Long ago, there was no requirement to have a differing site condition or significant change in the character of the work clause in the state standard specifications.
As some contractors know, Congress left a loophole under which states could “opt out” of having the clauses, and some states have done so.
Even in states that have the differing site conditions clause and change in the character of the work clause in their contracts, it is not unusual for the state DOT to deny claims for quantity overruns. The argument typically is that the quantities are just estimates used to compare bids, and that such claims are barred by the clause that requires contractors during the bid period to “thoroughly examine the site.” Some state courts simplistically buy those arguments, but not the Virginia Supreme Court. Contractors take heart; there is hope in these cases.
Overruns aren’t overruns
In June 1992, Asphalt Roads and Materials Co. Inc. contracted with the Virginia Department of Transportation (VDOT) to widen a section of road. Asphalt Roads subcontracted the installation of the utility pipes. That work required removal and replacement of any unsuitable soil under the utility pipes, with an estimated quantity of 940 cu yd. During excavation, the subcontractor had to remove and replace substantially more than 940 cu yd of unsuitable soil.
Asphalt Roads, on behalf of its subcontractor, claimed additional compensation for the excess unsuitable material that was discovered, removed and replaced with borrow. VDOT paid for the removal of some of the material as an “unforeseen condition” covered by Section 104.02 of the Standard Specifications. VDOT also paid for some of the backfill under Section 303.06(d). VDOT declined to pay the balance of the claim.
Asphalt Roads filed suit. The trial court held that the contractor was entitled to payment for an additional 8,657 cu yd of backfill and 8,807 cu yd of unsuitable material at the contract-stated unit price of $6.18 for select borrow.
The case eventually ended up at the Virginia Supreme Court. In deciding the case, the Virginia Supreme Court had to determine whether the contractor was entitled to additional compensation for removing and disposing of the excess unsuitable material under the differing site conditions clause or at the contract unit price. Citing cases from other states, the court first considered the purpose of the differing site conditions clause “to encourage low, competent bids,” and “to take at least some of the gamble on subsurface conditions out of bidding.” The court noted there will be no windfalls or disasters and that the state benefits from bids without contingencies.
VDOT argued that the differing site conditions clause did not apply to quantity overruns. The court disagreed by finding that treating the quantity overruns as nothing more than quantity overruns would defeat the purpose of the differing site conditions clause.
VDOT also argued that the claim should be denied based on the site investigation clause in the Standard Specifications. The court rejected that position, stating, “If we applied these sections to the change of condition shown in the evidence in this case, we would render meaningless the language of sections like 104.03 and negate their salutary purposes.”
This Virginia Supreme Court decision is well reasoned and it is consistent with the realities of bidding and construction. In the short time available for bidding, a contractor does not have time to find the design errors or determine that the quantities are out of whack. The DOTs do get the benefit of lower bids, and in return should compensate contractors when the quantity overruns change the character of the work.