Most, if not all, public construction bid or proposal documents require that bidders visit and inspect the site prior to bidding on the project. Clearly the purpose of such a requirement is to hold the contractor to a higher level of knowledge in the event unexpected conditions are encountered during the performance of the work. Consistent with this goal, many of these contracts include a differing site conditions clause. Most contracts also include a statement that the contractor has investigated the site and has satisfied itself as to the conditions at the site.
For example, in Department of Transportation v. P. DiMarco and Company, Inc., 711 A.2d 1088, 1090 (Pa. Commw. Ct. 1998), the contract for a Penn DOT roadway repair project involved a clause stating:
The contractor further covenants and warrants that he has had sufficient time to ... examine the site of the project to determine the character of the subsurface materials and conditions to be encountered; that he is fully aware and knows of the character of the subsurface materials and conditions to be encountered ...
Experienced federal government contractors may notice that the provision quoted from the Penn DOT contract significantly differs from the clause found at FAR 52.236-3. For purposes of comparison, the FAR clause provides:
The contractor also acknowledges that it has satisfied itself as to the character, quality, and quantity of surface and subsurface materials or obstacles to be encountered insofar as this information is reasonably ascertainable from an inspection of the site, including all exploratory work done by the government, as well as from the drawings and specifications made a part of this contract.
As can be seen, the provision contained in the DiMarco case omits the qualifying phrase "reasonably ascertainable," and the contractor is stated to have "warranted" an examination of the site and is "fully aware" of the character of the subsurface conditions to be encountered. The import of these differences was directly addressed in the DiMarco decision.
The above provisions became pertinent when DiMarco encountered "soft spots" in the soil under the existing roadway that required additional labor and materials to remedy. DiMarco had not been aware of the soft spots prior to bidding on the contract. The Pennsylvania DOT refused to compensate DiMarco for the additional expenses. The basis for the refusal was that DiMarco was responsible for any subsurface problems encountered that differed from those anticipated at the time of the bid.
Reasonable Standard of Inspection
A board of claims heard the dispute and awarded DiMarco $556,429.00 in damages. The Commonwealth Court modified the damage award but affirmed the basis for the decision. Both the board of claims and the Commonwealth Court found that a contractor could not be held responsible for costs due to conditions that could not have been discovered upon reasonable investigation. The Commonwealth Court relied upon a prior Pennsylvania decision, I.A. Construction Corp. v. Department of Transportation, 139 Pa.Cmwlth. 509, 591 A.2d 1146 (1991). There the court had held the contractor could not be responsible for costs due to unforeseen subsurface utility lines encountered during the work. The contract in that case involved a clause identical to the site inspection clause at issue in DiMarco. Relying upon language set forth in the I.A.Construction case, the DiMarco court held it was not reasonable to expect DiMarco to dig beneath the surface of the road to test for soft spots prior to submitting its bid.
Although it is true that the I.A. Construction case did involve the same clause and the court implied a reasonability requirement, additional facts supported the I.A. Construction holding. There the court found that the contractor has reasonably relied upon contract drawings that mislead the contractor as to the difficulty of work. No such finding was made in DiMarco. No drawings or representations by Penn DOT were mentioned at all. A finding that the contractor relied on information contrary to that indicated in the contract is consistent with the inclusion of a differing site conditions clause. Where both the differing site conditions clause and the site inspection clause are included in the contract, requiring only a "reasonable investigation," for the most part, harmonizes the clauses. Without the differing site conditions clause, the courts could easily apply a higher standard with regard to the duty to inspect. The DiMarco court failed to mention reliance or whether the contract contained a differing site conditions clause.
Overall, the facts presented in the DiMarco case would tend to support a stricter reading of the site inspection clause than that applied by the court. The DiMarco decision was rendered by a Pennsylvania lower court. To date, it has not been appealed, but may be subject to appeal. In the event it is not reversed, this case may be of assistance in holding governmental agencies liable for unforeseen conditions. Thus, although the DiMarco case purports to follow the prior Pennsylvania case law, it may be a significant step in increasing the potential liability of the Pennsylvania Department of Transportation.