James M. Kwartnik, Jr., Associate, Pepper Hamilton LLP
King County v. Vinci Construction Grands Projects/Parsons RCI/Frontier-Kemper, JV, 2015 Wash. App. LEXIS 2735 (Wash. Ct. App. Nov. 9, 2015)
The Court of Appeals of Washington recently decided King County v. Vinci Construction Grands Projects/Parsons RCI/Frontier-Kemper, JV, a dispute between a joint venture contractor (the "Contractor") and King County, Washington (the "County"). The dispute stemmed from problems that arose and significant delays that occurred during a major expansion of the County’s wastewater treatment system, known as the Brightwater project. The case illustrates the potential pitfalls of a contractor’s claim of differing site conditions.
The Brightwater project consisted of the construction of a new treatment plant and a new 13-mile underground conveyance system that involved extensive tunneling work. Construction of the underground conveyance system was divided into three contracts, one of which was awarded to the Contractor (the "Project").
Prior to the award, the County and its consultants prepared contract documents, including specifications and two geotechnical reports (the "Contract Documents"), to assist with the solicitation and preparation of bids for the Project. According to the Contract Documents, the entire Project would be situated below the groundwater table, which meant there would be conditions that would require special excavation techniques and equipment in order to apply constant pressure to the face of the tunnel to prevent it from collapsing. The Contract Documents contained information about the soil samples extracted from boreholes drilled roughly 300 to 400 feet apart on the Project, as well as baseline estimates of the expected numbers and percentages of “tunnel soil groups” that would be encountered on the Project.
The Contractor received and analyzed the Contract Documents and retained two geotechnical consultants to assist with preparing the bid. Relying on the Contract Documents, the consultants developed reports attempting to identify the types and locations of soils that would be encountered on the Project. The Contractor submitted the lowest bid and was awarded the Contract.
The Contractor encountered many difficulties during the construction of the tunnels, and the Project was significantly delayed as a result. When the Contractor failed to meet contractual deadlines, the County retained a new contractor to complete portions of the work. The County then sued the Contractor and its surety for default.
In its defense and counterclaim, the Contractor asserted, among other things, that the County breached the Contract by failing to grant change orders and time extensions for differing site conditions. One of the Contractor’s differing site condition claims was based on the Contractor’s assertion that “the soil conditions encountered [were] materially different than what was anticipated.” Specifically, the Contractor contended “that the frequency of transitions between one soil condition and another [in particular, from plastic to non-plastic soils] was higher than what was indicated in [the Contract Documents] and what was anticipated.” The Contractor claimed that the increased number of changes in soil conditions substantially slowed progress because the Contractor had to repeatedly stop work and readjust excavation parameters. The Contractor asserted that this change constituted a differing site condition, which, under the Contract’s “Differing Site Condition” clause, entitled the Contractor to an equitable adjustment in time and price.
The trial court denied the Contractor’s differing site condition claim on summary judgment. On appeal, the King County court identified the following requirements for establishing a differing site condition claim: 1) the contract documents indicated certain conditions; 2) the contractor reasonably relied on those indications when making its bid; 3) actual conditions materially differed from those that were indicated in the contract; and 4) the materially different conditions were not foreseeable. Applying this test, the court affirmed the trial court’s grant of summary judgment because the Contractor failed to satisfy the first two requirements.
First, the King County court found that the Contractor admitted that “the Contract documents contained neither location-specific baselines for soil types between the boreholes nor indications of expected transitions from plastic to non-plastic soils.” Further, the court was not persuaded by the Contractor’s argument that, “even though there was no explicit representation in the Contract documents about the frequency of transitions,” the Contractor made a reasonable interpretation about the number of transitions based on the information presented in the Contract Documents.
The court stated that, even if a Contractor’s “reasonable interpretation” of owner-provided documents was enough to satisfy the first requirement of a differing site condition claim, there could be no such “reasonable interpretation” here, where the Contract Documents contained no express or implied indication as to the number of transitions. Moreover, the court found that a statement in the Contract Documents that “bidders should make their own interpretations and conclusions about the soil conditions along the tunnel” shifted to the Contractor any risk associated with assumptions made by the Contractor.
Next, the court found that the Contractor failed to establish the second requirement of a differing site condition claim — that a contractor reasonably relied on the indicated conditions when making its bid. The Contractor’s geotechnical consultants, who relied on the Contract Documents, did not analyze the expected frequency of transitions between plastic and non-plastic soils. The consultants’ reports identified the soils likely to be present at various locations along the Project, but both consultants stated that they did not estimate the number of transitions and that doing so would be “difficult, if not impossible.”
The requirements of an affirmative representation as to site conditions and actual reliance on those conditions are not unique to Washington, and contractors should be cognizant of such requirements when claiming differing site conditions.
Article originally posted November 30, 2015 on Constructlaw, an update and discussion of recent trends in construction law and construction, maintained and edited by Pepper Hamilton's Construction Law Practice Group.