How to evaluate a Differing Site Condition claim

April 22nd, 2008 by admin, under Uncategorized. No Comments

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How to evaluate a Differing Site Condition claim

Owner’s Checklist

1. Did the contractor meet the contract notice requirements?

   1. Timely?
   2. Written?

      1. Or Actual or constructive?

2. Did the contractor meet the other contract requirements?

   1. Eg. site investigation clause
3. Has the contractor used the data properly?

   1. Type 1 vs. Type 2 (if applicable in your contract, eg. Federal)
   2. Is contractor’s interpretation of contract document data reasonable?

      1. Test = “reasonable & prudent” person

4. Did the contractor rely on the contract document data?

   1. Did it review the data prior to bid?
   2. Did it not obtain actual knowledge of DSC before contract was executed?
   3. Did it rely on the “entirety” of the contract documents and not just a portion?

      1. Cannot disregard unfavorable data

   4. Did the contractor not “know better” based on similar experience?
5. Are there “exculpatory” or disclaimer clauses which impact this claim?

   1. Are they material to this issue?
   2. Are they enforceable in this jurisdiction?
   3. Has your company or agency been upheld in enforcing these clauses?

      1. Knowledge that they may be unenforceable may be seen as unfair, even bad faith

6. Is this truly a DSC claim?

   1. Not a claim for adverse weather or climate?

      1. Unless owner has superior knowledge of weather conditions vital to performing the contract – not shared before entering contract

   2. Not a claim filed merely to recover from mis-bidding contract work?
   3. Not a claim for conditions which are not usually encountered in that type of work?
7. Has the contractor proven entitlement?

   1. Carefully review the contractor’s claim

      1. Does the contractor have evidence to support entitlement to its claim?

         1. Burden of proof is the contractor’s

      2. Is the contractor in compliance with all contractual prerequisites to establish entitlement?

8. If entitled, has the contractor proven damages (quantum)?

   1. Costs, inefficiencies, time delays
   2. Carefully review the contractor’s claim

      1. Is the contractor’s record keeping adequate?

         1. Has the contractor “shown its work” in calculating damages?
         2. Can it be audited?

      2. Where estimates are used, are they reasonable?

         1. Are they verifiable by other authorities?

9. In loss of efficiency claims:

   1. Is the benchmark period “representative” of anticipated conditions?

      1. Should include normal contract inefficiencies

         1. Bad weather
         2. Productivity losses for other reasons
         3. Should not be “ideal”

   2. Questions to ask:

      1. Was the soil excavated during the benchmark all the expected types or only the easy soil?
      2. Did the benchmark period include:

         1. a proper blend of anticipated low-productivity elements or was it all high-productivity work?
         2. a representative amount of bad weather days?
         3. a representative amount of equipment downtime?
         4. consideration of:

            1. Learning curves?
            2. Finishing costs?
            3. Other normal contractor inefficiencies?

      3. Loss of Efficiency adjustments

         1. analyze costs in other period to demonstrate representative data

            1. Cost codes become critically important here

         2. Adjust using estimates prepared by engineers, estimators, consultants, other knowledgeable persons

      4. What if no “measured mile” is available?

         1. Select another benchmark

            1. Question: how do you make it fair?

         2. Selecting a productivity benchmark:

            1. Bid’s productivity estimate

               1. Testimony about decisions, assumptions, changes made in preparation of the bid

                  1. bid work papers and supporting schedules

                     1. Clear, concise, detailed

                  2. notes of the estimator
                  3. bid escrow may be appropriate where DSC is highly probable

                     1. eg. environmental remediation

            2. Contractor’s productivity on other similar projects

               1. Problem: projects are seldom identical

            3. Another contractor’s productivity on the same project

               1. Problem: skills from one contractor to another are not homogenous

            4. Productivity manuals and studies

               1. Problem: not site specific

            5. Expert evaluation or re-estimation after the fact

10. Owners should create documentation every time a DSC is alleged

    1. Regardless of whether the owner’s staff agree that it is a DSC
    2. Segregate costs of impacted work

       1. Verify timecards and rate information

          1. signed daily by owner’s construction manager, resident engineer or inspector

    3. Even so, you may not be able to capture all losses in productivity

       1. Crowding
       2. Stop-and-start work flow
       3. Waiting
       4. Unproductive time
       5. Low labor morale
       6. Ripple effect: impact on other trades and activities

11. Presentation

    1. Owners are reasonable in expecting a clear, understandable, well-documented claim

       1. Unsophisticated contractors may need guidance

          1. Refer them to industry associations

    2. If you reject a claim as incomplete

       1. Give specifics of what would be acceptable format and documentation

    3. Fairness is good public policy
12. Assure your staff are “up to the task”

    1. Continuing training programs
    2. Ongoing evaluations of completed claims
    3. Adequate time
    4. Get assistance from expert consultants in areas of law, engineering, industry-practice

       1. But watch for conflicts of interest

          1. Eg. construction managers evaluating claims against its actions
          2. Eg. designers evaluating claims involving allegations of inadequacies or conflicts in its plans and specifications

    5. Always look for the “alternate” solution to resolution of the dispute