I have seven kids. Two of them have hopped the nest. There are two of them who are ready to be spoilt. They are a distinct kind of child, and therefore, I have to treat them differently from those who live in my home. When it comes to construction, some courts have decided that the form of the contract delivery methods does not alter the manner in which the other clauses in the contract, for example, the application of a different site conditions clause.
The appeal of John C. Grimberg Co., Inc., ASBCA No. 58791 (Oct. 25 October 25, 2018) included the building of a lab in Fort Detrick, Maryland. It was a design-build contract. It was typical for a design-build contract where no prices for excavation units were set because the foundation of the contractor was not determined at the date of the award. In addition, the contractor had executed different contracts in Fort Detrick involving deep foundations, which turned out to be design-bid-build contracts that included the unit price for excavation.
During construction, the inability of rock made the contractor employ more drilling rigs than expected. This created a lot of congestion on the site and prevented the planned start of grade beams and the rough-in of the under-slab MEP work. When the contractor had completed drilling piers, it had dug more than four times the amount it anticipated in its plan. The contractor filed a Request for Equitable Adjustment saying it had faced a Type I different site condition–i.e., the location was significantly different from those described by the government. The contracting officer rejected the claim, and then the contracting company filed an appeal.
To prove that a claim is valid, the contractor must show:
- The conditions stipulated in the contract were significantly different from the conditions that were actually observed during the performance.
- That the conditions actually existed and were not reasonably foreseeable to the contractor prior to the moment of the bid.
- Contractor reliance in addition.
- Damage.
In this instance, the board ruled in favor of defenses by government officials that the different site conditions clause applies in a more restrictive manner to a design-build company than in the context of design-bid-build. The board concluded:
The exact DSC clause must be included in construction projects with fixed prices. Projects regardless of whether the design-bid-build option of construction is used. There is no reason for applying the clause in a different way when it is used in a design-build setting. The appellant acknowledges that the risk of design can be transferred over to the contractor in the context of the design bid but not the risk associated with DSCs. Design-builders do not lose their rights as a result of the DSC clause to depend on solicitation representations regarding subsurface site conditions.
The board found that the contractor had made Type I differing site conditions and claimed that the “quantities of rock encountered greatly exceeded the quantity reasonably foreseeable based on a fair reading of contractual indications, albeit the Project was constructed in highly-variable karst topography at the site.”
In the end, the decision provides an excellent example for contractors to record “all of the facts, circumstances and contractual indications of subsurface conditions,” which is the information that the board relied on to make its decision. Another lesson to be learned is that in “reasonableness” when drafting or making claims. Even though the panel found that the two borings that the contractor used were unjust, it was “more reasonable” than the government’s evaluation. The bottom line is that it’s all about reasonableness. Is important.
There are more lessons to learn from Damico as well, and homebuilders are likely to be facing a fresh round of criticisms against their contracts once attorneys and courts begin applying the ruling not only to the homebuilder business but also to general consumer transactions.