Differing Site Conditions

Why Differing Site Conditions Matter

Differing Site Conditions (DSC) are one of the most common and costly sources of change orders, claims, and disputes on construction projects. Because the subsurface and concealed conditions of a site can never be fully known before excavation begins, every project carries some risk that reality will not match the drawings, the geotechnical report, or the reasonable expectations of an experienced contractor. How that risk is allocated, identified, documented, and resolved is a core duty of the Construction Manager (CM) during the Contract Administration phase.

For the CCM exam, DSC questions test whether you understand (1) the two recognized categories of differing site conditions, (2) the contractual notice and investigation procedures, (3) the CM's role as the owner's agent and as an impartial administrator, and (4) how equitable adjustments to cost and time are determined. Expect scenario-based questions that ask what the CM should do first, what documentation is required, or whether a condition qualifies as a DSC at all.

What Is a Differing Site Condition?

A Differing Site Condition (also called a changed condition or concealed condition) is a physical condition at the site, typically subsurface or otherwise latent, that differs materially from what the contract documents indicated or from what would normally be expected. Standard contract forms, including the Federal Acquisition Regulation (FAR 52.236-2), AIA A201 (Section 3.7.4, Concealed or Unknown Conditions), ConsensusDocs, and EJCDC documents, all contain a DSC clause that shifts the risk of unknown conditions away from the contractor and onto the owner in exchange for the contractor not padding the bid with contingency for the unknown.

There are two categories you must know cold:

Type I (Category 1) Differing Site Condition
Subsurface or latent physical conditions at the site that differ materially from those indicated in the contract documents. The key test is a comparison between what the contract (drawings, specifications, boring logs, geotechnical reports incorporated by reference) represented and what was actually encountered. Example: Boring logs show sandy clay to 20 feet; the contractor encounters solid rock at 8 feet.

To prove a Type I claim, the contractor generally must show that: (1) the contract documents affirmatively indicated or represented the conditions; (2) the contractor reasonably relied on those indications; (3) the actual conditions differed materially; (4) the conditions were reasonably unforeseeable based on the information available; and (5) the contractor incurred additional cost or time as a result.

Type II (Category 2) Differing Site Condition
Unknown physical conditions at the site of an unusual nature, differing materially from those ordinarily encountered and generally recognized as inherent in work of the character provided for in the contract. Here the comparison is not to the contract documents but to what an experienced contractor would normally expect at that location. Example: An abandoned buried fuel tank, an unmarked underground vault, or archaeological artifacts discovered during excavation where nothing in the documents or local experience suggested such features.

Type II claims are harder to prove because the contractor must demonstrate that the condition was truly unusual and unknown, not merely inconvenient or more difficult than hoped.

What Is NOT a Differing Site Condition
Exam questions frequently include distractors. The following typically do not qualify: weather and climatic conditions (unless unusually severe weather is handled under a separate clause); conditions that were visible and could have been discovered by a reasonable pre-bid site investigation; conditions the contractor actually knew about; conditions caused by the contractor's own means and methods (for example, dewatering failure or cave-ins caused by poor shoring); market conditions, labor shortages, or material price escalation; and conditions the contract expressly allocates to the contractor through a clear risk-shifting clause. Also note that a site investigation clause requiring the contractor to visit the site does not eliminate DSC protection for latent conditions that a site visit could not reasonably reveal.

How the Differing Site Conditions Process Works

Step 1: Discovery and Stop Work on the Affected Area
When a contractor encounters a suspected DSC, it must stop disturbing the condition (except for safety) so the owner and CM can observe it in its undisturbed state. Proceeding without notice can waive the claim.

Step 2: Prompt Written Notice
Every DSC clause requires prompt written notice before the condition is disturbed. Timeframes vary: FAR requires notice promptly and before disturbance; AIA A201 requires notice no later than 14 days after first observance; many public contracts specify 48 hours to 10 days. The CM must know the project-specific notice requirement and enforce it consistently. Verbal notice should be confirmed in writing. Failure to give timely notice is the most common reason DSC claims are denied, though some jurisdictions excuse late notice if the owner had actual knowledge and suffered no prejudice.

Step 3: Investigation and Documentation by the CM
The CM promptly investigates, typically with the designer and geotechnical engineer. The CM should photograph and video the condition, record measurements and locations (stations, elevations, grid lines), take samples if appropriate, record who was present and when, compare the field findings to the boring logs and drawings, and prepare a written field report. The CM should also direct the contractor to keep separate, contemporaneous force account records (labor, equipment, materials) for all work related to the condition, even before entitlement is decided.

Step 4: Determination of Entitlement
The CM evaluates whether the condition meets the Type I or Type II definition and advises the owner. The designer or architect typically renders a determination under AIA-based contracts, while the CM makes a recommendation under CMAA and most agency CM arrangements. The determination should be in writing and should state the basis for acceptance or rejection. If rejected, the contractor may pursue the claim through the contract's dispute resolution process.

Step 5: Direction to Proceed
The owner, through the CM, must decide how to proceed: redesign, relocate, remove the obstruction, or change the construction method. Because delay compounds cost, the CM often issues a Construction Change Directive or Field Order authorizing the contractor to proceed on a time-and-materials or not-to-exceed basis while final pricing is negotiated.

Step 6: Equitable Adjustment
If entitlement is established, the contractor is entitled to an equitable adjustment in contract price and/or time. The adjustment covers the direct costs of dealing with the condition (labor, equipment, materials, subcontractor costs), allowable markup, and time-related costs if the critical path is delayed. Importantly, the equitable adjustment can also be a decrease if conditions are more favorable than indicated (for example, less rock than shown). The CM reviews the contractor's proposal, performs an independent estimate, verifies force account records, evaluates schedule impact through a time impact analysis, negotiates, and recommends a change order to the owner.

Step 7: Change Order and Record Keeping
The final agreement is formalized in a change order, which should include a release for the specific condition. The CM updates the change log, the schedule, the budget, and the as-built records.

Risk Allocation and the CM's Pre-Construction Role

The CCM exam also expects you to understand how DSC risk is managed before construction. The CM should advise the owner to invest in an adequate geotechnical investigation (the cost of additional borings is small compared to the cost of claims), ensure that geotechnical reports and utility surveys are made available to bidders and are clearly either incorporated into or expressly excluded from the contract documents, recommend inclusion of a fair DSC clause rather than an exculpatory clause (courts often refuse to enforce disclaimers that are contradicted by affirmative representations), consider allowances or unit prices for rock excavation, unsuitable soils, or contaminated material, and conduct a thorough pre-bid site visit with documented minutes. Attempting to shift all subsurface risk to the contractor typically produces higher bids, more disputes, and an adversarial project.

Exam Tips: Answering Questions on Differing Site Conditions

Tip 1: Memorize the two types by their comparison baseline. Type I compares actual conditions to the contract documents. Type II compares actual conditions to what is ordinarily encountered and generally recognized for that type of work in that locale. If a question says the boring logs showed X but the contractor found Y, it is Type I. If the question says nothing in the documents addressed it and the condition was unusual or unexpected, it is Type II.

Tip 2: When asked what the contractor or CM should do first, the answer is almost always notice and preservation. Stop work in the affected area, do not disturb the condition, and give prompt written notice. Pricing, negotiating, and change orders come later. Do not pick an answer that has the contractor proceeding with removal before the owner has an opportunity to inspect.

Tip 3: Written notice beats verbal notice every time. If an answer choice involves confirming a phone call in writing, documenting in the daily report, or issuing a formal letter, it is stronger than an option that relies solely on a conversation.

Tip 4: Document before deciding. The CM should investigate, photograph, measure, and compare to the contract documents before making an entitlement determination. An answer that has the CM immediately denying or approving a claim without investigation is wrong.

Tip 5: Remember the CM is an advisor and administrator, not the party who unilaterally spends the owner's money. The CM evaluates and recommends; the owner approves the change order. Under AIA documents, the architect makes the initial determination on concealed conditions. Read the question for which contract framework and which party is being asked about.

Tip 6: Equitable adjustment includes both cost and time, and can go either direction. If a question asks what the contractor is entitled to, the complete answer includes time extension when the critical path is affected, not just money. If conditions are better than indicated, the owner may be entitled to a credit.

Tip 7: Eliminate distractors that are not physical, latent site conditions. Weather, labor availability, price escalation, permitting delays, and conditions caused by the contractor's own operations are not differing site conditions, even if they add cost.

Tip 8: A site visit requirement does not negate DSC rights for truly latent conditions. But it does defeat claims for conditions that were visible or discoverable through reasonable pre-bid inspection. Ask yourself: could a reasonable contractor have seen or known this before bidding?

Tip 9: Know the standard contract references. FAR 52.236-2 (Differing Site Conditions), AIA A201 Section 3.7.4 (Concealed or Unknown Conditions, 14-day notice), and the equivalent ConsensusDocs and EJCDC provisions. Questions sometimes test the general concept of prompt notice before disturbance rather than a specific number of days, so read carefully.

Tip 10: Direct the contractor to keep force account records even if entitlement is undecided. This is a classic CM best practice question. Tracking actual costs contemporaneously protects both the owner and the contractor and makes the eventual equitable adjustment defensible.

Tip 11: Use the elimination method on scenario questions. Identify (a) whether the condition is physical and latent, (b) whether it differs materially from the documents or from normal expectations, (c) whether notice was timely, and (d) whether the contractor's reliance was reasonable. The answer choice that satisfies all four elements, or correctly identifies which element fails, is the right one.

Tip 12: Think about the owner's interest in fairness, not just cost avoidance. The CMAA Standards of Practice emphasize that a fair and prompt resolution of legitimate DSC claims preserves the project relationship, avoids litigation, and keeps the schedule moving. An answer that reflects impartial, documented, timely administration will generally be preferred over an answer that reflects reflexive denial.

Quick Review Summary

Type I: Conditions differ materially from what the contract documents indicated.
Type II: Unknown, unusual conditions differing materially from what is ordinarily encountered.
Contractor duty: Stop, preserve, and give prompt written notice before disturbing the condition.
CM duty: Investigate, document, compare to contract documents, direct force account tracking, evaluate entitlement, recommend direction to proceed, negotiate equitable adjustment, and process the change order.
Remedy: Equitable adjustment in contract price and/or time, upward or downward.
Not DSC: Weather, market conditions, visible conditions, contractor-caused conditions.

Master these fundamentals and the decision sequence, and you will be well prepared for any Differing Site Conditions question on the CCM exam.