LEGALLY SPEAKING Differing Site Conditions Claims on Design-Build Contracts M any owners, contractors and design professionals believe that a design- builder assumes the risk of subsurface conditions simply by virtue of the design- build project delivery method. Under this view, a design-builder and its subcontractors have no right to claim for differing site conditions on design-build contracts. This belief is oversimplified and largely mistaken. While a design-builder generally assumes the risks and warranties of the design — that the design it prepares is fit for its intended purpose and will perform in accordance with the owner’s requirements units for a Marine Corps base. The solicitation documents con- tained a geotechnical report indicating that soils on the site have a “slight expansion potential.” The request for proposals stated that the geotechnical report contained in the solicitation documents was provided for “preliminary information only” and expressly required the contractor to conduct its own independent soil investigation. Once awarded the contract, the design-build contractor hired a consultant to perform a geotechnical Brian Wood Attorney Of Counsel Smith, Currie and Hancock errors in the pre-contract assertions by the government about the subsurface site conditions. Addressing the exculpatory language Courts and boards of contract appeals have routinely held that the mere fact that work is performed under a design-build contract does not shift the risk of differing site conditions to the design-builder. — allocation of the risks of differing site conditions is less automatic. Whether the design-builder assumes the risk of differing subsurface conditions depends upon several factors. These factors include, but are not limited to (1) representations about subsurface conditions made by the owner and its engineers in the solicitation documents; (2) the language of the differing site conditions clause; (3) cautionary, exculpatory and other language in the contract regarding allocation of risks; (4) contractual requirements for the contractor to perform an additional geotechnical investigation; (5) the ability of the bidder to perform site and subsurface investigations prior to submitting the bid or proposal; and (6) other pre-bid representations by the owner. Courts and boards of contract appeals have routinely held that the mere fact that work is performed under a design-build contract does not shift the risk of differing site conditions to the design-builder. In Metcalf Const. Co., Inc. v. U.S. (2014), a federal appeals court considered a design- builder’s claims arising out of a contract for the design and construction of housing investigation. The investigation revealed that the soils were very expansive and had a “moderate to high” swelling potential. As a result, the contractor was forced to over- excavate the site and replace the expansive soils with non-expansive fill. The Navy rejected the design-builder’s differing site conditions claims for delays and other impact costs citing, among other things, the design-build contract and the design- builder’s obligation to perform an inde- pendent geotechnical investigation. In filings to the court, the contractor argued that its “position as design-builder did not shift the risk of differing site conditions to [the design-builder], for if it did, the standard FAR clause on differing site conditions, FAR 52.236-2, would be rendered meaningless.” In its decision, the U.S. Court of Appeals held that the obligation to perform an independent site investigation did not negate the design-builder’s right to rely upon the “government’s affirmative represen- tations.” Interpreting the site investigation clause, the court concluded: The natural meaning of the represen- tations was that, while [the design-builder] would investigate conditions once the work began, it did not bear the risk of significant disavowing the government-furnished geotechnical report as “preliminary,” the court noted, “It does not say that [the design-builder] bears the risk if the “preliminary” information turns out to be inaccurate. We do not think that the language can fairly be taken to shift that risk to [the design-builder].” In reaching its decision, the court cited the overarching purpose of the differing site conditions clause, “to take at least some of the gamble on subsurface conditions out of bidding.” A 2010 board of contract appeals involving deep foundations reached the same conclusion regarding the allocation of risks of subsurface conditions on a design- build contract (despite ultimately rejecting the design-builder’s claims on the merits). In Appeal of NOVA Group, the Armed Services Board of Contract Appeals con- sidered a design-builder’s claims for differing site conditions following exces- sive settlement of piles placed during the construction of a trestle. As with the Metcalf decision, the board in NOVA did not allocate risks based upon the fact that it was a design-build contract, nor did it interpret the site investigation clause to shift the risk to the design-builder. Instead, the board performed a traditional analysis of the differing site conditions claims, comparing actual conditions with those indicated in the solicitation geotechnical report, noting that it was reasonable for the design- builder to rely upon the geotechnical report to prepare its bid. DEEP FOUNDATIONS • NOV/DEC 2016 • 123
