A contractor on a U.S. Army Corps of Engineers project filed a complaint with the U.S. Claims Court, claiming it was entitled to equitable adjustment to its contract for additional costs and time due to encountering differing site conditions while dredging the Miami River and disposing of contaminated sediments.  The court denied counter-motions for summary judgment, concluding that issues of material fact are in dispute and that the contractor needs to present evidence to meet its burden of proof that the conditions actually encountered were materially different from those indicated in the contract documents and unforeseeable on the basis of the information available to the contractor at the time of bidding.  The decision explains the “six indispensible elements” that the contractor will be required to prove at trial for a differing site condition claim. Weston/Bean Joint Venture v. United States, 115 Fed. Cl. 215 (2014).

Details on Differing Site Conditions

In its complaint, the contractor alleged that the subsurface conditions it found were materially different from those indicated in the contracting documents.  Specifically, it alleged that the contract indicated that the sediments the contractor would be required to dredge and process would consist of fine or course particle less than one to two inches in size, but the actual sediments contained significant amounts of large gravel, as well as cobbles and boulders.  Based on what the court called “voluminous briefs and exhibits in support of the cross motions, and based on oral arguments, the court decided “the proper resolution of the plaintiff’s claims would benefit from full development of the record at trial.”

Subsurface or Latent Physical Conditions

This is a type 1 differing site condition claim.  That means it is based on the alleged existence of “subsurface or latent physical conditions” at the site that differ materially from those indicated in the contract.  The court explains that, “To determine whether [contractor] has met this burden, the court must ‘place itself into the shoes of a “reasonable and prudent” contractor, and ascertain whether the conditions actually encountered were reasonably unforeseeable on the basis of all the information available to the contractor at the time of bidding.”

As stated by the court, “There are ‘six indispensable elements’ to a differing site condition claim, incluidng: (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.” Citing Weeks Dredging & Contracting, Inc. v. United States.

 In support of its differing site condition claim, the contractor here asserted that the contract documents, including boring logs and wash probe tests, and a “character of materials clause,” as well as the contractual characterization of the project as one involving “maintenance” rather than “new work” dredging, would be read by a reasonably prudent contractor as indicating that the sediments to be dredged would consist largely of fine or course particles less than one to two inches in size.  The contractor provided a report and deposition testimony of an expert.  In response, the government argued that the contract documents made no representation as to the quantity of oversized material in the sediment.

In denying summary judgment motions, the court found there to be several significant areas of material fact in dispute that would need to be resolved at trial.  These include what subsurface conditions were “indicated” by the contract documents, and also the extent to which the conditions encountered differed from what was “indicated.”

Other issues to be resolved are whether the conditions were reasonably foreseeable, whether the contractor actually relied upon the conditions indicated in the documents when preparing its bid, and the extent to which the contractor’s increased performance costs were caused by differing site conditions.

About the author: Article written by J. Kent Holland, Jr.,  a construction lawyer located in Tysons Corner, Virginia,  with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners.  He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects.  He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk.com Report, Vol. 16, No. 7 (July 2014).

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