Your contract may involve new construction or rehabilitation of an existing facility. In both cases, the contract will likely contain a site inspection clause requiring you to familiarize yourself with existing conditions and take those conditions into account in your estimating and scheduling. Do you think this sounds like a reasonable demand?
An inadequate inspection by your company could result in your waiver of claims for interference by other contractors, so-called “unforeseen conditions,” delays, and extras. How can this be?
This article discusses various types of site inspection clauses, how they can impact you financially, and how you can protect yourself.
The site inspection clause normally appears in an early section of the general terms and conditions, surrounded by introductory provisions, such as scope of work, listing of contract documents, and payment terms. Some examples include:
Contractor shall have the sole responsibility for satisfying itself concerning the nature and location of work and the general and local conditions, including but not limited to:
* transportation, access, disposal, handling, and storage of materials;
* availability and quantity of labor, water, electric power, and road conditions;
* climatic conditions, tides, and seasons;
* river hydrology and river stages;
* physical conditions at the job site and the project area as a whole; and
* topography and ground surface conditions.
On first impression, it appears that this language is not unduly burdensome. You look at the site for access and storage, make sure you know if you are in a cold or rainy region or are close to water, and check for hills and valleys, rocky outcroppings, and the like. Is that enough?
Clauses like this can also specifically reference, or implicitly require, knowledge of state and local codes and laws (e.g., noise ordinances), that you have accounted for any standard procedures of the owner (no work on Sundays), including safety procedures, and that you have accounted for any existing union agreements and project agreements.
In one dispute, the owner’s standard procedures provided that the entire site was nonsmoking. Consequently, 15-minute breaks extended to a half-hour or more as the employees drove outside the site to smoke. On a pharmaceutical project, food and drink were banned from the high-rise structure, causing lost break time and significant expense to the contractor.
What about “ground surface conditions?” How deep is a “surface?” Underground rock or past construction debris might hinder your work, but you may have no claim for the extra effort. What about existing asbestos on a school renovation project? Hazardous materials may be a “general and local condition.” All of these matters must be clarified.
Another clause to cause worry is one used on an amusement park:The subcontractor shall inspect the job site and conduct any tests or surveys it deems necessary or desirable... and shall accept full responsibility for any loss sustained by it as a result of any variances between the conditions as shown on the contract documents and the actual conditions revealed during the progress of the work.
The above provision goes further in requiring the contractor to conduct tests and surveys. Tests of what? Subsurface conditions? Electrical conductivity of the soil? Load-bearing capacities in an existing building? On a warehouse conversion, an electrical contractor had planned on hanging cable and conduit from existing steel columns, but did not divulge that apparently reasonable plan to the owner. In fact, the columns had not been tested for that additional weight and the materials had to hang from the ceiling.
The financial impacts for ignoring these clauses can be extreme. With this clause, even errors in the owner’s plans and specifications do not give rise to an extra if the discrepancies from actual conditions might have been detected. On an automotive manufacturing reconstruction, the contractor did not measure the height or complexity of existing structural steel inside the building. As installation began, it was discovered that high-reach equipment could only be used sparingly. In addition, there were only two gates available into the building, both remote from the contractor’s work.
These clauses are designed to cause the contractor to forfeit claims. The owner’s argument is that you should not be permitted to demand an extra for conditions that should have been apparent to you at bid. This attitude, by itself, is not unreasonable, but increasingly the terms of the site inspection obligations have become onerous.
In one case, an incinerator was being built on landfill. The foundation design was up to the general contractor, but no advance provisions had been made for the soupy ground conditions after every rain. Lay-down areas became bogs, and site roads became impassable mud holes. In hindsight, these terrible conditions could have been anticipated. As a result, the electrical installation was delayed, without recourse to a time extension, and then accelerated to meet the unadjusted completion date.
In another case, there was so much construction going on in the vicinity of the project that there was a labor shortage. Employees who could be hired jumped from job to job for better pay. Remember the language noted above for “availability and quantity of labor?”
The art of self-protection
The types of clauses quoted in this article are actually to your benefit. By listing the types of potential problem areas, they act as a checklist for your analysis. But you should make your own checklist for site conditions and use it for every job. Too many times, difficulties arise because you think you know the area of the work, and the owner and designer. You do not think that a “from scratch” investigation needs to be done.
If you treat each project as the first of its kind, you cannot go wrong. Perhaps the most important and difficult task is to list your assumptions. Some questions and unanswered assumptions include:
(a) Another party will take care of drainage?
(b) Another will provide site roads?
(c) Who will handle project scheduling?
(d) All rights-of-way have been approved?
(e) Who takes care of hazardous materials?
(f) What are the subsurface conditions?
(g) Are there site surveys?
(h) Does the owner have special site rules?
(i) What time of year covers project duration?
(j) Did you confirm your lay-down area?
(k) Did you confirm the access to work areas?
(l) Are there limitations on equipment use or on overtime?
For each new job, you will add to your list and use it for the next one. Once your assumptions are complete, write them down and send them to the general contractor or owner. If there is a problem with your assumptions, you should know up front.
Lastly, take notes of your initial walk-through. Proof that your site investigation was reasonable in scope can aid you in the event of a claim.