| Fair Allocation of
Risk for Differing Site Conditions
by David J. Hatem, partner, Burns & Levinson
Substantial time and cost impacts may result when a subsurface
condition is encountered during construction that materially
or substantially differs from conditions represented in the
contract documents and/or conditions ordinarily expected.
Unfortunately, when the risk of those cost and time impacts
has not been fairly allocated between the owner and construction
contractor, the design professionals involved in the project
face an increased exposure to professional liability claims.
The Problems
In general, claims involving differing site conditions have
been asserted against professional consultants by owners and
third-parties -- including contractors, subcontractors and
construction lenders -- based upon the following allegations:
- Failure to undertake an adequate pre-construction investigation/survey
of existing site conditions.
- Failure to accurately and/or completely describe existing
site conditions on bid and contract documents.
- Failure to disclose information concerning existing site
conditions which was generally (or otherwise) not available
to bidders, or which was not available within the time frame
permitted for preparation of the bid.
- Negligence in drafting of bid or contract documents with
respect to the circumstances under which a contractor would
be entitled to time or economic relief due to the encountering
of differing site conditions.
- Failure to properly and/or timely address and resolve
differing site condition claims in accordance with the professional
consultant's obligations under the contract documents, or
in accordance with the standard of practice prevalent in
the profession.
The Solutions
Certain practices, if adopted and implemented, can serve
to fairly allocate the risk of differing site conditions and,
thereby, reduce the liability risk for professional consultants.
Although professional consultants may not always be in a position
to control the owner's decision making with respect to the
adoption and/or implementation of these practices, they can
and should play an important and persuasive role in influencing
that decision-making process in a positive direction.
Specifically, in striving to achieve a fair allocation of
risk for differing site conditions, the following practices
should be considered:
- The commissioning of an adequate pre-construction subsurface
investigation of existing site conditions.
- The commissioning of an adequate subsurface investigation
report.
- Making subsurface investigation reports and other data
concerning existing conditions available to bidders and
including that information within the definition of "contract
documents."
- Using "disclaimer" language selectively, with
the stated presumption being that construction bidders are
entitled to reasonably rely upon the accuracy of subsurface
information (data and opinions) including geotechnical baselines
which are provided to them as part of the bid and contract
documents.
- Inclusion in the contract documents of a fair and impartial
procedure for the presentation, evaluation and resolution
of differing site condition claims.
- A fair, impartial and consistent practice implementing
the contractually prescribed procedure with respect to the
evaluation and resolution of differing site condition claims.
Achievement of these practices should result in decreasing
a substantial amount of the litigation involving differing
site conditions. In addition, the risk of professional liability
for professional consultants should be significantly reduced.
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