Construction and Procurement Law News, Q2 2017

The Civilian Board of Contract Appeals (“Board”), the court with jurisdiction over the General Services Administration and other non-defense executive agencies, denied a contractor’s claim for increased labor and equipment costs resulting from what the contractor claimed were differing site conditions. In Tucci & Sons, Inc. v. Dept. of Transportation, the FHWA Western Federal Lands Highway Division (WFLHD) solicited bids for the reconstruction of a roadway in Mount Rainer National Park and for the installation of a utility trench in part of the road. The solicitation contained project drawings that showed undisturbed native material outside the trenches and encouraged prospective bidders to inspect the location of the work. During its site investigation, the contractor observed cobbles and boulders alongside the road, but did not think the presence of the boulders would have much effect on its estimate because he assumed the boulders had been purposefully placed on the roadside for aesthetic reasons or resulted from an avalanche. During the hearing, the contractor’s project superintendent stated that he did not rely on the observed conditions of the area as an indicator of the subsurface conditions.

The contractor’s fixed-price contract contained the Federal Acquisition Regulations (“FAR”) standard Differing Site Conditions clause, which provides in pertinent part as follows:

(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.

FAR 52.236-2.

The contract also included FAR clause 52.236-3 which states in pertinent part that

(a) The Contractor acknowledges that it has taken steps reasonably necessary to ascertain the nature and location of the work, and that it has investigated and satisfied itself as to the general and local conditions which can affect the work or its cost, including but not limited to: ...

(4) the conformation and conditions of the ground; and

(5) the character of equipment and facilities needed preliminary to and during work performance.

The Contractor also acknowledges that it has satisfied itself as to the character, quality, and quantity of surface and subsurface materials or obstacles to be encountered insofar as this information is reasonably ascertainable from an inspection of the site, including all exploratory work done by the Government, as well as from the drawings and specifications made a part of this contract.

On the contractor’s first day of work it encountered subsurface boulders which impeded the excavation of the utility trench. Each time the contractor encountered a boulder it would deter-mine the extent of the obstruction and then attempt to remove it with the excavator. If the boulder could not be removed with the excavator, the contractor brought in a hydraulic rock breaker to break the boulder into small enough pieces to be removed by the excavator. This process slowed the contractor’s work schedule significantly.

The contractor notified WFLHD of the subsurface boulders by letter and alleged that the boulders were a differing site condition that was unanticipated at the time of bid. WFLHD disagreed with the contractor, and denied the claim.

The contractor appealed, but the Board denied the contractor’s appeal, finding that the subsurface boulders were not a differing site condition. The Board based its decision, in part, on the more than 100 photographs contained in the bid solicitation that showed rocks, cobbles, and boulders in the immediate vicinity of the road. The Board reasoned that “[t]he photographs clearly establish that boulders and bedrock should be expected in undisturbed native material at Mount Rainer National Park.” The Board also found that because the project drawings accompanying the bid solicitation showed undisturbed native material outside the trenches, the contractor “was aware or should have been aware from the surrounding site conditions that it might encounter boulders in the undisturbed native material under the pavement.” The Board went further to hold that “the possibility of excavating rock was far from remote; in fact, it was obvious and apparent.”

This case reaffirms the importance of thoroughly investigating a site prior to submitting a bid. Although differing site conditions clauses are a comfort to contractors, they must be read carefully in conjunction with the site inspection clause.