Surprises happen on construction projects. Contracts with the federal government, a large and sophisticated owner, contain clauses from the Federal Acquisition Regulation, (“FAR”), that address the risk of the unforeseen and unanticipated. For example, the Changes clause at FAR §52.243-4 allows the government to make changes in the work within the general scope of the project. The government can direct acceleration of the work or order changes in the method or manner of performance of the work to accommodate unexpected developments. The Differing Site Conditions clause at FAR §52.236-2 shifts to the government the contractual risk that overcoming certain unexpected site conditions may require extra work by the contractor and extra expense to the government.
Although the government usually accepts the economic risk of encountering certain unforeseen site conditions by including the Differing Site Conditions clause, the federal government also includes other clauses – clauses that obligate the contractor to examine the site prior to bidding on the contract. The Site Visit clause at FAR §52.237-1 provides that in advance of submitting a quote or proposal, contractors are “expected to inspect the site ... and to satisfy [themselves] regarding all general conditions that may affect the cost of contract performance.” The Site Investigations and Conditions Affecting the Work clause at FAR §52.236-3 includes acknowledgments by the contractor that it has “investigated and satisfied itself as to general and local conditions which can affect the work or its cost.” The obvious purpose of these clauses is to make the contractor look before it leaps into taking on a federal project and evaluate the conditions that would be revealed by a reasonable site investigation.
If a contractor fails to make a pre-award site investigation, it may encounter an "unexpected" by site condition. Under those circumstances the results can be unpleasant but predictable – the contractor has no claim that it encountered a differing site condition. Two recent federal contracts cases, Top Painting Co., Inc., ASBCA No. 57333, 12-1 BCA 35,020 and D&M Grading, Inc. v. Dept. of Agriculture, CBCA No. 2625, 12-1 BCA 35,021, illustrate this common sense outcome.
No Site Inspection – No Recovery
Top Painting was awarded an indefinite delivery, indefinite quantity, multiple award contract for general painting and repair work at Camp Lejeune, North Carolina. Top Painting received a task order to paint metal generator housings and fuel storage tanks. The metal surfaces were to be scraped, sanded, wire-brushed, or otherwise prepared for the primer coat. The task order stated that Top Painting was “responsible for actual field verification prior to bidding ... and during every step of construction ....” The contract included the Site Investigation and Conditions Affecting the Work clause (FAR §52.236-3) that called for Top Painting to satisfy itself regarding all general conditions that might affect the cost of performing the contract work.
Top Painting did not make a pre-award site investigation. It did, however, submit a surprisingly low quote and re-confirmed its bid price after the contracting officer inquired. When Top Painting started the work, it quickly discovered to its surprise that the generator housings and fuel storage tanks needed power washing to remove mold and mildew. They also needed power sanding and power wire brushing to remove heavy rust. Top Painting claimed that removing the mold and mildew by power washing and scraping rust by power sanding and wire brushing required procedures that went beyond the intent of the contract and constituted a differing site condition. Needless to say, the government saw things differently. It denied the differing site conditions claim and Top Painting appealed to the Armed Services Board of Contract Appeals (the “ASBCA” or the “board”).
The ASBCA denied Top Painting’s appeal. The board found that visible rust, mold, and mildew on the generator housings and fuel storage tanks did not qualify as a differing site condition. The mildew and rust were neither subsurface or latent or unknown conditions at the time of bidding. Top Painting had not made a pre-award site investigation as required by the contract and thus had assumed the risk for those conditions when it actually encountered them on site.
D&M Grading, like Top Painting, received a task order that turned out to involve more work than expected. Under its roadway vegetation maintenance contract with the U.S. Department of Agriculture Forest Service, D&M submitted a quote on a task order to perform brush removal along a section of highway. The contract included a Site Visit clause (FAR §52.237-1), but D&M submitted the quote without making a site visit. D&M deemed the site inaccessible due to snow pack.
After receiving the notice to proceed, D&M finally reviewed the actual site conditions. It was surprised at what it found. The roads had been badly neglected for many years and were in the worst shape D&M had ever seen. D&M asked first for an increase in the contract price for the extra work needed to overcome the “worse than expected” condition of the site, but the government denied the change. D&M then requested either a contract termination or a substitution of roads. The government obliged D&M’s request for a contract termination – it terminated D&M for default, entered a contract with another contractor to complete the work, and to offset the re-procurement costs, it kept contract funds otherwise earned by D&M. D&M appealed to the Civilian Board of Contract Appeals (the “CBCA” or the “board”).
The CBCA showed little sympathy for D&M’s argument that it had encountered differing site conditions entitling it to a change in the contract. Neither the contract nor task order indicated the condition of vegetation on or along the roads. Nothing demonstrated that the conditions D&M actually encountered (but did not expect) were of an unusual nature which differed materially from conditions ordinarily encountered in that type of work. D&M, said the board, had accepted the risks of performing the called-for brushing for the price in its task order. D&M had not encountered a differing site condition, had not completed the required brush work, and the agency was justified in issuing a termination for default.
These decisions show that federal contractors should look at project site conditions before they leap into a federal contract. Actual site conditions, visible at the time of bidding, which are worse than the contractor expected, will not support a differing site conditions claim – when the contractor failed to conduct a reasonable site inspection prior to bidding the project. Site conditions so visible and obvious that anyone would notice them are not differing site conditions. They are a part of the scope of work that the contractor is obligated to perform for the quoted price. Contractors that bid on a project without checking the site assume the risk that actual site conditions might be worse, and more costly for them to overcome, than contractor expected. A federal contractor should look before it leaps into a federal project.