As I have stated before, differing site condition claims remain fairly common. They can also one of the most difficult claims for a contractor to prove at trial. There are two types of differing site condition claims–Type I and Type II.

Generally, a contractor may make a Type I differing site condition claim where the contractor encounters a subsurface or latent physical condition at the project site that differs materially from the conditions indicated in the parties’ contract.

Under a Type II claim, a contractor may assert a differing site condition claim where there are unknown and unusual physical conditions at the project site that differ materially from those ordinarily encountered and generally recognized as inherent in work of the character provided for in the parties’ contract.

The United States Court of Federal Claims recently considered a contractor’s $10.5 million differing site condition claim in Nova Group/Tutor-Saliba, Joint Venture v. United States.

The Nova case arose out of a design and construction project for the replacement and upgrade of waterfront substructures for a federal government naval base. In essence, the contractor had to demolish an existing waterfront pier and replace the pier with a bigger pier.

As a part of the work, the contractor had to drive piles deep into the ground. One of the contractor’s subcontractors had difficulty driving the piles as deep as designed, which resulted in excessive cutoffs and misalignment of the piles and a significant increase in the cost to do the work.

The contractor claimed that the issues with the piles were due to a misrepresentation in the contract documents that the piles could be driven a certain number of feet into the ground. The contractor also argued that the piles were not driven as planned because of undisclosed subsurface cobbles and boulders.

The contractor submitted a request for equitable adjustment based on an alleged differing site condition claim. The contracting officer denied the claim, and the contractor then sued the federal government to pursue, among other things, its differing site condition claim.

After having a lengthy trial, the court held that the contractor failed to prove its differing site condition claim.

The Type I Differing Site Condition Claim

As to the Type I claim, the court noted the following elements that a contractor must prove by a preponderance of the evidence:

[1] the conditions indicated in the contract differ materially from those actually encountered during performance; [2] the conditions actually encountered were reasonably unforeseeable based on all information available to the contractor at the time of bidding; [3] the contractor reasonably relied upon its interpretation of the contract and contract-related documents; and [4] the contractor was damaged as a result of the material variation between expected and encountered conditions.

As to the first element, the contractor focused on language in the contract that provided the following:

[W]e recommend that the piles be driven to and tipped a minimum of 5 feet into the glacial soils or practical pile refusal. Assuming an approximate, practical pile refusal of 5 feet, piles should be driven to a minimum of elevation 37 and 29 feet (PSNS Datum), for Stations 0+00 to 8+25 and 10+00, respectively, or 5 feet of embedment into the glacial soils as shown on Figure 3…. Note, practical pile refusal is a function of the hammer selected by the Contractor, and therefore must be estimated during construction with observation of the actual equipment and pile driving behavior.

The court emphasized the above language and found that the contractor failed to prove that the contract contained some identification of the conditions to be encountered at the site. In short, the court found that as stated in the contract, “the depth at which piles would meet practical pile refusal was not definitized.”

The Type II Differing Site Condition Claim

As to the Type II claim, the court noted that the contractor must prove three elements by a preponderance of the evidence: “(1) the condition must be unknown to the contractor; (2) unusual; and (3) materially different from comparable work.”

The contractor argued that it had encountered a Type II differing site condition because the piles did not drive into the ground as easily as expected because there were undisclosed cobbles and boulders in the ground.

The court found that the Type II differing site condition claim failed because the contractor should have known the potential for the subsurface conditions encountered. In particular, the court focused on the fact that the contract documents disclosed potential subsurface obstructions. The court also noted that cobbles and boulders were not unusual in the region “and should have been anticipated as potential obstacles to driving piles.”

In short, the court held that the contractor had “not demonstrated that any of these potential causes for hard driving or the piles reaching refusal in the [soil] layer were unknown or unusual in the region or materially different from comparable work.” Thus, the court held the contractor could not recover for a Type II differing site condition.

Bottom Line: When asserting a Type I differing site condition claim, a contractor needs to make sure the contract definitively misrepresented an unknown physical condition at the project site that impacted the contractor’s ability to complete the work. Also, for a Type II differing site condition claim, the focus should be on whether the physical condition encountered was truly unexpected and unusual for the region.

As courts have noted, it is more difficult to prove a Type II differing site condition claim than a Type I differing site condition claim. So if your Type II claim is weak, you may want to consider focusing your efforts on pursuing a Type I claim.

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