Pre-Bid Site Investigation Considerations in Differing Site Condition Claims

To recover under a differing site condition claim in federal construction contracts, the contractor must establish that the conditions it encountered were either materially different from those indicated in the contract (type I) or those ordinarily encountered (type II). In both types of differing site conditions claims, the contractor must demonstrate the existence of an unexpected physical condition. In addition to the differing site conditions clause, solicitations for construction contracts typically also contain a site investigation provision that places a duty on offerors to perform a reasonable pre-bid site investigation. If the adverse condition is or should have reasonably been discovered during the pre-bid site investigation, it can no longer be considered unexpected during performance. Thus, the reasonableness and results of the site investigation may later impact the contractor’s differing site conditions claim. While performing a reasonable site investigation is an important obligation, the duties imposed on the contractor in this regard are not so broad as to frustrate the key purpose of the differing site conditions clause, which is to encourage contractors not to inflate their bids in anticipation of conditions that may not ultimately arise. Accordingly, unless otherwise indicated in the contract documents, offerors are typically required to show that they performed at least a relatively straightforward site investigation for type I condition claims, with a more extensive site investigation obligation for type II condition claims. However, if the contractor fails to conduct any pre-bid site investigation, it may later be precluded from bringing a differing site conditions claim altogether if it is determined that a reasonable site investigation would have revealed the adverse condition. 

In Orlosky Inc. v. United States, 64 Fed. Cl. 63 (2005), the Court of Federal Claims (COFC) denied a differing site condition claim when a reasonable investigation would have revealed the allegedly differing site condition and the contractor failed to conduct a required pre-bid site investigation. The U.S. Navy awarded the contract for electrical work at San Nicolas Island, Point Mugu Naval Air Weapons Station, in Point Mugu, California. The contract involved the resetting of reclosers, which serve the basic function of a circuit breaker and provide emergency shutoff in the event of a short circuit. As relevant here, the contract incorporated by reference the Differing Site Conditions clause and the Site Investigation and Conditions Affecting the Work clause. The solicitation also included a pre-bid site visitation provision which required offerors to inspect the site of performance before submitting their offers. Six bidders attended the Navy-hosted pre-bid site visit, but the awardee failed to attend and did not conduct any pre-bid inspection of the premises. When the contractor conducted a site inspection following the award, it was surprised to find that, despite the contract calling for pole-mounted reclosers, there were no poles for mounting them. Instead, the reclosers were installed in a pad-mounted configuration, requiring a different scope of work than the contractor anticipated when reviewing the solicitation and preparing its bid. Due to the added complexity of the performance, the contractor later filed a certified claim, which was denied by the contracting officer (CO). In the COFC suit that followed, among other counts, the contractor sought an equitable adjustment for $565,481 plus interest, due to differing site conditions.

In response, the Navy filed a motion for partial summary judgment seeking dismissal of the contractor’s claim for defective site conditions. In its motion, the Navy argued that the contractor was precluded from bringing such a claim because a pre-bid site inspection would have revealed the type and mounting of the reclosers on the island. For its part, the contractor admitted that an investigation would have revealed the condition of the reclosers and that it failed to conduct a pre-bid site inspection but argued that it had been misled by government specifications. The COFC began its analysis by noting Federal Circuit precedent that even when they fail to conduct a site inspection, contractors are charged with knowledge of the conditions that a pre-bid site inspection would have revealed. To prevail on its differing site condition claim, the contractor would have to show that the condition it encountered was unforeseeable based on all information available at the time of bidding. However, since the contractor was charged with knowledge of the type and mounting of the reclosers due to its failure to conduct a pre-bid site inspection, the conditions relevant to the reclosers were reasonably foreseeable, and the contractor’s differing site condition claim had to fail. The Court also noted that a reasonable contractor would have conducted a pre-bid site inspection, and if the contractor were permitted to maintain a differing site condition claim in this case, the very purpose of charging contractors with knowledge discoverable by a pre-bid site inspection would be defeated. Consequently, the COFC partially granted the Navy’s motion for summary judgment as it pertained to the contractor’s differing site condition claim.  

To successfully recover under either type of differing site condition claim, contractors must establish the existence of an unexpected physical condition. The differing condition must be reasonably unforeseeable based on the information available at the time of bidding. In construction solicitations that require a pre-bid site investigation, contractors who do not conduct a site investigation are nevertheless charged with the knowledge they would have reasonably obtained had they conducted the investigation. Accordingly, such contractors are precluded from bringing a differing site condition claim based on an unexpected physical condition if the site investigation would have revealed the condition. To recover under a type I differing site condition claim, the physical condition should have remained unforeseeable to the contractor following a relatively simple site investigation, with a more extensive investigation required for maintaining a type II claim. In addition to being barred from bringing differing site condition claims, contractors who fail to conduct a required site investigation are also precluded from raising defective specifications claims for the government’s failure to disclose conditions that would have been revealed at a site investigation. In this connection, the Federal Circuit has held that where the alleged specification defect is the government’s failure to disclose the differing site condition, the two claims collapse into one and are governed by the contract’s differing site conditions clause. Therefore, if a differing site condition claim is barred in such cases, so is any defective specification claim grounded in an undisclosed condition that would be reasonably foreseeable to the contractor if charged with the knowledge it could have gained from conducting a pre-bid site investigation.

This Federal Contract Claims Insight is provided as a general summary of the applicable law in the practice area and does not constitute legal advice. Contractors wishing to learn more are encouraged to consult the TILLIT LAW PLLC Client Portal or Contact Us to determine how the law would apply in a specific situation.