Category Archives: differing site conditions

SPECIFICATION CHALLENGE; EXCUSABLE DELAY; TYPE I DIFFERING SITE CONDITION; SUPERIOR KNOWLEDGE

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An Armed Services Board of Contract Appeals dispute, Appeal of L.S. Black-Loeffel Civil Constructors JV, ASBCA No. 62402, 2023 WL 5827241 (ASBCA 2023), involved which party bore liability for delay—the federal government or the prime contractor–based on various legal theories.  Without detailing the factual details, a number of interesting legal issues were raised in this dispute including (1) a defective specification challenge, (2) excusable delay, (3) Type I differing site condition, and (4) superior knowledge.  These legal issues are discussed below.

1. Specification Challenge (Defective Specifications)

The contractor claimed that the government’s specifications were defective in regard to a thermal control plan. The government countered that the specifications were not design specifications but performance specifications. The specifications were performance based because they did not tell the contractor how to achieve the performance-based criteria.

[A] defective specification cause of action only applies to defective design specifications; it does not apply to allegedly defective performance specifications.

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Performance specifications set forth an objective or standard to be achieved, and the successful bidder is expected to exercise his ingenuity in achieving that objective or standard of performance, selecting the means and assuming a corresponding responsibility for that selection. Design specifications, in contrast, describe in precise detail the materials to be employed and the manner in which the work is to be performed. The contractor has no discretion to deviate from the specifications, but is required to follow them as one would a road map.

The amount of discretion the specifications give to the contractor in execution of the contract is a question of contract interpretation, which is a matter of law for this Board to decide.

L.S. Black-Loeffel, supra (internal citations and quotations omitted).

2. Excusable Delay

The contractor claimed the government constantly rejected its thermal control plan without providing any reason other than it was incomplete and did not meet the specifications, and this caused an excusable delay to the project.

To establish entitlement to an extension based on excusable delay, a contractor must who that the delay resulted from unforeseeable causes beyond the control and without the fault or negligence of the Contractor, and the unforeseeable cause must delay the overall contract completion, i.e., it must affect the critical path of performance. Similarly, where both parties contribute to the delay, neither can recover damage, unless there is the proof of clear apportionment of the delay and the expensive attributable to each party.

L.S. Black-Loeffel, supra (internal citations and quotations omitted).

The Board found that the government reviewed the contractor’s thermal control plan within the timeframe in the contract. “The fact that [the contractor] needed multiple submittals speaks more to the incomplete nature of its submittals than it does to any delays on the part of the government.” L.S. Black-Loeffel, supra (“[I]n every instance, the government provided a facially reasonable basis for rejecting the submittal and [the contractor] has not presented a single piece of evidence challenging those bases.”).

3. Type I Differing Site Condition

The contractor further contended that historical water tables incorporated into the contract “bound the government regarding the water levels [the contractor] would encounter and that water levels it encountered constituted a Type I differing site condition.” L.S. Black-Loeffel, supra.

In order to establish a Type I differing site condition, a contractor must prove all four of the following elements: (1) that a reasonable contractor would interpret the contract documents as making a representation of the site conditions; (2) the actual site conditions were not reasonably foreseeable such that the contractor reasonably relied on the representations; (3) the contractor did in fact rely on the contract representation; and (4) the conditions differed materially from those represented and the contractor suffered damages as a result.

L.S. Black-Loeffel, supra.

The first element is based on the contract; it’s a matter of contract interpretation. Id.   However, here, the contract stated that the actual water levels may vary from those indicated in the historical hydrographs.  Id. (“The contract, and the hydrographs themselves, say nothing about the precise conditions the contract would encounter during performance.”). Thus, the Board found that the historical hydrographs of water tables did not constitute a representation of site conditions.  Id.

The second element includes reasonable foreseeability. Weather, regardless of severity, is not considered a differing site condition under the Federal Acquisition Regulations differing site conditions clause.  Id. (“[T]he differing site conditions clause applies only to conditions which existed at the time of contracting; weather conditions which occur during the contract period are not covered by the differing site conditions clause.”).  Here, the Board found that high water tables was a weather condition where the contractor was offered additional time, but not additional compensation. Id. (“A contractor usually is only entitled to additional time for unusually severe weather, but the government has no legal responsibility for the additional costs incurred.”).

4. Superior Knowledge

The contractor also claimed the government had superior knowledge of the design and construction of a component of the project and did not share it. “The doctrine of superior knowledge is based upon the premise that, where the government has knowledge of vital information that will affect a contractor’s performance, the government is obligated to share that information.” L.S. Black-Loeffel, supra.

“In order to recover a claim based on superior knowledge, the contractor must show: (1) the contractor undertook performance without vital knowledge of a fact that affects performance costs or duration; (2) the government was aware the contractor had no knowledge of the vital information and no reason to obtain such information; (3) the contract specification supplied misled the contractor or did not put it on notice to inquire; and (4) the government failed to provide relevant information.” Id.  This argument is “grounded in the government’s warranty of its contract specifications.” Id.

However, because the specifications were performance-based, the Board found this did not apply – “[b]ecause no warranty attaches to the government’s performance specifications, it has no duty to disclose superior knowledge.” Id.  Moreover, the government had no way of knowing the contractor had no knowledge of the purported vital information and no reason to obtain it to support a superior knowledge argument.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

FOUR ELEMENTS TO PROVE TYPE 1 DIFFERING SITE CONDITIONS CLAIM

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There are two types of differing site conditions claims.  A Type 1 claim and a Type 2 claim.  The Federal Acquisition Regulations (FAR) describes these claims, which are often described similarly in any construction contract that has a differing site conditions clause. (Most construction contracts will have a differing site conditions clause.).  It is important to understand the distinction between a Type 1 differing site conditions claim and a Type 2 differing site conditions claim.

A Type 1 claim is “subsurface or latent physical conditions at the site which differ materially from those indicated in this contract.”  F.A.R. 52.236-2(a).

A Type 2 claim is “unknown physical conditions at the site, of an unusual nature, which differ materially from those ordinarily encountered and generally recognized as inhering in work of the character provided for in the contract.” Id.

The United States Court of Federal Claims in Marine Construction, LLC v. U.S., 158 Fed.Cl. 158 (Fed.Cl. 2022), explained a contractor’s burden to support a Type 1 differing site conditions claim. This burden requires the contractor to prove four elements to demonstrate entitlement to a Type 1 differing site conditions claim:

First, plaintiff must prove “a reasonable contractor reading the contract documents as a whole would interpret them as making a representation as to the site conditions.”  Whether the contract makes a representation as to the disputed site conditions is a matter of contract interpretation and a question of law.  The contractual representation must be affirmative.  “A contractor cannot be eligible for an equitable adjustment for a Type I differing site condition unless the contract indicated what that condition would be.”  “[A] proper technique of contract interpretation is for the court to place itself into the shoes of a reasonable and prudentcontractor and decide how such a contractor would act in interpreting the contract documents.” 

 “Second, [plaintiff] must prove … the actual site conditions were not reasonably foreseeable to the contractor, with the information available to the particular contractor outside the contract documents, i.e., that the contractor  ‘reasonably relied’ on the representations.”  “In other words, … it must be ‘reasonably unforeseeable on the basis of all the information available to the contractor at the time of bidding.’ ” “[C]onditions which are discoverable by a reasonable site visit and review of the contract documents [are] chargeable to the contractor.” 

 “Third, [plaintiff] must prove … [it] in fact relied on the contract representation.”

“Fourth, [plaintiff] must prove … the conditions differed materially from those represented and [it] suffered damages as a result.” Relying on a “total time theory” to prove excusable delay  is impermissible because it assumes the government is responsible for all the claimed delay.

Under the “total time theory,” a contractor asserts that wrongful government action contributed to delayed contract completion and “simply takes the original and extended completion dates, computes therefrom the intervening time or overrun, points to a host of individual delay incidents for which defendant was allegedly responsible and which ‘contributed’ to the overall extended time, and then leaps to the conclusion that the entire overrun time was attributable to defendant.”

Marine Industrial, supra, at 188-89 (internal citations omitted).

A contractor that encounters differing site conditions needs to understand its burden in substantiating the claim. A contractor’s burden is challenging so it should not take its burden for granted.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

TYPE I DIFFERING SITE CONDITIONS CLAIM IS NOT EASY TO PROVE

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shutterstock_397981669A differing site condition claim will almost universally result in both a cost and time impact.    There will be additional, unanticipated costs incurred.  And there will likely be a delay requiring additional time to perform.

 

A Type I differing site condition claim is when the contractor encounters conditions at the site different than those indicated in the contract documents.  That seems easy enough to prove, right.  Nope.  And, I mean nope!  If you don’t believe me, consider the recent decision in Meridian Engineering Co. v. U.S., 885 F.3d 1351 (Fed.Cir. 2018).

 

To prevail on a Type I DSC claim, a contractor must prove that: (1) a reasonable contractor reading the contract documents as a whole would interpret them as making a representation as to the site conditions; (2) the actual site conditions were not reasonably foreseeable to the contractor, with the information available to the particular contractor outside the contract documents (i.e., reasonable foreseeability); (3) the particular contractor in fact relied on the contract representation; and (4) the conditions differed materially from those represented and … the contractor suffered damages as a result.  

 Meridian Engineering Co., 885 F.3d at 1356 (internal quotations and citation omitted).

 

In this case, the contractor entered into a contract with the government to build flood control structures.  During construction, the contractor encountered subsurface unsuitable saturated soils.  The contractor notified the government and modifications were issued as a result of the unsuitable soils.  However, the government eventually suspended the work following structural failures and then terminated the project.

 

An issue pertained to the contractor’s Type I differing site conditions claim that the subsurface unsuitable saturated soil caused delays and increased costs.  The trial court found that the existence of the subsurface saturated soils was reasonably foreseeable.  (If the site conditions were reasonably foreseeable, there is not a Type I differing site conditions claim.)

 

First, the specifications stated “[w]ater in varying quantities may be flowing in natural washes throughout the length of the project,” and “[t]he work site may be inundated because of [water] runoff.”  Meridian Engineering Co., 885 F.3d at 1357.  Based on these specifications, the court found that a reasonable contractor would interpret the specifications as a representation of water as a site condition.  Remember, the very first element in a Type I differing site conditions claim requires a reasonable contractor interpreting the contract as a whole would interpret them as making a representation about the site conditions. This kills the Type I differing site conditions claim.

 

Next, the original drawings showed the potential presence of saturated soil and the job was on a floodplain.  Based on this, a reasonable contractor would have performed a site inspection which, in turn, would have informed the contractor of the subsurface saturated soil conditions.   

 

Moreover, boring logs that accompanied the contract stated that variations may exist between boring locations.  Certain geotechnical information did indicate there would be hard unyielding material in excavation areas.  “[E]ven though the Contract indicated ‘hard unyielding material’ found at parts of the site, a reasonable and prudent contractor would not have understood the [C]ontract documents as providing an affirmative indication of the subsurface conditions to be nonsaturated at the site.  Meridian Engineering Co., 885 F.3d at 1357 (internal citations omitted).  Had the contractor undertaken a pre-bid site inspection, it reasonably would have foreseen a saturated soil condition.

 

This case demonstrates that Type I differing site conditions claims are not simple to prove. If the site conditions were reasonably foreseeable, perhaps with a pre-bid site visit, then there goes the claim.  And, presumably, the contract and accompanying geotechnical information will warrant a reasonable contractor to undertake a pre-bid site inspection (according to the Meridian court’s reasoning).  

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

 

DIFFERING SITE CONDITIONS: TYPE I & TYPE II CLAIMS

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It is not uncommon for contractors, especially foundation and civil contractors, to encounter unanticipated site conditions.  These conditions are known as “differing site conditions.”    In government contracting, there is a differing site conditions clause (F.A.R. 52.236-2 shown at the bottom of this posting that is routinely incorporated into prime contracts and subcontracts through flow-down provisions) that identifies two types of differing site conditions.

 

Type I differing site conditions are “subsurface or latent physical conditions at the site which differ materially from those indicated in the contract.”  F.A.R. 52.236-2.  Type II differing site conditions, on the other hand, are “unknown physical conditions at the site, of an unusual nature, which differ materially from those ordinarily encountered and generally recognized as inhering in work of the character provided for in the contract.”  Id.

 

If a contractor complies with the differing site conditions clause and proves the differing site condition, it should be entitled to an equitable adjustment from the government.  The objective behind the differing site conditions clause is to prevent contractors from including fluff in their prices to account for contingencies and unknown conditions since the government will equitably adjust the contract based on these conditions.  In reality, though, the contractor still bears the burden of proving the differing site condition which is oftentimes more challenging than it sounds.  It is important for contractors to understand the difference between Type I and Type II differing site conditions so that they know what is necessary to support an appropriate adjustment to their contract (from a dollar and time standpoint).

 

 

I. Type I Differing Site Condition (subsurface or latent conditions differing materially from contract):

 

There are six elements to a Type I differing site conditions claim that a contractor must prove:

 

“(1) that the contract affirmatively indicated subsurface conditions upon which the contractor’s claims are based; (2) that the plaintiff acted as a reasonably prudent contractor in interpreting the contract documents; (3) that the contractor reasonably relied on the indications of subsurface conditions in the contract; (4) that the subsurface conditions actually encountered differed materially from subsurface conditions indicated in the contract; (5) that the subsurface conditions encountered were reasonably unforeseeable; and (6) that the contractor’s claimed excess costs were solely attributable to the materially different subsurface conditions.”

Weston/Bean Joint Venture v. U.S., 115 Fed.Cl. 215, 218 (Fed.Cl. 2014).

 

These conditions are in addition to the initial notice requirement that the contractor must give the contracting officer before proceeding with the alleged additional work.  See Id. at 218, n.2 citing F.A.R. 52.236-2.  Timely notice should always be given, especially notice before the work commences, to take away any argument that notice was not properly or timely provided to the government.

 

The contractor should also submit any request for equitable adjustment or claim based on the six elements.  This means the contractor needs to point out the subsurface or latent conditions that were indicated in the contract documents and the reasoning / factual basis supporting the different subsurface conditions that the contractor encountered.  This is important because a contractor will not succeed with its Type I differing site conditions claim without showing what the contract indicated. As the United States Court of Federal Claims explained:

 

“A contractor cannot prevail on a claim for a Type I differing site condition unless the contract indicated what that condition would be.  However, the indication in the contract need not be explicit or specific if it provide[s] sufficient grounds to justify a bidder’s expectation of latent conditions materially different from those actually encountered. There must be reasonably plain or positive indications in the bid information or contract documents that such subsurface conditions would be otherwise than actually found in contract performance ….  Determining what the contract indicated requires contract interpretation performed by stepping into the shoes of a reasonable and prudent contractor and decid[ing] how such a contractor would act in interpreting the contract documents.”

All Power, Inc. v. U.S., 60 Fed.Cl. 679, 684 (Fed.Cl. 2004) (internal citations and quotations omitted).

 

The contractor should also endeavor to separately cost code and track its costs (manpower, equipment, subcontractor(s), etc.) solely relating to the differing site condition.

 

 

 

 II. Type II Differing Site Condition (unknown physical conditions at the site differing materially from those ordinarily encountered and generally recognized): 

 

There are three elements to a Type II differing site conditions claim that a contractor must prove: “(1) the condition must be unknown to the contractor; (2) unusual; and (3) materially different from comparable work.”  All Power, 60 Fed.Cl. at 685.  Type II claims are harder to prove because the contractor carries a heavier burden “since there is a greater duty to conduct pre-bid inquiries or reasonable site inspections inasmuch as recovery is available only if the condition is unknown, which means it would not have been revealed upon inquiry or during a reasonable site investigation.”  Totem Construction, ASBCA 35985, 1990 WL 224243 (1990).

 

Similar to a Type I claim, the contractor must provide timely notice and endeavor to separately cost code and track the additional work it incurs in furtherance of supporting a request for equitable adjustment or claim.

 

 

52.236-2 Differing Site Conditions.-                                                                                                                                                                                               
(a) The Contractor shall promptly, and before the conditions
are disturbed, give a written notice to the Contracting
Officer of—
(1) Subsurface or latent physical conditions at the site
which differ materially from those indicated in this contract;
or
(2) Unknown physical conditions at the site, of an
unusual nature, which differ materially from those ordinarily
encountered and generally recognized as inhering in work of
the character provided for in the contract.
(b) The Contracting Officer shall investigate the site conditions
promptly after receiving the notice. If the conditions
do materially so differ and cause an increase or decrease in the
Contractor’s cost of, or the time required for, performing any
part of the work under this contract, whether or not changed
as a result of the conditions, an equitable adjustment shall be
made under this clause and the contract modified in writing
accordingly.
(c) No request by the Contractor for an equitable adjustment
to the contract under this clause shall be allowed, unless
the Contractor has given the written notice required; provided,
that the time prescribed in paragraph (a) of this clause for

giving written notice may be extended by the Contracting Officer.

(d) No request by the Contractor for an equitable adjustment
to the contract for differing site conditions shall be
allowed if made after final payment under this contract.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.