A differing site conditions claim is the one exposure an owner cannot negotiate away by reading the price more carefully, because the subject of the argument is not in any document. It is under the site, and nobody has seen all of it.
The two types, and why the difference matters
American construction contracts generally recognize two kinds of differing site condition, and they behave very differently.
Type one is a condition that differs materially from what the contract documents indicated. The ground turned out not to be what the geotechnical report, the borings or the drawings said it was.
Type two is a condition of an unusual nature that differs materially from what would ordinarily be encountered in work of that character. Nothing in the documents was wrong. What was found was simply not the sort of thing anybody expects.
Type one is the more common and the more winnable, because it is answered by comparing two documents: what the contract said, and what was found. Type two requires an argument about what is ordinary, which is a matter of opinion and therefore expensive.
The practical consequence for an owner is that the language describing what the documents indicate is worth more attention than the clause describing the remedy. The remedy clause is standard. The indication is specific to your site and your report.
What the contract says the ground is
Most owners assume the geotechnical report is part of the contract. Frequently it is not, or it is included with a disclaimer stating that it is provided for information only and is not warranted.
That disclaimer does less than it appears to. Courts have repeatedly held that information furnished to bidders can form the basis of a type one claim even where a disclaimer is attached, on the reasoning that the owner supplied the data and the contractor was entitled to use it.
What the disclaimer does achieve is uncertainty, and uncertainty is expensive for both sides.
The more useful question at signature is narrower. How many borings, where, to what depth, and how far apart. A six acre site with four borings has been sampled at a density where surprises are likely rather than possible, and the contractor has priced on four borings too.
Where the sampling is thin, the honest position is that the ground is an open risk carried by somebody, and the contract should say who rather than leaving it to be discovered.
The notice clock on a differing site conditions claim
Every differing site conditions clause carries a notice requirement, and it is usually short: written notice before the condition is disturbed, or within a stated number of days of discovery, commonly between three and ten.
The reason is practical rather than procedural. Once the condition has been excavated, backfilled and built over, nobody can inspect it, and the owner has lost the ability to verify the claim or to propose a cheaper remedy.
This cuts both ways. A contractor who continues working and claims later has usually waived the entitlement. An owner who receives notice and does not attend the site has lost the chance to question what was found.
The general mechanics of these clocks, and what a missed one is worth, sit in notice deadlines and what a missed one costs.
The owner side practice that works is simple: when notice arrives, somebody goes and looks, that day, with a camera.
A worked example
Illustrative figures. Not taken from any client project and not a quotation.
A 220,000 square foot industrial building on a former rail yard. The geotechnical report is based on nine borings and describes fill to four feet over competent sand.
At excavation the contractor encounters buried timber cribbing, ballast and a rubble layer extending to eleven feet across roughly a third of the footprint. None of it appears in the borings, which happened to miss it.
Notice is given the same day. The owner attends, photographs and agrees the condition is not what the report described. That is a type one claim and it is a strong one.
The remedy is over excavation, disposal of material that turns out to be regulated, imported structural fill and revised footing design. Direct cost $940,000, associated delay 22 days, total $1.2 million.
The argument that does not happen is about entitlement, because the notice was timely and the condition was inspected. The argument that does happen is about quantity, which is a shorter and cheaper argument.
The same finding with notice given three weeks later, after backfill, becomes a dispute about whether the condition existed as described.
What an owner can do before signature
Four things, none of which require more borings.
Read what the contract says the ground is, and whether the geotechnical report is incorporated or disclaimed. Know which one you are relying on.
Count the borings against the footprint and the history of the site. A greenfield agricultural parcel and a former industrial site with the same boring count are not the same risk.
Check whether the contractor has qualified the price on assumed conditions. A qualification stating that the price assumes no rock, no groundwater above a stated elevation and no unsuitable material below four feet is a differing site conditions claim already written, waiting for a trigger.
Decide the contingency separately. Ground risk does not behave like the rest of the job: it is binary rather than gradual, and a contingency sized on a percentage of contract value has no relationship to it. The reasoning behind sizing against named exposures rather than a percentage is in how much contingency is enough.
Groundwater, rock and the two qualifications that matter
Two conditions produce most of the subsurface arguments on commercial projects, and both are usually addressed in the qualifications rather than in the contract body.
Groundwater is the first. A price qualified on groundwater not being encountered above a stated elevation has moved every foot above that elevation to the owner. Dewatering is expensive, it is continuous rather than one time, and on a site where it becomes necessary it also changes the excavation method, the shoring and the schedule.
Rock is the second, and the argument is almost never about whether rock exists. It is about the definition. Contracts that define rock by whether it can be removed by a stated size of excavator produce a different answer from those that define it by material description or by rippability, and the contractor has priced whichever definition is in the document.
Both qualifications are short sentences and both can be worth seven figures. An owner reading the price for the first time should look for them before looking at anything else in the earthwork scope, because unlike most exclusions they cannot be closed by negotiating scope. They can only be priced, capped or accepted.
Where the answer is to price them, the useful form is a unit rate agreed at signature rather than an allowance. A rate for rock excavation per cubic yard and a rate for dewatering per week convert an open exposure into an arithmetic problem, and they are negotiated at bid rates while the contractor still wants the job rather than at change order rates once the excavator has stopped.
A cap on the owner exposure for each is worth asking for and is sometimes granted on sites where the contractor has done neighboring work and holds a view about the ground that the report does not contain.
What we do
We read the geotechnical documents against the contract language and against the qualifications list, and we price the assumed conditions the contractor has excluded. Where the sampling is thin for the site history, we say so at signature rather than after the excavator finds out. That work sits in the readiness review. Where a claim is already on the table, dispute and claims support works from the same records under the direction of your counsel.
Questions people ask
Can an owner transfer ground risk to the contractor entirely?
Sometimes, at a price. A contractor asked to carry unknown subsurface conditions will either add a substantial allowance or qualify the price so heavily that the transfer is illusory. Paying a known premium is often better value than accepting an unknown exposure, but it should be a decision rather than an accident.
Does a site visit by the contractor defeat the claim?
Not for subsurface conditions. A pre bid site visit obligation is generally read as covering what is observable on the surface. No court expects a bidder to have excavated the site, so a visit requirement rarely answers a type one claim about what lies underneath.
What if the contractor found it but did not give notice?
Entitlement is usually lost or substantially weakened, because the owner was deprived of the chance to inspect and to direct a cheaper remedy. Enforcement varies by jurisdiction and some states apply a prejudice test, but an owner should treat the deadline as real and respond promptly when notice does arrive.
This is general information about construction contracts and is not legal advice.