The Ground Truth: Differing Site Conditions for Contracting Officers (CO) and Contractors
Differing Site Conditions, How We Get There
Simply put, the term “differing site conditions” in construction contracting refers to when what was considered accurate in terms of all things related to the construction site prior to start of work turns out to not to be what was true. This could be a problem, such as soil drainage capacity being different from what was portrayed in the solicitation soil data that causes the contractor to have to import more or better soil. But it could also be an unforeseen advantage like a complete opposite of the previous scenario, and those truckloads of dirt no longer must be brought in.
How does such a thing happen? It’s usually not the fault of either party if the Government performs due diligence and the Contractor is an active participant in the solicitation phase.
The Clause, Explained
FAR 36.502 directs the inclusion of FAR 52.236-2, Differing Site Conditions, in solicitations and resultant contracts for fixed-price construction or modification of real property (think demolitions). It’s mandatory for actions above the simplified acquisition threshold, and optional for actions below that. The clause itself is short, but it’s worth noting that there’s a two-part proof of test:
- The issue encountered on site differs from what is in the contract itself
- The issue impacts work that would be included in the contract scope
In construction, this should be straightforward. It’s important to note that substantiated issues are treated as equitable adjustments vice claims, as the CO is required by the clause to investigate any timely reports of issues brought to them by the Contractor. Issues verified by the CO are then treated as equitable adjustments, resulting in upward or downward adjustment of contract price as appropriate. The main point of this clause is that it provides some relief for contractors that would otherwise have to compute every foreseeable issue during performance that would cause an unnecessary inflation of their bid or proposal.
Reducing Risk for the Parties
COs working in construction or alteration of real property should do everything they can to ensure that industry knows exactly what they’re getting into. Some examples include:
- Including related environmental/soil studies and analysis products as annexes to the scope of work, or place that data where industry can find it.
- Allowing maximum practicable time for site visits, to include opportunities for on-site questions during the site visit and for a mechanism to allow for follow-up questions afterwards.
The main bit of advice for contractors is simple:
- Ask questions if there’s uncertainty! In fixed-price work, knowing the facts makes for a more competitive proposal and less problems during contract performance. Build your facts and assumptions and get clarifications from the CO if they’re needed.
- When construction starts, report issues quickly to the Government with as much information to support your request for equitable adjustment. As always, communication is key.
