Preparing for Change: Differing Site Conditions and Protecting Your Surety

There are a lot of things in life for which surprises are good. Nobody really minds a surprise party — it shows people care. Bumping into an old friend at an unexpected place can brighten your whole week. Twists and turns are why we watch films. However, there are a few circumstances for which surprises aren’t as good: appendectomy, audit, arraignment — before we’re through “A” we’ve likely had our fill of the unexpected. To that list, we can add anything unexpected that comes up during a construction project.

For all its reputation as a trade requiring physicality, contracting is a precision business in which assuming that something will work out is often the best way to ensure that it doesn’t. This is especially true when entering into a contract with a site owner or a government. We all know that a contract requires two things: to be as prepared for any eventuality as possible, and to make sure that you are protected in case something comes up that you couldn’t be prepared for. If you want to make sure you keep your surety bond and don’t have to pay, your contract has to allow for differing site conditions.

Understanding Differing Site Conditions

At its essence, the contract you sign with the site owner stipulates how long a job will take and what it will cost them to have you do it. We all know, however, that things can go wrong. The problem arises when things go wrong to the extent that it causes the project take substantially longer than was originally expected. At that point, owners can become litigation-happy and expect to be able to recoup your performance bond.

This can become very complex. Contractors often have to prove that the conditions on the site were materially different than what could have been reasonably expected. If there is a tornado, then it is extremely easy to see why conditions might have been difficult. Other differing site conditions aren’t as easy, and the burden can ultimately fall upon the contractor. Differing site conditions are factors that cause a project’s timeline to be re-evaluated and it must be proven that there is nothing else that could have been done.

Let’s take a hypothetical: You received a contract with a municipal government to build an office building. While excavating or driving piles, you encountered a far different subsurface than you were expecting. This might just be in one portion of the site, but it is going to necessitate extra time to dig it up, as well as extra costs to make sure that all layers are even across the site. This will delay your other subcontractors and throw the whole project into a mess. You will look to recover the costs of this extra work.

Now, the owner can come back and say that you should have known that this could occur when you submitted a bid, that this is your financial responsibility, and that overrun costs are your fault. At this point, it is more likely than not that courts will be involved. The law on this can be very tricky. So how could you have protected yourself?

Planning in Advance for Differing Site Conditions

It’s hard to plan in advance for the unexpected, but you can do yourself a favor by anticipating the “known unknowns”.

Perform a thorough site inspection. This is the most important step. Know that it’s impossible to catch everything. In the above example, you clearly wouldn’t have been able to do samples of every portion of the site (or else you would have excavated the whole thing before even submitting a bid). But showing a reasonable amount of diligence and still not coming up with anything usually makes a good case. Interestingly, this can also apply if you didn’t perform a reasonable inspection, as long as it can be proven that if a reasonable inspection occurred, the issue would have still gone unnoticed. If no one could have reasonably found the problem, even with an inspection, then it helps your case. This is trickier to prove, and anyway, there are a lot of reasons why you want to be thorough in the beginning.

Have everything stipulated in advance. This is where your contract is key. Make sure that you have a differing site clause that takes into account your reasonable inspection and what you expect to happen throughout the project. You don’t want to be left stating your case without a paper trail.

Follow the clauses in the contract. If the contract says that a differing site claim requires you to immediately submit paperwork explaining the problem and start a re-evaluation, then you need to do it. Even if it says fill everything out in triplicate, then you fill it out in triplicate. Don’t assume you can wait and don’t get burned on a technicality.

We know that there are good surprises and bad ones. The bad ones are those that leave you reeling and can hurt your time, wallet, and reputation. Don’t let differing site conditions ruin your relationships and ability to obtain a bond. Protect yourself in advance the best way you know how: planning and preparation.

Getting the contract requires the backing of a strong Surety company with a reputation you can depend on. Contact Surety1 today for a quick and fair bonding process that’ll get you to work.