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Differing Site Conditions:
Getting Paid for Extra Expenses and Lost Time

December 8, 2014

By Thomas R. Olson, Esq. 
Differing Site Conditions: Getting Paid for Extra Expenses and Lost Time
It is an all too predictable aspect of underground construction:  you encounter conditions different from what you anticipated.  What is also too common is not getting paid for the related extra costs, and not getting a time extension for the related delay.  This article provides a roadmap for getting both.

Most contracts define “differing site conditions” as conditions that are either different from those indicated in the contract documents or different from those ordinarily encountered in performing work of the character involved. Those conditions must exist at the time the project starts for there to be a contractual basis for additional compensation.

The Owner’s Responsibility

A project owner can indicate site conditions in the contract in several ways. The simplest way is to expressly state what the conditions will be, such as including plans detailing what utilities you will encounter, or by including soil borings, which expressly represent what the site conditions will be (e.g., the type or hardness of the soil, the groundwater level). While both of these are clear indications of what the site conditions will be, you as the contractor must also examine the contract to see whether and to what extent you have the right to rely on this information

Engineers frequently attempt to disclaim a contractor's right to rely on the site condition information expressly provided.  You see language, for example, in which the engineer states that the soil borings are "for information only" and "not to be relied upon."  We know, of course, that the only reason that these borings are provided is for contractors to rely upon them when bidding the job.  As a result, more and more courts have ruled that such disclaimers are unenforceable. 

Project owners also try to counter contractors’ claims for compensation based on differing site conditions by saying that the contractor should have discovered the differing conditions as part of its site investigation.  Keep in mind that as a contractor you are normally required to learn only what you can see and read.  Absent a contract provision otherwise, you are not required to conduct below-grade testing.  On the other hand, if the owner states that soils information 'is available upon request,” you are held accountable for what that information states, whether you read it or not, so by all means request it

A project owner can also indicate site conditions through what he expressly states for the work requirementsIf, for example, the contract includes a large quantity of water to be used to make the cut suitable as fill, this can be characterized as an "indication" that the soils are dry.  The owner can also indicate site conditions by what it does not stateLet's stay with this example, and assume the job is designed to “balance.”  Assume that there is no traffic control bid item (i.e., the need to divert traffic at night).  Given this, the owner has "indicated" that the soils can be made suitable as fill the same day.  Put another way, the owner has indicated that the existing moisture level is within a reasonable range of the optimum moisture level.

If the Owner Provides Little or No Site Condition Information

On more and more jobs, the owner includes little or no site data.  This allows the owner to save money.  It is also part of an increasingly widespread owner view that the less they say the better. But be aware that you can still encounter differing site conditions even when the owner says little or nothing about anticipated site conditions.  If the work cannot be performed as designed, or to perform it as designed will require a type or quantity of work beyond what was anticipated, you have the basis for a differing site conditions claim.  Let me give you several examples.

Making Your Case, Some Examples

First, assume you cannot complete the bore on line because of cobbles or boulders.  You can rightfully say that the conditions are "different from those than ordinarily encountered in performing work of the character involved."  The engineer must not have anticipated the cobbles and boulders for the work, otherwise  he would have designed a large casing to allow manual removal of the rock.

Second, assume the work requires a large embankment.  Assume further that there are no requirements for piezometers, inclinometers or settlement plates. If the foundation soils subsequently settle, and thereby threaten the integrity of the embankment, you have the basis to assert that you have encountered “conditions different from those anticipated in performing work of the character involved.”  And the same is true if the trench will not hold at the anticipated slope, i.e., it sloughs back. Under both circumstances, even if you encounter the anticipated soils, if the soils are not reacting as anticipated, the conditions are different.

Substantiating Your Claim

While you may encounter site conditions which fit within one of the two contractual bases discussed above, the engineer may still not agree.  And that can pose a problem. Once you complete your work, the evidence of the differing site conditions will be erased unless you properly document what you encountered.  How you do this depends on what you encounter.

Take pictures and/or videos.  If you encounter unanticipated structures (e.g., utility lines, construction debris, boulders), try to memorialize with visual evidence.  Since part of what is different (gravel versus cobbles versus boulders) and its impact is defined by size, make sure to include measurement as part of your evidence.  If you are taking pictures, include a tape measure or some other means to calculate size (someone standing next to the structure, for example).
Some conditions are not as conducive to visual evidence as others.  If, for example, the soils are wetter and/or less stable than anticipated, the best way to substantiate this is with geotechnical testingHave this done by a geotechnical firm. More specifically, if you cannot make the cut suitable as fill because it is too wet (i.e., you cannot close the gap between existing and optimum), take moisture tests.  If the ground is too hard to drive sheeting or bore through, take strength tests.  If the water table is higher than shown in the borings, have a dewatering firm measure elevations.
If the engineer still insists that you should have anticipated what you encountered, ask the engineer for the site data on which they relied to design the projectYou can also look at bid tabs; how other contractors and engineers priced the work is strong evidence of whether you have encountered differing site conditions.
Calculating Contractor Reimbursement Costs

When you are required to perform either a different type of work (muck excavation versus common excavation, for example) or a different quantity of work, than what you anticipated, it is easy to measure the impact; you have a start and finish to measure the extra workWhat is common with differing site conditions, however, is that you are performing the anticipated type and quantity of work, but under conditions that make it more expensive to perform.  It is more expensive because the differing site conditions prevent you from obtaining the anticipated level of production, and the project takes longer to complete. 
When you are performing the same work, but at a lower production rate, you have two methods by which to calculate the impact in time and dollars.  Under both of these methods, you have to create a baseline to compare your actual production with what your production should have beenThe best method involves comparing your reduced production where you have encountered differing site conditions with the production you encountered performing the same work on site where you did not encounter differing site conditionsThis is called the Measured Mile Approach. 
The second method, which you should not use unless all of the work for that bid item is affected by the differing site conditions, involves comparing your reduced production with the production you anticipated at bid time.  There are a two compelling reasons to avoid using this second method if you can.  First, the actual production rate, even in an area unaffected by the differing site conditions, will almost always be less than the rate anticipated at bid time due to the normal losses of production (e.g., bad weather, equipment breakdowns, late material deliveries, re-work, etc.).
Second, the owner can rightfully argue that there is no evidence that you could have and would have obtained your planned/bid production rate but for the differing site conditionsTo help counter that, always generate an accurate as-planned schedule and distribute it to the engineer at the preconstruction meetingYou can then divide the estimated quantity of the affected bid item by the duration for that item to calculate the planned daily production rate. 
Preventing Claim Problems

Recognize that every contract requires the contractor to provide written notice to the engineer of the alleged differing site conditions before they are disturbed and before the affected work is performed.  That written notice is not only necessary for you to establish a claim for additional time and compensation; it also makes business sense.  Remember, where differing site conditions are concerned, you only have one piece of leverage:  your work.  Once you perform it, you have given up this leverage.  And it is always easier to get the engineer to form the right view initially than to change his wrong view later.
The problem, of course, is that even when you provide the required notice, the engineer often either does not make a decision, or delays making one.  If there is no other work to perform, your equipment sits idle.  If there is other work, you have to jump around to perform it, thereby getting less production than planned.  And, whether you realize it or not, even if you can perform other work, that work presumably is not critical path or progress-controlling, or you would already have been performing it.  The net effect is that while you may work a full day on other work, you still have been delayed a full day, which means that your resources will have to remain on the job another day and the project will wait another day for completion.
One way to elicit a decision from the engineer sooner is to immediately evaluate whether the contract provides for payment of delay-related extra costs.  If it does, you should immediately provide written notice to the engineer that:  (1) you are being delayed and/or disrupted while waiting for a decision on how to proceed; (2) you have a right to payment for this under section ____ of the contract; and (3) your extra costs per day total _____.  By providing notice right away of the potential delay/disruption-related extra costs, you give the engineer the informed basis on which to make a decision immediately to either eliminate all such costs or otherwise mitigate them.  Rather than surprising the engineer with these costs for the first time after you have incurred them, you have given him the option to act at the outside to reduce them. This will help promote a good working relationship 
If the engineer denies your request, or does not respond, the contract will invariably dictate additional steps you must take, or you will waive your claim.  Figure out what those steps are and follow them exactly as they are written. 
Even if all of this makes sense, you will not succeed in getting paid for the cost of differing site conditions unless and until you believe you have the right to be paid, and while maintaining a good relationship with the engineer is a laudable goal, it shouldn't prevent you from requesting compensation for working under site conditions that you did not anticipate.  When you make a mistake, you pay for it.  When the engineer makes a mistake, the owner should pay for it.  That is fair, and should be the foundation of a good relationship.  A simple and effective way to communicate your right to extra compensation is to say this:  The money that I am asking for now would have been part of my bid at the outset if I had known then of the site conditions I am now aware of. The owner is therefore not paying anything more than he should have based on what we know now.
Thomas R. Olson
Office (651) 298-9884
Cell (952) 486-1372
This article is published by Olson Construction Law, P.C.  as a service to clients and contractors.  The information contained herein is not intended to be relied upon as legal advice, as a solicitation to provide legal services, or in any manner to form an attorney-client relationship.  Readers should consult with an attorney about specific project questions and other legal matters.  Copyright © 2014 by Olson Construction Law, P.C.  To unsubscribe to this list, email