A recent decision from the Armed Services Board of Contract Appeals highlights the risk of being unfamiliar with local conditions when estimating complex construction work. In Appeal of Tri-State Consultants, Inc., ASBCA No. 55251 (February 15, 2008), the ASBCA denied the contractor’s appeal of a contracting officer’s denial of a differing site conditions claim.

The project was for dredging approximately 85,000 cubic yards of fill material from a New Jersey navigation channel and beneficially reusing it to repair a nearby sand dune. The bid solicitation identified borrow area conditions variously as “dynamic in nature” and “very dynamic in nature [. . .] characterized by strong tidal currents and rough wave action [. . .].” The U.S. Army Corps of Engineers’ (USACE) estimate for the work was $1.4 million. The contractor’s bid was $1.16 million. The next lowest bid was $2.18 million.

The contractor struggled and did not complete the project until August 26, 2000, well after the November 1999 contract completion date. Swift bottom currents sometimes eroded the anchor points for the contractor’s dredge. Other times ocean currents covered over dredged areas with fresh material. The contractor was also hampered by wind and wave action.

The contractor made a claim for $1.65 million for extra costs attributable to being on the job much longer than originally planned and for having to use larger equipment than what was originally planned. The contractor characterized its claims as a Type I differing site condition (conditions different from what was represented in the contract), Type II differing site condition (highly unusual conditions), and also accused the USACE of having superior knowledge of site conditions that it did not share.

Type I Differing Site Condition

The contractor argued that because the contract specified a 12-foot limit on dredging depth and 150-foot embankment width, it impliedly warranted that a dredge machine with a 12-inch working face would be sufficient to complete the work, making the USACE liable for costs attributable to a larger dredging machine.

The ASBCA was not persuaded. It did not agree that such a deep interpretation of the contract was reasonable. The Board held further that the contractor failed to prove that a 12-inch machine would have fared any better or worse because one was never used.

Type II Differing Site Condition

The ASBCA rejected the Type II claim as well, citing case law that imposes a duty upon a contractor to seek information from sources familiar with the geographical area and type of work involved with a Type II claim. The court concluded the contractor failed to do this by referring to a letter from a local, experienced dredger sent to the contractor after the bid warning that the chosen dredging method would not work well in the anticipated difficult work conditions.

Superior Knowledge Claim

A contractor can sometimes prevail in what would otherwise be a losing differing site conditions claim if it can prove that the owner withheld vital information about project conditions. This is referred to as the doctrine of superior knowledge.

In this case the contractor pointed to information it acquired via a Freedom of Information Act request, a 1996 paper authored by two USACE engineers and a scientist detailing difficult underwater conditions in the dredge area. Again, the Board was not persuaded. It deemed that the caveats in the solicitation about dynamic conditions and strong currents adequately surmised the gist of the 1996 paper.

There are some projects where a contractor does not want to be the low bidder, especially if the contractor is inexperienced in either the type of work or local conditions. This project, with its treacherous currents and risk of bad weather, was one of those. A differing site conditions clause is not meant to rescue a contractor that is in over its head.