MEC&F Expert Engineers : 10/29/14

LESSONS LEARNED FROM CONSTRUCTION CLAIMS AS THEY RELATE TO DIFFERING SITE CONDITIONS

DIFFERING SITE CONDITIONS

Perhaps the most commonly occurring set of disruption and delay issues at construction sites comes under the heading of “differing site conditions” (DSC). Things found by the contractor after contract signing that are different than represented by the contract documents are a “Type I Differing Site Condition”. Instead, the condition may fall under the heading of a “Type II Differing Site Condition”; conditions unusual in nature that differ in a materially physical way from those normally encountered in similar contracts.

Differing site conditions in construction projects can cause schedule delays, cost increases, and dangerous working conditions, or invalidate design assumptions. Construction projects necessarily involve the assessment of site surface (and subsurface) conditions to select the best means and methods to develop a construction schedule and bid and to complete the project. For traditional design-bid-build projects, the assessment of site conditions is typically based on information provided by the owner/agency in the bid package, familiarity gleaned from a site walk, as well as insight regarding conditions that could be reasonably expected.

In some cases, contractors are encouraged to perform additional investigations, as needed, to become better acquainted with the field conditions. For design-build projects, the contractor typically accepts additional responsibility for evaluating site and subsurface conditions. Bidding contractors may be provided with a stipend to conduct additional subsurface investigations.

Based on our experience with the differing site conditions claims, we provide below lessons learned from either the owner or the contractor view. We hope that these lessons will serve as a cornerstone for further reducing the construction disputes between the parties or at least help in expediting the resolution of these claims.

Lessons Learned for Contractors

Prior to bidding on a project, the contractor should:

1. Carefully review the contract and understand how it assigns the risk of differing site conditions. Carefully read the contract and know what limitations will be applied to the ability to make differing site conditions claims or any other requests for change orders. Either have prior experience performing the particular type of work and contract – or hire managers that have requisite prior experience. Be prepared for Courts to enforce the contract as written and not to reform the contract to be fair or reasonable.

2. Search the contract for onerous exculpatory clauses or contract language disclaiming the accuracy of site information reflected in the bid documents.

3. Perform a reasonable site inspection and make a written and photographic record of your site investigation. Notice the physical characteristics of the surrounding property.

4. If a differing site condition is encountered, follow carefully the contract notice requirements and wait for instructions from the owner before disturbing the site conditions.

5. Keep careful and separate cost records of your additional costs flowing from differing site conditions.

6. Understand that the law varies greatly, from state to state, with respect to the allocation of site conditions risk. Before bidding work in an unfamiliar jurisdiction, check with your construction lawyer.

7. When a bidding document identifies other subsurface conditions reports and/or soil borings are “available upon request”, request and review all such information and incorporate the knowledge gained into your bid.

8. When reviewing bidding documents, do not assume that the owner is required to provide all possible information available. Be prepared to perform and document some independent investigation of conditions potentially impacting the project. If other information is discovered, make certain that the bid cost reflects this independently discovered information.

9. If the bidding documents are silent on an issue (for example, groundwater) this is no guarantee that the condition does not exist. The contractor must perform his independent Investigation from other sources and do test borings if this is warranted. The contractor must perform a reasonable amount of independent investigation concerning subsurface conditions especially where the bidding information is silent on matters that, logically, should be present on or near the site. When the contract information makes no specific representations as to conditions to be encountered, contractors may not be successful in claiming that the condition encountered “differed materially ” from the conditions anticipated.

10. If site conditions change subsequent to contract award, do not rely upon the Differing Site Conditions clause for an equitable adjustment to the cost or time of the contract. Look to other equitable adjustment clause such as the Delay or the Changes clauses instead.

11. When bidders are faced with a requirement to perform their own independent, post award geotechnical investigation, they may not be able to rely exclusively on the owner furnished subsurface information.

12. Contractors may have to retain the services of a local geotechnical consultant to review the owner furnished information and provide advice on how to interpret the data and prepare this portion of the bid. If this is done, it will need to be documented in the event of a later differing site condition claim.

13. If the information provided by the owner in the contract documents is included as a “guide” then the contractor may be at risk for relying totally on this information. The contractor must perform his own investigation of the conditions and cannot later claim differing site conditions.

14. When other available information is noted in the bidding documents bidders must take the time and make the effort to review this information. Such a review may prove helpful in bidding and planning the project. Further, such a review will help preserve the contractor’s right to file a differing site condition on the basis of a material difference between available information and actual conditions encountered.

15. Bidders must read the new contract anew. The contractors cannot assume that conditions from previous contracts are the same as the conditions in the new contract currently out for bid.

Lessons Learned for Owners

To avoid liability for unknown or unforeseen site conditions, the owner should:

1. Disclose all known conditions prior to the submission of bids.

2. If you include a differing site conditions clause in the contract, impose strict notice requirements and consider limiting the reimbursable costs to only direct job site costs incurred by the contractor.

3. Exculpatory clauses may not avoid liability when the contract documents make positive representations about the site or subsurface conditions. Avoid such representations within the contract documents or otherwise.

4. If there is a desire to disclaim geotechnical information provided to bidders, be sure the contract clearly states that the geotechnical reports are not part of the contract documents.

5. Prior to letting a project, be certain that you understand how the contract allocates the risk of unknown or differing site conditions.

6. To potentially avoid claims such as this, owners may want to consider use of a Geotechnical Design Summary Report or a Geotechnical Baseline Report where the geotechnical consultant interprets soil, rock and water conditions between borings.

7. Make certain that the design professionals and geotechnical consultants identify, search out and capture all subsurface conditions reports and boring logs previously done on or near the site and incorporate an appropriate notice of the availability of such additional information in the bidding documents.

Metropolitan Engineering, Consulting & Forensics (MECF)

Providing Competent, Expert and Objective Investigative Engineering and Consulting Services

P.O. Box 520

Tenafly, NJ 07670-0520

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METROPOLITAN “EYES AND EARS” CONSULTING SERVICES (OWNER REPRESENTATIVE)

BACKGROUND

Hiring an Owner's Representative Project Manager is a growing trend for construction projects -- particularly with today's uncertain market -- because of its potential for large cost savings. For larger construction projects, it is a middle ground between a property owner or manager hiring all of their own contractors, and hiring an expensive General Contractor. Essentially we bring together all the logistics necessary to implement the project.

Owner's Representatives will prepare Requests for Proposals (RFP's), solicit qualified contractors for specific scopes of work, and project manage the process; all on behalf of (and with the oversight of) the owner.

Clients frequently ask us for these services after working with us conducting a Reserve Study, Commercial Building Inspection, Property Condition Assessment or related service. It is a natural progression given that these studies often reveal an immediate need for repairs.

OWNER REPRESENTATION

When you need expert "eyes and ears" on site, we can be your owner representative. In this unique relationship we are responsible to you, the property owner, alone.

As an Owner’s Representative, METROPOLITAN CONSULTING ENGINEERING serves as the owner’s “eyes and ears” on a project site to facilitate project delivery with the highest possible quality, on schedule and within budget. In this capacity we function as an extension of the owner and solely represent the owner’s interest, independent of the design professionals and general contractor.

METROPOLITAN CONSULTING ENGINEERING in the role of project intermediary can make suggestions with regard to engineering, design, scope, contract matters, budget adjustments, proposed changes, schedule changes, and time extensions. We can assist with issue resolutions and answer questions that arise on any given day. We can also manage the project and do all the required coordinations.

We are flexible in tailoring our representation services to meet your needs. METROPOLITAN CONSULTING ENGINEERING Owner’s Representative services may include:

Pre-Construction Services:

Communicate with the Owner, Design Team, Contractor and local municipalities assigning, managing and prioritizing tasks.
Project planning and control.
Lead design coordination meetings between Architect and Consultants to ensure progress and keep design within budget. Track issues that need to be resolved to keep advancing the project.
Prepare clear and concise financial reports so that you know where costs stand and where they are headed.
Provide input on design elements without compromising quality and reliability of a product.
Assist in establishing means and methods of construction.
Work with the design team to develop a comprehensive scope of work for each trade and ensure coordination between Architect and Engineers.
Create and track design and pre-construction schedules.
Assist the Owner in retaining and coordinating the professional services of surveyors, special consultants and testing laboratories required for the Project.
Work with Construction Manager establishing construction methods, availability of materials, labor and other factors related to cost and schedule.
Assist with preparing budgets, schedules and site logistics plan.
Create, monitor and update cost reports keeping track of all design and construction costs.
Monitor and track all logs and correspondence to ensure that matters are dealt with promptly and accurately.
Review and approve payment requests from Construction Manager and Consultants.
Track permits with expeditor ensuring DOB filing and inspections are completed.
Review, determine validity and negotiate change orders from the Construction Manager, Design Team and Subcontractors.
Attend meetings with Owner to discuss progress, identify decisions that need to be made and provide a forecast on what steps need to be taken in the future to keep the project moving forward.

Construction Services:

Monitor project schedules prepared by Construction Manager.
Identify tasks requiring attention and suggest alternative course of action if necessary.
Oversee the bidding process, including participating in interviews with Subcontractors, defining the scope of work for each trade and working with Construction Manager to analyze and clarify bids.
Identify and track long lead items.
Lead weekly meetings reviewing schedule, design issues, quality control and project costs.
Attend weekly meetings between Construction Manager and Subcontractors.
Inspect work in place to ensure quality control and compliance with construction documents.
Update cost reports keeping track of soft and hard costs.
Determine in general that the work of each Contractor is being performed in accordance with the Contract Documents, and endeavor to guard the Owner against defects and deficiencies in the Work.