On a federal construction project, differing site conditions are subsurface or hidden physical conditions the contractor encounters that do not match what the contract described or what would normally be expected for that kind of work. When they appear, federal contracts allow the price or schedule to be adjusted, provided the contractor follows the notice and claim rules built into the Federal Acquisition Regulation.
The Two Categories That Qualify
Federal contracting recognizes two types. A Type I condition is one that is materially different from what the contract documents indicate. A contract that portrays stable soil, for instance, but a site that turns out to have a high water table, can fall into this category.1Acquisition.GOV. FAR 52.236-2
A Type II condition is an unknown physical condition of an unusual nature, differing materially from those ordinarily encountered in work of the character provided for in the contract. The focus here is whether the condition itself is genuinely unusual for that geography or type of construction, not whether the contract said anything specific about the subsurface.1Acquisition.GOV. FAR 52.236-2
What the Contractor Has to Show
The difference has to be material. A minor variation that does not change what the job actually requires will not support relief. The condition must be significant enough to affect the work itself.1Acquisition.GOV. FAR 52.236-2
There also has to be a causal link between the condition and a change in the contractor’s cost or time. If the condition causes an increase or decrease in the cost of performing any part of the work under the contract, the contract may be modified in writing. That is true whether or not the specific work being done was itself changed by the condition.1Acquisition.GOV. FAR 52.236-2
Give Written Notice Before Disturbing the Site
Notice is where most claims are won or lost. When a differing condition appears, the contractor must promptly give written notice to the contracting officer, and it must be given before the conditions are disturbed. That timing lets the government investigate the site while the evidence is still intact.1Acquisition.GOV. FAR 52.236-2
Skip the written notice and the right to an equitable adjustment can be lost. The contracting officer has authority to extend the time for giving notice, but the default rule is that no adjustment will be allowed without it. Any request for adjustment also has to be made before final payment under the contract.1Acquisition.GOV. FAR 52.236-2
Filing a Formal Claim When Negotiation Fails
If informal negotiation with the contracting officer does not produce an agreement, the contractor can submit a formal claim. All claims against the federal government relating to a contract must be submitted in writing to the contracting officer for a final decision, under the Contract Disputes provisions of the U.S. Code.2Office of the Law Revision Counsel. 41 U.S.C. § 7103
Timing for the decision depends on the size of the claim. For claims of $100,000 or less, the contracting officer must issue a decision within 60 days of receiving a written request from the contractor for a decision within that period. For larger claims, the officer must either issue a decision within 60 days or tell the contractor when the decision will be issued. The contracting officer’s decision is final unless it is appealed through the proper legal channels.2Office of the Law Revision Counsel. 41 U.S.C. § 7103