Differing site conditions can be time consuming and costly to a contractor. To mitigate that risk on public projects in Massachusetts, G.L. c. 30, §39N provides that contractors (or subcontractors) who encounter substantially or materially different site conditions are entitled to an equitable adjustment in the contract price. The equitable adjustment provided for under the statute is tied to the actual cost increase caused by the differing site condition.
Here's how the statute works. A contractor becomes entitled to an adjustment in its contract price when subsurface or hidden physical conditions are discovered at the job site which either materially and substantially differ (1) from conditions shown in contract documents or (2) from those ordinarily encountered and generally recognized as inherent in the work.
The differing condition is usually found underground. Although most Massachusetts cases involve subsurface conditions, it is possible that a differing condition in a building itself may qualify under the statute. For example, if the plans show that a concealed wall is brick and it turns out to be concrete (involving extra cost for removal), a contractor may claim an equitable adjustment in the contract price.
What constitutes a compensable differing condition is simple. If the actual conditions are substantially and materially different from what is shown on the bid documents, then the awarding authority must adjust the contract price. For example, if the site plans show ledge on 10% of the site and there is actually ledge on 90% of the site, the awarding authority is required to make an equitable adjustment.
Also, if hidden conditions are substantially and materially different from conditions ordinarily encountered in similar contract work the awarding authority is required to make an equitable adjustment. For example, a site contractor who finds a buried automobile tire dump well below ground surface would likely be entitled to an equitable adjustment in the contract price since this hidden condition is not one ordinarily encountered.
C. 30, §39N requires the claimant to give notice "as soon an possible after such conditions are discovered." The contractor must give the notice before doing the extra work. A general contractor should give written notice to the awarding authority, and subcontractor to the general contractor with a copy to the awarding authority.
The statute also allows the authority to adopt other reasonable rules and regulations governing the filing and investigation of these claims. If adopted, those rules and regulations would appear in the contract documents and must be met. Other contract notice provisions not explicitly authorized by c. 30, 39N should not apply. However, all should be met as a matter of prudence and to avoid complications. An awarding authority may deny any claim which is untimely or not made in accordance with applicable notice requirements.
C. 30, §39N benefits contractors, but it also benefits the public in the form of lower prices. It enables contractors to base their price on what reasonably could be anticipated. Because differing site conditions require an equitable adjustment of the contract price, contractors need not include contingency pricing in their bids. In addition, equitable adjustments work both ways. If differing site conditions eliminate work otherwise required, the awarding authority may be entitled to an equitable adjustment in its favor in the form of a credit.
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