Unforeseen site conditions typically spawn two types of claims based on two distinct but related theories: differing site conditions (DSC) and defective specifications.  A contractor may attempt to circumvent the limitations on recovery under a DSC provision by characterizing its claim as one for breach of contract due to defective specifications.  In Comptrol Inc v. United States (Fed Cir. 2002) 294 F.3d 1357, a federal court recognized the close relationship between these two theories and blocked the contractor’s attempt to do an end-run around the recovery limits in the owner’s DSC provision.

In Comptrol, the contractor claimed that during bidding, the government withheld material information concerning the presence of quicksand and the location of a subsurface pipeline.  Apparently unhappy with the recovery allowed by the DSC provision, the contractor tried to argue that its claim should be permitted as a claim for damages for breach of contract arising from defective specifications.  The court rejected this argument and held that although DSC claims and defective specifications claims are distinct in theory, “where the alleged defect in the specification is the failure to disclose the alleged differing site condition,” the two claims are “so intertwined as to constitute a single claim” that is governed by the DSC provision.”

Contract Drafting NOTE: DSC provisions typically contain a number of clauses relating to such things as notice, cost recovery, and continuous work that are valuable protections for the owner.  In order to preserve these protections, an owner should try to draft the DSC provision with language that limits the contractor’s ability to circumvent the DSC provision by characterizing its claim as one for “defective specifications.”

ABOUT THE AUTHOR:  Steve Densmore is an attorney with the law firm of Kane, Ballmer and Berkman, 515 South Figueroa Street, Suite 1850, Los Angeles, CA 90071; Tel: (213) 617-0480. Email: sdensmore@kbblaw.com.  Website: http://www.kbblaw.com.

ConstructionRisk.com Report, Vol. 5, No. 4 (May 2003)