When formulating a bid on a construction project, it is important to distinguish between the site conditions directly supported by the owner’s data and any assumptions made about the site conditions based on that data.
This distinction is especially important when the bid documents are accompanied by a disclaimer provision that shifts to the contractor any risk of assumptions the contractor made that differ from the owner’s data. The recent ruling by the Court of Appeals for the State of Washington in King County v. Vinci Construction Grands Projects, which resulted in affirming a substantial judgment of $155.8 million in damages against the joint venture contractor VPFK, provides a cautionary tale illustrating the consequences of proceeding with a large project based on faulty assumptions made despite the presence of a disclaimer provision.
This litigation involved the Brightwater Project, a major expansion of King County’s wastewater treatment system to better handle the increasing sewage from a region that encompasses Seattle and Redmond. After conducting a bidding process, King County engaged VPFK to construct portions of the tunneling work for a fixed price and within a specified time frame. The construction of the tunnels was plagued with difficulties and setbacks stemming from unexpected soil conditions, and the project was significantly delayed. King County eventually retained another contractor to complete one of the tunnels and sued VPFK for default.
In the ensuing action, VPFK asserted that the county breached the contract by failing to grant change orders and time extensions for differing site conditions based on bid documents that failed to specify the number of transitions between different kinds of soil conditions. These bid documents included the Geotechnical Data Report (GDR) and the Geotechnical Baseline Report (GBR), which interpreted the raw data from the GDR. The GBR identified a number of soils and soil groups that contractors could expect to encounter, as well as the location of the boreholes and the locations of the soil groups present at different depths within the boreholes. Crucially, the bid documents included a provision stating that the contractor was to accept full responsibility for making assumptions that differed from the baselines set forth in the GBR. A warranty statement contained in the GBR further warned that these geotechnical baselines were not necessarily geotechnical fact. Rather, the GBR only gave a representative range of values for the actual site conditions and cautioned that the locations at which the conditions are encountered may vary.
VPFK retained consultants to analyze the bid documents and develop its tender for the contract. One of the consultants explained that he applied an assumption that there would be a continuity of material between two given boreholes. During construction, however, VPFK observed that the frequency of transitions between one soil condition and another was significantly higher than expected. As a result, VPFK frequently stopped work to adjust the boring machines, leading to numerous delays.
The Court of Appeals held that the disclaimer provision and VPFK’s unwarranted assumptions based on its consultants’ interpretations of the bid documents precluded it from asserting a differing site condition claim. As its consultants would testify, their reports did not predict the number of soil transitions along the tunnel’s path and that such a task was impossible. Even the lead estimator for VPFK testified that it was not possible to determine the exact composition of the soils between the boreholes and that the contractor’s estimate did not take into account the number of changes in the soil.
As this case shows, where the bid documents are silent, a contractor bears the risk of encountering any adverse site conditions. Therefore, contractors must be aware of the gaps in information provided by the bid documents and take care not to fill them with unwarranted assumptions about the site conditions.