Clauses that may mitigate the harm of unforeseen site conditions
When contractors put in bids on a construction project, they likely have already done their due diligence regarding factors that may affect their scope of work. However, it may not be enough to visit the site; meet with owners, engineers and other people on the project team; and investigate surveys, reports and other site information.
According to Construction Dive, unforeseen site conditions affect roughly 75% of construction job sites, and often, the unwelcome issue involves soil. Contractors may have to treat it, remove it or replace it at their own expense before the project can move forward. Other common undesirable disruptions include the following:
- Structures containing hidden rot
- The presence of asbestos or lead
- Underground storage tanks
- Chemical contamination
- Shallow bedrock
It may seem as if these issues are the owner’s problem and not the contractor’s, but the way that many contracts detail the scope of work could ensure that the reverse is true.
While it is unlikely that anyone will ever be able to completely eliminate the risk of adverse conditions, a carefully created contract may keep them from derailing a project or causing the cost of completion to exceed the bid? As the Cornell University Law School’s Legal Information Institute points out, construction contracts often include a change clause and a clause specifically dealing with differing site conditions. These typically allow the contractor and the owner to re-negotiate to reach an equitable adjustment.
In an equitable adjustment proposal, a contractor will need to create a line-item breakdown of direct costs, markups and the changes to the time of completion and costs related to the delays.