conditions.
As readers know, boring logs can only provide explicit information about conditions at the boring hole – and everything else is an extrapolation or interpretation of what might be expected elsewhere. Absent affirmative indications in the contract documents, even a contractor who is genuinely surprised by site conditions will be unable to recover.
The Federal Circuit’s decision provides guidance on this point, stating that such interpretations may be acceptable: “The reasonableness of reliance on borings taken at a distance from a project site cannot be determined based on a bright-line rule, but must rather be determined based on the geologic and topographic features present in each case.”
In this case, Hamp’s experts were unable to support a finding that the borings could be reasonably used to predict conditions at the southwest bank.
This case also calls to mind the benefits of geotechnical baseline reports. A GBR would likely have specifically stated what could be expected at the site and whether the soil strength would support construction equipment.
In the authors’ experience, GBRs are not used often enough and provide a very valuable tool for the whole project team to reach reasonable conclusions about how to assess the data contained in boring logs – potentially avoiding costly disputes like this one.
