Did You Make a Complete Inspection
of The Site Before You Bid ?
William C. Last, Jr.
Attorney at Law
Many contracts include a clause that requires the contractor to acknowledge that it has taken steps reasonably necessary to ascertain the nature and location of the work, and that it has investigated and satisfied itself as to the all the conditions that can affect the cost of the work. The clause then continues to state that any additional costs that the contractor may incur as a result of failing to make such a complete investigation will be borne by the contractor.
Such clauses are intended to shift risk for investigating site conditions to the contractor. Owners also include the clause to avoid future claims for extra costs associated with hidden or differing site conditions.
This article will discuss what inspections the contractor is expected to make and what liability will result from failing to make inspections. The discussion in this article is based on cases interpreting federal government contracts. However, many of the concepts maybe applicable to local government and private contracts.
What Site Condition Investigations Are Required?
Typically, contractors are given an opportunity to make a pre-bid site inspection. The bid solicitation documents usually set forth when the inspections will incur and how long the contractor will be allowed to inspect the site.
The standard for determining if the contractor made a proper investigation is based on what a reasonably prudent contractor, who is experienced in the area of work that is being bid, would be expected to discover as a result of such an investigation. If the contractor discovers discrepancies in the plans and specifications as a result of the investigation they are obligated to inform the owner of the discovery before submitting a bid.
If the government sets forth the date for the inspection but then fails to provide adequate access, the contractor is not required to investigate the areas where access was denied.
If the condition in question is a subterranean conditions, the question then arises as to subsurface investigations are required. The type of hidden site condition will effect that requirement. There are two types of hidden site conditions. A Type I condition exists when the actual subsurface or physical condition differs from that indicated on the plans and in the specifications. A Type II condition exists when an unknown physical condition is discovered and that condition materially differs from what would be ordinarily encountered and generally recognized as an inherent part of the work set forth in the plans.
If a Type I condition is discovered after work starts, the contractor would only be expected to discover the condition if it failed to make a simple site inspection would have led it to discover the condition. In essence, the contractor is not required to open walls or excavate a site to discover the condition before submitting a bid. A contractor is thus allowed to rely on the completeness and accuracy of the plans.
If a Type II condition is discovered after the work starts, the contractor is expected to have made a more extensive investigation. The contractor's investigation will be compared to the type of investigation a reasonably prudent contractor would have undertaken to discovery local site conditions.
The bid document typically states that by submitting the bid the contractor acknowledges that a site inspection was made. If the contractor fails to make the inspection and later discovers a hidden site condition. The fact that no investigation was made will not necessary bar a claim for the discovered condition. The test will still be what a reasonable contractor could have discovered.
What Type of Documentation Must The Contractor Investigate?
In addition to inspecting the site, the contractor also has an obligation to review relevant documents that are associated with the project. The extent of the investigation of documents is the same standard as a site inspection: Would the inspection by a reasonably prudent contractor, who is experienced with the type of work in question, have discovered the condition in question.
If the investigation indicates there inconsistencies in the data or information, the contractor can be charged with making a more thorough investigation or, at least, requesting further clarification from the owner.
Clearly, the contractor must examine what ever documents are part of the contract. Most contracts set forth what constitutes the contract documents. If the contract documents reference or incorporate separate investigative reports (e.g. soils report) and documents., the contractor has an obligation to review those documents before submitting a bid. However, such data must be made available to the contractor. If the owner simply lists such documents but fails to provide the contractor with an opportunity to review those documents, the contractor may not be charged with reviewing those documents.
If the contract fails to list a document as part of the contract or fails to require the contractor to review a non-contract document, the contractor is not expected to review such additional documentation.
If you bid on a contract that includes a pre-bid site and data investigation clause you have a duty to make such inspections as a reasonably prudent contractor would under similar circumstances. As a result, the contractor should document what inspections were made and when they were made. If discrepancies or errors in the plans are discovered, the contractor should notify the owner.
If the differing site condition is discovered after work has started, the contractor should immediately notify the owner of the condition. The notification requirement is intended to give the owner an opportunity to determine how to proceed. Typically, the owner impliedly warrants that the plans and specifications are complete. The contractor should review the contract to determine if there is a differing site condition clause that is applicable. Such clauses may allow for an equitable adjustment in the contract amount. The contractor should also comply with any change order clause notice and documentation provisions.
If the project is a public works project, the contractor should determine if there are any applicable code sections. For example, California Public Contract Code section 7104, provides that local public entities may be obligated to make equitable adjustments if the differing site conditions are discovered.
©2002, William C. Last, Jr. wrote this article. Mr. Last is an attorney who has been specializing in Construction Law for over 20 years. In addition to belonging to a number of construction trade associations, Mr. Last holds a California "A" and "B" license. He can be contacted at 415-764-1990 or 650-425-7679. A number of his past articles can be found on his website (lhfconstructlaw.com). This bulletin is published periodically to provide general information about current legal issues. The articles are not intended to be a substitute for the advice of an attorney as to a specific problem. If you have a specific legal question or need legal advice, you should contact an attorney.