Differing site conditions (DSC) on a construction project can create significant problems for the construction company. While some degree of delays and unforeseen costs are accounted for by negotiating the initial contract, DSC can make a project unfeasible in the timeframe for the cost allotted for the job. When this happens, the construction company has a problem that needs to be addressed in the contract negotiation process. Otherwise, it could experience major losses on a project. In this article, a Nashville construction attorney discusses how to protect your construction company from DSC problems.
How DSC Creates Problems
When construction companies bid on jobs, companies focus on estimating the overall cost of completing the job. Creating an accurate estimate allows the company to charge enough to make the construction project profitable as long as they stay within the confines of the plan that they create. Anything that causes them to go outside of the plan increases the cost of the project.
DSC fundamentally changes the cost of the project because it changes how long it will take to complete the project because of problems in the construction area. Companies survey the construction area in order to estimate how long it will take to complete construction and what equipment it will require. DSC are often discovered after the project starts, making it hard for the company to adapt and stay on schedule and within its budget.
For example, building roads in areas with solid ground that is easy to remove can take months. When a construction company begins the project and finds that the soil is too weak to support the road without adding other materials, it may face increased costs trying to finish the project. This is because the company needs to find a way to acquire these materials, add them to the area, and complete the rest of the road construction project.
While many of the situations created by DSC on a project can be easily resolved with more construction work, it creates problems with contracts and construction operations. One of the main problems is the amount of time it takes to finish a project. Increasing the construction time increases the cost for the construction company, which means it needs to charge more in order to stay profitable.
This raises the question of responsibility for those additional costs, which is why many construction companies have a Nashville construction lien lawyer or another type of Nashville construction lawyer that they can rely on for assistance. There are often debates in the construction community about which party has to shoulder those additional costs. However, the simplest and most direct answer to this problem is to address DSC in contracts.
A Clause in the Contract
In order for construction companies to protect themselves from additional costs created by DSC, most companies have begun adding clauses to their contracts that specify who is responsible for changes in the overall cost of the project. Considerable effort is placed on developing these clauses using several frameworks to make sure that the cost can be covered before differing site conditions stop a construction project in its tracks.
The clause in question essentially states who is responsible for paying additional costs when differing conditions are discovered and impact the progress of the project. Any party involved can be held liable depending on what they agree to. How they divide that liability depends on the negotiation process as well as what risks each company is willing to have on the project. For contractors, it may be a good idea to consult with a Nashville mechanics lien law attorney before negotiating a contract with a DSC clause to see how you can avoid the possibility of having a lien placed on a project. There are three possible options for how the contract can cover DSC.
Related: The Differing Site Conditions Clause
One way for the contract to cover DSC is by having the contractor assume all liability for DSC. This means that, if any differing site conditions are found that impact the project, the contractor is responsible for handling the problem and paying the additional costs. While it may seem dangerous for the construction company to assume this much liability, there are situations where it can work in its favor.
With the construction company handling all of the liability, it can have full control over how the problem is addressed. This means that the company can choose which method that it will use to fix the problem, find where the materials come from, and control how the solution is applied. That also means the company can control the cost of this part of the project as well as the timing. If it would take a long time for the contractor to get approvals for addressing DSC from the site owner, then this method is a better option for the company. It can get things done quickly and return to the project at hand.
On the other side of the spectrum, it’s possible to have the site owner maintain all liability for DSC. This is a more effective method when there are limits to time or the number of resources available to address the problem. Owners also use this method when they have conducted extensive site surveys to be sure that there are no unknown conditions before the project begins. It’s an effective way of minimizing risk and keeping stronger control over the costs.
It’s also possible for the owner and the contractor to share liability for DSC. There are multiple ways of dividing liability between the two parties. This can be an effective method when the parties specialize in specific areas, and the party that is most knowledgeable and capable of resolving the problem can handle the DSC that they are more suited for. Negotiating shared liability is often easier than any other method, and a Nashville contractor attorney includes it in just about any type of contract.
Including a clause to govern how DSC will be handled in your contract is an important step to improving your protections. In doing so, you may be saving yourself a lot of trouble if something unexpected happens on the worksite. If you have questions about how to handle DSC, contact one of the Nashville construction attorneys from Cotney Construction Law.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.