BENESCH ADSC West Coast Chapter Annual Meeting Recovering for - - PowerPoint PPT Presentation

BENESCH

Richard D. Kalson, Esq. rkalson@beneschlaw.com 614.223.5380 (W) 412.417.4209 (C)

Recovering for Unforeseen Conditions May 20, 2016 ADSC West Coast Chapter Annual Meeting

Things to Consider:

• Understand what your soil conditions are:

– How do you know if you have a change of ground conditions? – Everyone on team must know expected conditions AND notice

• requirements. Recommended Summary Sheet.
• Critical to properly document underground conditions for potential differing

geotechnical information with consistent and correct Drill Logs and Daily Diaries.

• Owner/GC should provide on-site geotechnical representative to confirm the

ground conditions.

• Documenting potential differing geotechnical information –keys are drill logs

and daily diaries.

• Field journals are a subcontractors “best friend” when tracking a change of

condition.

Field Changes

Daily Journals

• Objective record of what occurred on site completed daily
• Uniform company policy regarding content and format
• Uniform company policy regarding review of daily logs
• Not your personal diary!
• Language to avoid

– Sexually explicit, racially offensive comments – Foul language – Personal information – Admissions of liability – Opinions

• Electronic submissions

– Easier review – Easier maintenance – Location/Retention issues – Easier to complete daily

Keys to Success: Daily Journals

• List all equipment including tooling
• List all production activities with commentary as

needed

• Note any changes to work or DSC
• Objective, not subjective, comments

Daily Reports

• Addition or deduction in quantities of work
• Providing surveying or performing continuous spoils removal

when previously excluded by subcontract (your proposal is critical)

• Additional demobilization and mobilization
• Careful review: compare subcontract to bid.
• Do not accept an expanded scope of work beyond your proposal.
• Your proposal should be incorporated in full and should take

precedence, especially as concerns scope of work.

Changes to Scope of Work

Key Points

• Teamwork
• Documentation
• Notice…Notice…and NOTICE

Field Changes

• Owner Contractual Disclaimers
• Reliance on Geotechnical Reports and other

Owner Disclosures

• Superior Knowledge Doctrine
• Constructive Fraud

Unforeseen Conditions/Spearin

Driller’s Definition: When subsurface conditions are materially different than as advertised in the contract documents.

Change of Conditions

• What is the Spearin Doctrine?
• Implied warranty of specifications
• Cause of failure to perform
• Compensation
• Duty to investigate

Unforeseen Conditions/Spearin

• “Type I” Differing Site Conditions
• “Type II” Differing Site
• Constructive Fraud

Unforeseen Conditions/Spearin

• Type 1: DSC arises where the actual site conditions

encountered during performance of the work differ materially from the conditions described in the contract documents.

• Type 2: DSC is present when the actual conditions are

unusual and unforeseen, and differ from conditions usually encountered in the type of work specified in that area.

Determination of fault is not a requirement.

Differing Site Conditions

• Notice clauses are no longer overrated and overly relied

upon by owners and contractors.

• Negotiate a reasonable number of days.
• Notice clauses are very strictly enforced in some states,

while courts in other states find exceptions to the general rule that contract provisions requiring written notice of a claim will not be strictly enforced if some other notice is provided.

• Giving proper notice is especially critical in regards to

differing site condition claims.

• Reviewing the notice clause must be a priority during the

review and negotiation of your contract.

Compliance with Contractual Notice Clauses

• Encountered higher groundwater than indicated

in contract documents.

• Encountered significantly more cobbles and

boulders than indicated in the contract documents, perhaps at unexpected elevations.

• Encountered significantly higher strength rock

than indicated in the contract documents.

Differing Site Conditions: Examples

• When a public agency withholds material information,

documents or knowledge from prospective bidders and such information would have educated a contractor regarding an existing underground condition, a contractor may recover additional costs as a result of the condition.

• Fraudulent intent of this withholding is normally not

required to establish such recovery.

Superior Knowledge

• Failure to comply with prompt written notice requirements may

waive claim.

• Actual notice or substantial compliance may act as a waiver of

formal notice requirements in some states where there is constructive notice, a waiver of notice provisions, a lack of prejudice despite the lack of formal written notice, contractor may not be immediately aware of the scope of the differing site condition.

• Subcontractor after providing proper notice, must be careful

not to waive the claim by executing a serious of unambiguous releases barring suits or causes of action arising on or prior to date of execution, released claims for extra work where subcontractor did not show on releases that extra additional amounts were owed to it. Must reserve claim on lien waivers.

Notice Clauses

• Absher Construction Co. v. Kent School District No. 415,77 Wn.
• App. 137, 890 P.2d 1071 (1995)

– The owner had nonotice of the contractor's additional work until it was already completed.The owner did not have an opportunity to investigate the differing site conditionsand make a determination of how to accommodate them. – Rather,the contractor went ahead and completed the work and then presented the bill. – The contract notice provisions had not been met or waived

Notice Clauses

• Jonovich Cos. V. City of Coolidge, 2011 Ariz. App.
• Unpub. Lexis 1332, Arizona project owners

impliedly warrant the adequacy of their plans and specifications.

• Contractor must adhere to plans and

specifications to receive Spearin protection.

• Need for written change order for deviation.
• Spearin does not apply to performance

specifications.

Arizona

• California allows for a third type of differing site condition

for local public entity projects: “material that is hazardous

• waste. . . [and] that is required to be removed to [certain

classes of] disposal site. . .” This third type ensures that the owner takes responsibility for the proper disposal of hazardous wastes.

• California Public Contract Code section 7104 was amended

in 2006 to define a type 1 differing site condition as: “Subsurface or latent physical conditions at the site differing from those indicated by information about the site made available to bidders prior to the deadline for submitting bids”.

California

• Key 2007 California Case

– “Since the disclaimers wholly denied responsibility for the subsurface conditions indicated, in violation of [the statute mandating the differing site conditions clause], they were properly excluded from jury consideration. . . . [¶] . . . . [E]ven under the law preceding [that statute], a general disclaimer could not overcome positive assertions of fact regarding subsurface conditions upon which the contractor was entitled to rely. (See E. H. Morrill Co. v. State of California, 65 Cal.2d at 793.) Adjusting the Morrill analysis to substitute the required statutory standard of “indicated” for positive assertions of fact, the disclaimer in this case is precisely the kind of general disclaimer condemned in the Morrill case.”). – California courts have rejected efforts to circumvent the differing site conditions clause with disclaimers – The contractor must prove (1) a subsurface or latent physical condition at the site, (2) differing materially (3) from what was indicated in the bidding information. What was “indicated” can be either a positive statement about the condition in the bidding information, or an inference about the condition arising from that information – “Determining whether the contract and related documents indicated the subsurface conditions at the jobsite . . . is a matter of contract interpretation . . .”

California

• In L. A. Young Sons Constr. Co. v. Cty. of Tooele, 575 P

.2d 1034 (Utah Sup.Ct. 1978), at the contractor's request, the county gave the contractor a chart showing the water table of the project area. The contractor argued that the chart was false and misleading because the water was located much closer to the surface than was indicated by the chart. The contractor claimed that the high water table resulted in extra costs. The county claimed that the contractor's negligence and omissions caused the problems with the runway.

• At trial, the evidence established that the water table chart was accurate, that

there was a fluctuating water table in the project area, and that neither party was aware of such fact.

• The court affirmed the judgment for the owner. When there was no

misrepresentation of factual matters within the state's knowledge or withholding of material information, and when both parties had equal access to information as to the nature of the tests which resulted in the state's findings, a contractor could not claim in the face of a pertinent disclaimer that the state's presentation of the information amounted to a warranty of the conditions that would actually be found.

UTAH

• Home Furniture v. Brunzell Constr. Co., 440 P. 2d

398 (Nev. 1968), in Nevada a contractor which follows deficient plans and specifications furnished by the owner will not be responsible for any loss or damage that results in absence of any negligence on the part of the contractor or an express warranty.

• Fulfill specified manner and method of work and

complete work, liable only for improper workmanship.

Nevada

• Per A.H. Barbour & Son, Inc., 433 P. 2d 817 (Or.

1967), an owner’s specification is in nature of warranty, that if complied with will produce a satisfactory result.

• Faulty specification.
• Examination requirements.
• Superior knowledge.
• Unusual conditions and responsibility for costs.

Oregon

• King Cty. v. Vinci Constr. Grands Projets / Parsons RCI / Frontier-

Kemper, JV, 191 Wash. App. 142, 364 P.3d 784 (2015)

– The contractor did not establish its claim that the county breached the contract by refusing to grant orders and time extensions for differing site conditionsbecause the contractor failed to satisfy two of the elements for a differing site condition claim – A construction contract does not make any representation that would support a differing subsurface site condition claim if the contract (1) is silent about subsurface conditions or (2) instructs bidders to make their own interpretations or conclusions about subsurface conditions, places on bidders the risk of assumptions that differ from data provided by the project owner, and warns bidders about the scope of the data provided.

Washington

• In H.B. Mac, Inc., 153 F.3d 1338 (Fed. Cir. 1998), a SDB contractor was

awarded a $6.2 million contract to construct two buildings in Hawaii that were 300 yards apart and 700 yards from the ocean.

– The contractor did not visit the site before submitting its bid; rather, it relied upon eight soil borings that were included in the bid package. The contractor presumed that the borings were representative of the site, even though they were all taken by only one of the building sites. – The actual conditions at the other building site were substantially different, resulting in the contractor incurring additional costs for piling, delays and dewatering operations. – The contractor sought an equitable adjustment for a Type I differing site condition. – Ruling in favor of the owner, the court explained that the owner was not required to satisfy a Type I differing site conditions claim because the borings could not reasonably be interpreted as indicating the subsurface condition of a building location 300 yards away in an area that was geologically diverse.

Hawaii

• Found. Int'l, Inc. v. E. T. Ige Constr., Inc., 102 Haw. 487, 78 P.3d

23 (2003)

– There can be no recovery under Hawaii law for extra work if the work is covered by the terms of the construction contract. – In order to prevail on a differing site conditionsclaim under Hawaii law, a contractor must prove that the conditions indicated in the contract differ materially from those encountered during

• performance. The conditions actually encountered must have been

reasonably unforeseeable based on all of the information available to the contractor at the time of bidding. The contractor also must show that it reasonably relied upon its interpretation of the contract and contract-related documents and that it was damaged as a result

• f the material variation between the expected and the encountered

conditions.

Hawaii

BENESCH

• COMMENTS?
• QUESTIONS?

Open Discussion

BENESCH

Richard D. Kalson, Esq. Benesch Friedlander Coplan & Aronoff LLP 41 South High Street, Suite 2600 Columbus, Ohio 43215-3506 614.223.9380 (W) 412.417.4209 (C) rkalson@beneschlaw.com

Benesch – Cleveland Benesch – Hackensack Benesch - Shanghai 200 Public Square, Suite 2300 411 Hackensack Ave. 3rd Floor Kerry Centre Tower 1, Suite 3002 Cleveland, OH 44114 Hacksensack, NJ 07601 1515 W. Nanjing Road (216) 363-4500 (201) 488-1013 Shanghai 200040 China (86-21-3222-0388) Benesch – Columbus Benesch – Indianapolis Benesch – Wilmington 41 S. High St. Suite 2600 One American Square, Suite 2300 222 Delaware Ave. Suite 801 Columbus, OH 43215 Indianapolis, IN 46282 Wilmington, DE 19801 (614) 223-9300 (317) 632-3232 (302-442-7010) Benesch – Chicago 333 West Wacker Dr. Suite 1900 Chicago, IL 60606 (312-466-7555)