DIFFERING SITE CONDITIONS: TYPE I & TYPE II CLAIMS

imagesIt 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.

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