Differing Site Conditions in Construction Contracts

Subsurface and concealed conditions create a classic construction-contract risk: the actual site may differ from the information or conditions on which the work was priced. The governing contract controls the remedy. For exam purposes, know the two common categories in the Federal Acquisition Regulation (FAR) clause, the notice sequence, and why the contractor should preserve evidence before work changes the condition.

The two FAR categories

1. Type I: subsurface or latent physical conditions at the site materially differ from those indicated in the contract.
2. Type II: unknown physical conditions at the site are unusual in nature and materially differ from conditions ordinarily encountered and generally recognized as inherent in work of that character.

The distinction matters. Type I focuses on a mismatch with contract indications. Type II focuses on an unusual, unknown physical condition compared with what is ordinarily encountered in that kind of work. A condition that is inconvenient or more costly does not automatically fit either category.

The notice sequence

1. Stop before disturbing the condition, where practicable under the contract clause.
2. Promptly send written notice to the contracting officer describing the condition and where it was found.
3. Preserve photographs, measurements, logs, samples, plans, and other contemporaneous evidence.
4. Allow the contracting officer to investigate the site condition.
5. Document the effect on the work, cost, schedule, and any mitigation steps.
6. Submit any request for adjustment using the contract’s required process and timing.

Under FAR 52.236-2, the notice is due promptly and before the condition is disturbed. The clause says a request for equitable adjustment is not allowed unless the required written notice has been given, although the contracting officer may extend the notice time. It also bars a request made after final payment under that clause. Other contracts may use different language, so read the actual contract.

What the investigation and adjustment address

The contracting officer investigates promptly after receiving notice. If the condition materially differs and causes an increase or decrease in the contractor’s cost or the time required for any part of the work, the clause provides for an equitable adjustment and a written contract modification. The adjustment responds to the demonstrated effect; it is not an automatic bonus for encountering an unexpected condition.

Example: buried obstruction

Suppose the contract drawings indicate ordinary soil, but excavation reveals a buried concrete structure that was not shown. If the structure is a latent condition materially different from the contract indications, the contractor should promptly notify the contracting officer in writing before removing or altering it. The parties can then inspect, record dimensions and location, and assess the effect on labor, equipment, disposal, and schedule. The contractor should not simply remove it first and present the changed site as the only evidence.

How this differs from a change order

A differing-site-condition clause addresses a qualifying physical condition that was encountered; a change order generally directs or formalizes a change in contract work. The discovery may lead to a negotiated contract modification, but the contractor should not confuse the underlying condition claim with the document that changes the contract. Follow the contract’s authority, notice, pricing, and approval rules.

Common exam traps

• Treating any unexpected expense as a differing site condition.
• Forgetting that Type I compares actual conditions with contract indications.
• Forgetting that Type II requires an unusual condition compared with what is ordinarily encountered.
• Waiting until after the condition is disturbed before notifying the contracting officer.
• Assuming a cost adjustment is automatic without material difference and a demonstrated cost or time effect.
• Applying the FAR clause automatically to a private contract that uses different terms.

Key takeaway

Classify the condition, give prompt written notice before disturbance, preserve evidence, allow investigation, and document the cost or schedule effect. The specific contract clause governs the remedy.