Federal Circuit Court of Appeals Denies Contractor Recovery on Claim For “Differing Site Conditions” Because Information Available for Inspection but Not Incorporated in the Contract Documents Revealed Conditions Which Were Encountered

Randa/Madison Joint Venture III v. Dahlberg,
239 F.3d 1264, 2000 U.S. App. LEXIS 1736 (U.S. Fed. Cir., Feb. 7, 2001)

Randa/Madison Joint Venture III (“Contractor”) entered into a construction contract with the United States Army Corp of Engineers (“Government”) to perform de-watering of an excavation for a pump house foundation that was to extend forty (40) feet below the existing ground surface. The contract included the standard differing site conditions clause set forth in Federal Acquisition Regulation (“FAR”) § 52.236-2 (2000). In addition, the contract included two separate clauses which addressed the Contractor’s obligations to inspect the site and materials produced by the Government that were made available for inspection. The first clause required that the Contractor acknowledge that it has satisfied itself as to the character, quality, and quantity of surface and subsurface material or obstacles to be encountered insofar as this information is reasonably ascertainable from any inspection of the site, including all exploratory work done by the Government. The second clause addressed physical data and stated that whenever subsurface exploration logs are presented in the Contract Documents, soil test results and soil and rock samples are available for inspection. These test results and samples were not included in the contract documents.

Prior to submitting its bid, the Contractor did not inspect the gradation curves, other test results, or the soil and rock samples that were made available for inspection by the Government.

Upon commencing work, the Contractor determined that it had underestimated the extent of the de-watering operation, incurred enormous difficulty in de-watering the pump house site, and incurred additional expenses over the amount that it had projected and bid. The Contractor filed a timely claim with the Government for an increase in the contract price, alleging that it encountered excessive groundwater constituting a different site condition. The Government failed to issue a final decision on the Contractor’s claim, resulting in a deemed denial of the claim. The Contractor appealed to the Armed Services Board of Contract Appeals (“ASBCA”). The ASBCA denied the Contractor’s claim stating that the Contractor has failed to prove that the conditions encountered at the site materially differed from those indicated in the contract or that the conditions at the site were of an unusual nature, which differ from those ordinarily encountered. The Contractor appealed.

On appeal, the Contractor did not focus its argument or whether the additional information referenced in the contract depicted the alleged differing site conditions. Instead, the Contractor argued that it had no duty to review this information, or alternatively, the Government had an affirmative duty to disclose the additional information beyond just making that information available for inspection.

In affirming the ASBCA, the Federal Circuit Court of Appeals held that reference in a contract that identifies that additional material and/or information is available for inspection, puts a contractor on notice of that information and the contractor is presumed to have reviewed it. Thus, the Contractor had a duty to review the soil test results and other information explicitly referenced in the contract and available for inspection. The Court also held that the Government’s reference in the contract to additional materials that were available for inspection was sufficient and the Government had no further duty of disclosure. Applying this reasoning, the Court concluded that the test results, samples and other information made available for inspection accurately depicted the conditions of the site and affirmed the ASBCA’s denial of the Contractor’s claim.

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