dsc claims - tunneling short course · 2018. 10. 2. · type i dsc clause –first “changed...
TRANSCRIPT
An Engineer’s Lessons Learned from
DSC Claims
Denver, Colorado
September 10-12, 2018
Don Del Nero, PE, CDT
Stantec Consulting Services, [email protected]
Emphasize the importance of a differing site condition
clause---------------------
Not all DSC clauses are created equal----------------
DSC clauses often fall short of the needed direction
Contractors need for recovery----------------------
Renderings from DSC claims can provide a wealth of
information------------------------
Contractors play poker better than engineers! Take
the gamble out of bids and use a DSC Clause--------------------------------------------
Keep you in meeting rooms and out of court rooms
Overarching Messages…
Speaking of Court Rooms…
Agenda
1 Introduction & Industry Facts of Life
2 Different Site Condition Language
3 School of Hard Knocks
4 Refinements to DSC Language
5 Conclusions and Questions
Introduction & Industry Facts of
Life1
A tunnel is a hole in the ground with a
lawyer at each end and a tunnel engineer
in the middle!
Tunnel Definition…(not found in Webster’s)
In a general sense a DSC contract clause
is a risk management tool that is a
pathway for contractor relief should the
ground conditions or ground behavior be
different than indicated in the contract
documents.
Also, a DSC clause avoids shifting of
ground risk to a contractor and provides
for equitable damage recovery.
What is a DSC Cause?
• The ground is a good slave and a poor master!
• Contractors don’t take risk they price risk!
• Tunneling is blind construction!
• >$3,000/per hour at face• Mixed Face Conditions
• Groundwater has the habit of flowing where it does not belong!
• Difficult ground conditions
– Gravels, cobbles, and boulders, squeezing ground, swelling ground, weak rock, karstic conditions, leaky ground, sticky clay
• Rock to soil transitions often in tunnel alignments
• Linear nature of tunneling means any delay is a critical path delay
Why is a DSC Clause Important? • Cutterhead opening ratio
• Underground litigation can last a number of years
• Variations in cutterhead tooling
• Cutterhead crushing ability in GCB ground
• Relatively “infinite” volumes of ground compared to very finite amounts of ground investigated
• Reduce contingencies
• Reduce Bid scatter
• Increase bidder pool
• Reduce protracted conflicts
• Nuisances of underground construction difficult for lay jury to grasp
• Tunneling destroys the very ground that caused the claim in the first place!
DSC Language2
US Federal Government DSC Clause…paraphrasedIn federal government contracting, a Type I DSC is defined as follows:
1. The contract indicated a particular site condition;
2. The contractor reasonably interpreted and relied on the indications;
3. The contractor encountered latent or subsurface conditions which
differed materially from those indicated in the contract; and
4. The claimed costs were attributable solely to the differing site conditions.
A Type II DSC is defined as follows:
1. The contractor did not know about the actual condition found during
performance at the site;
2. The contractor could not reasonably have anticipated the actual
condition at the site from inspection or general experience; and
3. The actual condition varied in a material way from the norm in similar
contracting work.
Type I DSC
Type II DSC
EJCDC DSC Language*…GC 5.04
*EJCDC language has a copyright and requires purchase of EJCDC General Conditions
Differing Subsurface or Physical Conditions: Notice by Contractor: If
Contractor believes that any subsurface or physical condition that
is uncovered or revealed at the Site either:
1. is of such a nature as to establish that any
Technical Data on which Contractor is entitled to
rely as provided in Paragraph 5.03 is materially
inaccurate; or
2. is of such a nature as to require a change in the
Drawings or Specifications; or
3. differs materially from that shown or indicated in the
Contract Documents; or
4. is of an unusual nature, and differs materially from
conditions ordinarily encountered and generally
recognized as inherent in the work of the character
provided for in the Contract Documents;
CCDC Language*…GC 6.4
*CCDC language has a copyright and requires purchase of
CCDC General Conditions
If the Owner or the Contractor discover conditions at the Place of
the Work which are:
1. Subsurface or otherwise concealed physical conditions
which existed before the commencement of the Work
which differ materially from those indicated in the Contract
Documents; or
2. Physical conditions, other than conditions due to weather,
that are of a nature which differ materially from those
ordinarily found to exist and generally recognized as
inherent in construction activities of the character provided
for in the Contract documents
Type I DSC Clause – First “changed condition” clause was used on
November 22, 1921. Included as standard form of GC’s for
construction contracts that was completed on August 20, 1926.
Type II DSC Clause – First introduced in Federal contracts in 1935
Approved by POTUS for Federal contracts in 1985. DSC Clause now
mandated by Federal Regulations for use in US Gov. contracts and
in contracts with full or partial Federal funding.
DSC Clause approved by….US Feds, AIA, EJCDC, ASCE, AASHTO,
AGCOA, DBIA, NSPE, ACEC, and numerous other state and
municipal governments
Brief History of DSC Clauses…
• Material. Important; affecting the merits of a case; causing a
particular course of action; significant; substantial. A description
of the quality of evidence that possesses such substantial
probative value as to establish the truth or falsity of a point in
issue in a lawsuit.• To demonstrate a “material” difference you must test the
“material”!...follow that and you will have a bullet-proof case!
• Is the sampling program statistically representative?
• To more clearly define a “material” difference a geotechnical
baseline must be established. A material difference can be
established just from boring logs but that can be a convoluted
exercise! Materially different from what?
• Key: If the “material” cannot be tested the same way it was
during design it may not be the best parameter for a baseline!
So what is a “Material” Difference?
School of Hard Knocks3
Caveat….
Many of the examples provided are the
types of lessons that good, qualified
Owners, Engineers and Tunnel
Contractors work to avoid…but DSC
claims are still common!
Lesson: Prequalify contractors and keep in
mind the vast majority of tunnel contractors
want the best for the owner and project!
So now my “dirty dozen”…
plus some!
DSC Adjudication - Lost Efficiency…
Pre-DSC Advance Rates vs. Post-DSC
Advance Rates Comparisons are Valid!
Appeal of Bay West, Inc. to Armed Services
Board of Appeals
Rendering: Quantifying a lost of productivity
by the “measured mile” approach was
endorsed by the Board.
Contractor chose to use approximately
40% cutterhead opening ratio in running
sand…excessive settlement
Rendering: TBM cutterhead not adapted
to baselined ground conditions….sands
can be unstable even above
groundwater! No DSC.
TBM Cutterhead Opening Ratio…
Contractor chose a certain tunnel machine,
which was unsuccessful because of a
DSC…Owner claimed Contractor was not
prudent in machine selection
Rendering: Contractor was reasonable and
prudent in technology selection…(avoid trying
claim a contractor is unreasonable and not prudent– very subjective). DSC accepted.
Definition of a Reasonable and Prudent Contractor…
DSC Notifications & Procedures…
Contractor notified owner of a DSC but
beyond timeframe required and without
backup required…
Rendering: DSC notification timeframes
and procedural requirements must be
followed. No DSC…even though the DSC
may be legitimate. (from Construction
Claims Monthly, Jan. 04)
Contractor chose to rely on referenced geotechnical
information and ignore exculpatory clauses regarding
geotechnical information…
Rendering: In a competitive bidding environment
Contractor is obligated to review and consider
“reference” materials even though exculpatory
language is included. Contractors are not clairvoyant
about ground conditions!
No reliance clause on geotechnical information included with contract documents
DSC for Communications at a Remote Project Site…
A remote construction site did not have
cell phone reception.
The Contract Documents were silent on
the matter and no mandatory pre-bid
was held. Contractor awarded recovery
for use of satellite phones.
DSC Recovery Limitation…
Contractor was unhappy with recover from the
DSC Recovery Limitation so attempted a breach
of contract claim via defective specifications.
Rendering: A Federal court recognized the
close relationship between these two provisions
and blocked the contractor’s attempt to do an
end-run around the recovery limits in the
owner’s DSC provision.
(Compotrol v. United States (Fed Cir. 2001)
Pitfalls of a DSC Claim
Claim: Owner failed to grant change orders and time extensions for
DSC’s so was in breach of contract. Contractor claimed the
frequency of soil transitions was more frequent than indicated in
the Contract Documents and slowed progress.
Rendering: The court identified the following requirements for
establishing a DSC claim. 1) the contract documents indicated
certain conditions; 2) the contractor reasonably relied on those
indications when making its bid; 3) actual conditions materially
differed from those that were indicated in the contract; and 4) the
materially different conditions were not foreseeable.
Pitfalls of a DSC Claim, cont’d
Rendering: The Contractor failed to meet the first two
requirements… 1) the contract documents indicated
certain conditions and 2) the contractor reasonably
relied on those indications when making its bid.
First, the contract documents did not baseline the
number and location of soil transitions so did not satisfy
requirement one. Also, the court was not convinced
the Contractor made a reasonable interpretation of
those ground conditions.
Pitfalls of a DSC Claim, cont’d
Rendering: Next the court found that the Contractor
failed to establish the second requirement of a differing
site condition claim – that a Contractor reasonably
relied on the indicated conditions when making its bid.
The Contractor’s geotechnical consultants, who relied
on the Contract Documents, did not analyze the
expected frequency of soil transitions themselves.
(PepperHamilton LLP, Differing Site Condition Defense Rejected,
11/30/2015)
DSC Man-made Obstructions…
TBM cutterhead openings were found to be
clogged upon intervention inspection
Rendering: Inspection of clogged opening revealed
steel well casing was encountered that was not
documented in Contract Documents. Valid DSC.
DSC Documentation Not Completed in a Timely-way…
To avoid being liable for not following DSC
timelines indicated in the Contract Documents
Contractor submitted a letter to the indicating
they “reserved the right” to still pursue the DSC
at a later date.
Rendering: The Owner did not agree in writing to
change the Contract relative to DSC timelines so the
“reserve the right” language was not applicable.
Competent Person vs. Qualified Person…
OSHA 29 CFR 1926.32/ANSI A10.16-2009
There is a major difference between a
Competent Person and a Qualified Person. If
the Contractor is required to select excavation
support to maintain a safe excavation the
Contractor must have a Qualified Person on-
site.
Plus some…
• He who has the most accurate data wins!
• Dated stamped photographs
• Captions for all photographs
• Reserve the right language not always held up
• Avoid “dooms-day GBR”
• Keep track of leased vs. owned equipment
• Clearly define TBM downtime events
• Emails are court admissible
• Text will likely become court admissible
• Assignment of hierarchal precedent for each Contract Document
is essential…especially for geo-information
• Require an affidavit that the contractor relied on the GBR for the
basis of bid
Plus some more…• Clearly define every term related to ground conditions and ground
behavior
• The GBR is very much a specification for the ground…use it but use
it wisely
• Avoid ambiguous terms like “sometimes” and other relative terms
like “strong”
• Clarity is needed on who will measure the size of cobbles and boulders
• Consider unit price item for a unplanned recovery shaft
• Do not “approve” shop drawings…only “No Exceptions
Taken”…by approving you may be approving means and
methods! Stay out of the contractors business!
• Do not use the term “certified”…great legal meaning!
• DRB renderings often not binding but are court admissible
• Avoid non-baselined ground conditions
• Require signed affidavit from GC and subcontractor that entire set
of CD’s has been provided to the subcontractor
Refinements to DSC Language4
Consultants must establish clear procedures to get from DSC
merit to DSC recovery…too little information on “how to do it” in
current contracts. This gives contractors uncertainty as to the
chance for recovery
DSC Language Refinement
Establish DSC Merit (is there a material difference
between actual and contract
documents)
Establish DSC Quantum or Recovery (Equitable adjustment in price, time or both)
Possible DSC Clause Refinement…
SC-4.03.B: No claim by the CONTRACTOR related to construction
shaft excavation or tunnel excavation shall be allowed under the
Differing Subsurface conditions provisions unless the CONTRACTOR
investigates and demonstrates that such alleged conditions are
materially different from those conditions identified in the
Geotechnical Baseline Report and results in an increase in the CONTRACTOR’S cost of and/or time required for performance of
the Work. CONTRACTOR shall within 30 calendar days after
notification to the OWNER that CONTRACTOR believes a material
difference exists, provide the documentation, backup,
justification, and compensation for the alleged impact to
CONTRACTOR’S cost of and/or time required for performance of
the Work.
Possible DSC Clause Refinement…
Any and all costs incurred by the CONTRACTOR for demonstrating
that a material difference exists shall be borne by the
CONTRACTOR unless the OWNER agrees that the material
difference does have a cost and/or time impact. If OWNER
agrees that there is a material difference that impacts
CONTRACTOR’S cost and/or time, payment for geologic investigation(s) and testing of the material difference will be paid
for by the OWNER. Payment will be made by the OWNER for
reasonable and customary prices for geologic investigation(s)
and testing. CONTRACTOR is encouraged to review geologic
investigations and/or testing planned with the Engineer to
demonstrate a material difference prior to execution of the same.
Why this suggested refinement?
• There is a process and procedural gap between a DSC
notification, DSC merit, and DSC quantum/recovery
• This will expedite ultimate recovery to the contractor
• Owners are not equipped to go out and quickly confirm or deny
• The GBR must be established as the defining document for a
material difference• An engineer will likely delay the project to hire, contract with and
mobilize a driller and laboratory
• The Engineer-Owner agreement is never set up to quickly
respond to and cover additional field testing during construction
• Engineer’s do not always have adequate in-field construction
management services
DSC Claim Review Suggested Language…many GC’s or SC’s only have timeframe for DSC notification!
SC-10.05.D. Claim Review. Upon receiving a statement of claim,
complying with the requirements of Paragraphs A and B and with
advice and assistance of the ENGINEER as appropriate, the OWNER shall review the statement of claim submitted by the CONTRACTOR.
In conducting this review, the ENGINEER shall have the right to
require the CONTRACTOR to submit such additional or supporting
documents, data and other information as the OWNER and/or
ENGINEER may require, and the failure to submit such additional
documents, data or other information within fifteen (15) days
following written request shall be deemed a waiver of claim. Upon
completion of such review, to take place within thirty (30) days of receipt of the additional documents…
DSC Claim Review Suggested Language…most GC’s or SC’s only have timeframe for DSC notification!
data or other information as may have been required by the OWNER
and/or ENGINEER, the OWNER in consultation with the ENGINEER shall
issue a written determination, and if it deems appropriate accept
such parts of a claim as they find in good faith to be proper and, if
the CONTRACTOR agrees, a Change Order shall be issued to amend
the Contract Price, the Contract Time or either of them as may be
found proper. If the CONTRACTOR disputes the determination made by the OWNER, the CONTRACTOR as a condition precedent to any
further action to resolve such dispute must notify the OWNER and
ENGINEER in writing within five (5) days following receipt of the
decision of the factual basis of such dispute and permit the OWNER
fifteen (15) additional days to reconsider and, if it deems it
appropriate, issue a modified decision.
The Subcontractor shall demonstrate the following elements for a
determination of merit and to receive recovery:
1. There must be a difference between reasonably anticipated and
documented encountered conditions,
2. There must be a difference between reasonably anticipated and
documented encountered construction performance,
3. A cause-and-effect relationship must be demonstrable between the
differences in conditions and difference in construction performance,
4. There must be a demonstrable impact on time or costs, and
Contract conditions must be fulfilled (including, but not limited to conditions
such as reliance, notice, and mitigation).
In addition, Subcontractor must rely on all available geotechnical information
and assumptions and baseline statements provided in the Geotechnical Baseline
Report, have viewed the available soil and rock samples, have “walked” the
tunnel alignment and viewed conditions at shaft and staging areas, and provide
evidence of reasonable interpretation into material behavior.
*Paraphrased from World Tunneling, “Managing the Unforeseen”, March 2008
Determination of Merit and Recovery…
Avoid Undefined or Ill-defined Pricing
Items…facilitates quantum determination
1. Labor Rate Schedule Defined
2. Equipment Rates Defined
3. Active and Inactive Equipment Rates Defined
4. Owned vs. Leased Equipment Rates Defined
5. Schedule Float Ownership Clearly Defined
6. Inspection Daily Reports Cover Time, Motion, and Crew Size and
Makeup
7. General Conditions Costs Defined
8. General Conditions Charges for Remote Office Staff Clearly
Defined
9. Crew and Equipment Standby Time by Shift, Day, and Week
Defined
10.Use Lump Sum Items Cautiously…we are not dealing with doors
and hinges!
11.TBM Mobilization & Payment
Closing Thoughts…• Mega-tunnel projects should have legal counsel
experienced in underground projects on the team as a
technical advisor
• Includes guidance for the Contractor on how to
establish Quantum!
• Pay once for a different ground condition with a DSC
Clause or pay twice for a differing ground condition with
no DSC Clause!
• Could the lack of a DSC Clause be viewed by the courts
as a “defective specification”? ...with so many
engineering and construction organizations saying the
clause is an industry standard.
“We cannot solve our problems with the same level of
thinking that created them” – Albert Einstein
Questions & Potential Answers5