Managing Geotechnical Risks in Design–Build Projects (2018) / Chapter Skim
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E-1 Appendix E: Detailed Results of the Geotechnical Legal Review The consequences of finding unexpected geotechnical conditions can be devastating to any construction project. As a result, it is common for the affected parties to argue that someone else should bear the financial impact of these conditions.
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E-2 (b) The Contracting Officer shall investigate the site conditions after receiving the written notice.
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E-3 the differing site condition actually arises – as opposed to the unliquidated contingency for a problem that may never surface. It also helps to avoid the acrimony that can occur in the absence of such a clause, as the parties fight over who bears the risk of unexpected site conditions.
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E-4 arise in the case law with respect to these two types of DSCs. The cases that are cited below were all delivered through a design-bid-build delivery system, although, their principles are equally applicable to design-build projects.
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E-5 if their use was so integral to a contractor's performance that the owner should be responsible for the conditions.3 A case which allowed recovery under a DSC theory was Kaiser Indus.
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E-6 and incur additional costs in dealing with the unforeseen site condition, it can generally show a material difference and obtain an equitable adjustment (Loulakis et al.
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E-7 drawings. Notwithstanding this result, courts have generally taken a very liberal view of what constitutes a "contract document," as they will look at the purpose of the DSC clause (as articulated in the Foster decision)
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E-8 indicated in the contract documents will also preclude recovery. The standard for determining foreseeability adopts the perspective of the reasonable and prudent contractor.8 Unique Type 2 Requirements Unlike a Type 1 DSC, a Type 2 DSC does not require contractual indications regarding the conditions expected at the site.
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E-9 logs and other foreign matter. They have also recovered when geotechnical properties behave differently than expected – such as rock not fracturing as expected, or soil not compacting as expected.
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E-10 has satisfied itself as to the character, quality, and quantity of surface and subsurface materials or obstacles to be encountered insofar as this information is reasonably ascertainable from an inspection of the site, including all exploratory work done by the Government, as well as from drawings and specifications made a part of this contract. Any failure of the Contractor to take the actions described and acknowledged in this paragraph will not relieve the Contractor from responsibility for estimating properly the difficulty and cost of successfully performing the work, or for proceeding to successfully perform the work without additional expense to the Government.
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E-11 The limited nature of the contractor's duty to investigate site conditions is consistent with the holding in Foster, where the court found that the duty to investigate the site must be balanced against the right to rely on government provided site information: Faithful execution of the policy requires that the promise in the changed conditions clause not be frustrated by an expansive concept of the duty of bidders to investigate the site. That duty, if not carefully limited, could force bidders to rely on their own investigations, lessen their reliance on logs in the contract and reintroduce the practice sought to be eradicated – the computation of bids on the basis of the bidders' own investigations, with contingency elements often substituting for investigation.11 Without such a balance, the DSC clause would have no effect, and contractors would be forced once again to include contingencies for site conditions in their bids.
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E-12 documents, the contractor generally has a right to reasonably rely on the information. This is particularly the case when an owner provides express indications of the conditions, and the contractor cannot, due to time constraints or denial of access, perform its own investigation to verify the indications and generally ascertain the site conditions.
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E-13 Recovery in Absence of a DSC Clause Some owners have taken the position that despite the benefits of a DSC clause, they would rather shift all of the risk of such conditions to the contractor. In the absence of such a clause, recovery for unforeseen conditions is difficult at best.
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E-14 a lower court ruling for the city, concluding that it was a question of fact as to whether the contractor was justified in relying upon the boring logs even with the disclaimer. In Champagne-Webber, Inc.
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E-15 technical and commercial proposal; (b) the materiality of the differences between this information and the actual site conditions; (c)
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E-16 slaking would not be encountered at any degree that would affect constructability. When actual conditions varied, it affected Nova's design and constructability, delaying the project and resulting in a claim for over $6 million.
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E-17 preliminary, incomplete, and, based on contractual disclaimers, could not be relied upon by the design-builder; and (b) the design-builder had the contractual duty to perform the full geotechnical assessment (Loulakis et al.
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E-18 since the levels were deemed "acceptable." Metcalf later discovered soils with higher levels of chlordane than expected and incurred costs to remediate. The Navy refused to reimburse Metcalf for substantial remediation costs.
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E-19 The appellate court's opinion in Metcalf is consistent with substantial precedent that supports the DSC remedy for contractors in spite of disclaimers and discussed in Section A.6 above. Consequently, even though Metcalf is not binding on state courts, it is highly likely that a state court would find it valuable precedent for dealing with a design-build contract's broad contractual disclaimer for the owner's geotechnical information.
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E-20 Fundamentally, [LJI] misconstrues the extent of its design responsibility.
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E-21 geotechnical engineer to provide design calculations to support its ultimate recommendation. The design-builder's proposal specified that it would use a drilled pier system, but did not specifically state what would be used for the balconies.
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E-22 Contrast the result in the PBS&J case to that in Record Steel and Construction v. United States,30 where the dispute also involved whether geotechnical design specifications were a requirement or simply a recommendation.
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E-23 Report and over-excavate the site. The design-builder complied with this order and submitted a claim for the costs associated with the over-excavation effort.
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E-24 The court ruled, however, that the Corps' contract interpretation fell "within the zone of reasonableness."32 It looked to the fact that the RFP used the verb "shall" in connection with incorporating the foundation report's recommendations into the contract, and that, by referring to the terms "over-excavation and compaction requirements," there was an argument that the RFP expressly converted the foundation report's recommendations into requirements.33 Faced with two reasonable contract interpretations, the court then looked to the rule of contra proferentem for guidance on who should bear the risk of these ambiguities. The four-part test associated with this rule places the risk of the ambiguities on the government when: (a)
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E-25 design-build contract with Fluor for an embassy in Haiti. Fluor's $38 million claim included, among other things, a request for relief from differing site conditions.
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E-26 Fluor argued that the DOS should not have been allowed, "several years after the fact," to complain about the adequacy of its testing plan and methodology. The board disagreed, finding that because the DOS had notified Fluor that it did not believe there was a valid differing site condition, Fluor knew that its claim would be contested.
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E-27 the design and construction of the Tajikistan embassy. KI was ultimately terminated for default and went bankrupt as a result of the project, in large measure because of the geotechnical costs it incurred.
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E-28 different from what was shown in the contract documents. In drawing this conclusion, the board was critical of KI's foundation design: It is ironic, and indeed tragic, that the [RFP geotechnical]
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E-29 DOI ultimately entered into a design-build contract with Drennon Construction & Consulting, Inc. ("Drennon")
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E-30 anticipated, particularly given that the area was covered with snow during the bidding period. It also rejected the notion that "weasel words" (USKH's phrase used to describe the disclaimer)
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E-31 impossible to keep the wall of the excavation open for any period of time, contrary to the conclusions in the geotechnical report. Contractual Disclaimers of Responsibility for Geotechnical Information on Design-Build Projects As noted earlier, many public sector owners attempt to absolve themselves from liability for geotechnical information they furnish to design-build proposers.
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E-32 such matter. Design-Builder further acknowledges and agrees that (a)
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E-33 The definition for "Reference Information Documents" states that such documents were provided to the design-builder "for informational purposes only and without representation or warranty by TxDOT." The preceding clauses are examples of the competing goals that occur when an agency attempts to broadly disclaim responsibility for information it provides during the bidding process. While the agency's primary goal is to avoid claims arising from this information, its secondary goals are to encourage marketplace competition and avoid excessive bid contingencies.
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E-34 Contractual Geotechnical Risk Tools Given the above case law, a number of approaches have been developed to better allocate and in some cases, share the risk of geotechnical conditions between the owner and the design-builder. Scope Validation The Virginia Department of Transportation (VDOT)
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E-35 one hundred twenty (120) days from such date of receipt, unless otherwise stated in Exhibit 1.
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E-36 existence of such Scope Issue, which General Notice shall generally explain the basis for such Scope Issue. Within twenty-one (21)
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E-37 contrary in the Contract Documents or as a matter of law, Design-Builder shall have the burden of proving that the alleged Scope Issue could not have been reasonably identified prior to the Agreement Date and that such Scope Issue materially impacts its price or time to perform the Work. 2.2.5 Design-Builder's Assumption of Risk of Scope Issues.
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E-38 Contract Time(s) for, any Scope Issue associated with any of the Contract Documents, including but not limited to the RFP Documents.
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E-39 VDOT's original (2006) scope validation clause is included as an example in the Guide.44 Sharing DSC Risk While the policy behind the DSC clause is to eliminate some of the risk from bidding, transportation agencies have used contract provisions that shift significant risk to the designbuilder, particularly on larger design-build projects.
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E-40 threshold dollar amount for Differing Site Conditions has been used successfully on all WSDOT design-build projects to date. The $10,000,000 threshold for this project is consistent with another WSDOT design-build project of this size and complexity (Tacoma Narrows Bridge)
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E-41 Progressive Design-Build One of the challenges with public sector design-build is that the agency is not able to take advantage of the design-builder's ideas until after the owner has already developed the preliminary design concepts, since most public owners use some form of bridging documents in order to obtain a fixed price contract from the design-build procurement. For those owners who have complex projects, including major geotechnical risks, there can be a strong benefit in getting early involvement of the design-build team.
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E-42 complete, depending on the amount of control the owner desires to maintain over the design definition. Phase 2 is often called the "Final Design and Construction Phase." Once the agency and design-builder agree upon commercial terms, the design-builder will complete the design and construct the facility in accordance with those commercial terms (i.e., the agreed-upon price and schedule)
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E-43 but particularly because of their ability to provide the parties with real-time assessments of their positions and allow the projects to move forward based on those assessments. DRBs can provide an effective way to resolve DSC issues in a cost-effective and timely manner.
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