While most of my construction law practice is in the private sector, I get involved in a public contracting case every now and then. The underlying legal principles are often similar, regardless of whether the project is public or private. This month, we look at a recent Armed Services Board of Contract Appeals decision on differing site conditions. While the law governing “differing site conditions” has its genesis in government contracting, a similar concept may be found in construction contracts for private projects. In either case, plumbing contractors are not immune to such claims and may encounter them during a project.

In Skanska Civil USA Southeast, Inc., ASBCA Nos. 61220, 61347, 2025 WL 1217296, slip op. (April 3, 2025) (Skanska Civil), the appellant (Skanska) sought approximately $9.5 million in compensation for alleged additional costs arising from the removal of interior timber bearing piles during the performance of a fixed-price contract with the Department of the Navy for the demolition of two existing piers (Piers 4 and 5) and construction of a new pier at the Norfolk Naval Shipyard in Portsmouth, Virginia. 

Skanska claimed it sustained additional costs because the specifications were defective or differing site conditions were encountered.

Regarding the defective specifications, Skanska argued that a note in the solicitation mistakenly instructed bidders to assume that the timber piles were treated with creosote, a type of tar produced from coal and commonly used to preserve timber. Skanska Civil, slip op. at 1, n. 1. If the piles were treated, then Skanska assumed they could be removed in “sound condition” and “priced its means and methods of demolition and removal accordingly.” Id. at 19. 

However, according to Skanska, it was legally impossible to fully extract the interior bearing piles within the dredge limits in the permit because the piles were not treated with creosote. Moreover, Skanska argued that the Navy assumed the financial risk of “being wrong” about the creosote treatment. Id. 

Since the piles were not treated with creosote, Skanska argued that this lack of treatment was either a Type I or Type II differing site condition. According to Skanska, “the lack of creosote treatment constitutes a Type I [differing site condition] in that the interior piles differed materially from what the contract indicated.” Id. In the alternative, Skanska argued that “the ‘unknown physical condition’ of the interior piles differed materially from that ordinarily encountered.” Id. This, according to Skanska, constitutes a Type II differing site condition.

The board denied the appeal, finding that the specification was not defective and that there was no Type I or Type II differing site condition because Skanska should have reasonably anticipated the conditions it encountered. Id. at 1.

While Skanska raised many legal and factual arguments that filled the 33-page opinion from the board, we will focus on Skanska’s claims of differing site conditions. 

Type I vs. Type II differing site conditions

Understanding the difference between the two kinds of claims regarding differing site conditions as a threshold matter is essential. The best way to understand the distinction is by understanding what the claimant needs to prove by a preponderance of the evidence to be successful.

To prevail on a claim for differing site conditions, a contractor must distinguish between Type I and Type II conditions and meet specific requirements for each type.

Type I differing site conditions involve subsurface or latent physical conditions that differ materially from those indicated in the contract documents. 

To prove a Type I claim, a contractor must demonstrate: (1) the conditions encountered at the project site materially differed from those represented in the contract documents; (2) the conditions were reasonably unforeseeable to the contractor based on the information available at the time the bid was submitted; (3) the contractor reasonably relied upon its interpretation of the contract documents; and (4) the contractor suffered damages due to the difference in site conditions. Old Veteran Constr., Inc. v. United States, 121 Fed. Cl. 346, 354 (2015).

Type II differing site conditions involve unknown physical conditions at the site that are unusual and materially different from those ordinarily encountered and generally recognized as inhering in work of the character provided for in the contract. 

To prevail on a Type II claim, a contractor must show: (1) the unknown physical condition must be one that could not be reasonably anticipated by the contractor from its study of the contract documents, from its inspection of the site and its general experience as a contractor; and (2) the conditions encountered must differ materially from those ordinarily encountered and generally recognized for the work required in the contract. See Extreme Coatings, Inc. v. United States, 109 Fed. Cl. 450, 456-57 (2013) (citations omitted).

Skanska’s defective specification claim

The board dismissed this claim out of hand, finding that it was intertwined with Skanska’s differing site conditions claims. As the Court of Appeals for the Federal Circuit explained:

“Although differing site conditions and defective specifications claims are distinct in theory, they collapse into a single claim ... where the alleged defect in the specification is the failure to disclose the alleged differing site condition. Where the differing site conditions claim and the defective specifications claim are so intertwined as to constitute a single claim, that claim will be governed by the specific differing site conditions clause and the cases under that clause.”

Comtrol, Inc. v. United States, 294 F.3d 1357, 1362 (Fed. Cir. 2002).

Accordingly, the board determined that the defect “is so intertwined with Skanska’s [differing site conditions] claim that it constitutes a single claim.” Skanska Civil, slip op. at 21.

Skanska’s Type I claim

Next, the board engaged in a detailed analysis of the facts to determine whether Skanska met the four-part test required to prevail on a Type I claim. Id. at 26-31.

Although Skanska argued that the note indicated “All timber structure including but not limited to piles, bent caps, relieving platform shall be assumed to be creosote treated,” the board found the contract documents were neither consistent nor clear. Nevertheless, it found that Skanska satisfied the first part of the Type I test. Id. at 26-27.

 However, the board found that Skanska failed to meet the second and third parts of the Type I test. Skanska had to “show that the conditions encountered were reasonably unforeseeable in light of all the information available to it.” Id. at 27.

In reviewing the facts, the board found that the conditions Skanska encountered “were reasonably foreseeable” for three reasons: First, Skanska had prior knowledge and experience from a crane rail project (from May 2000 to April 2003), extracting interior bearing piles at the same location. Second, an as-built drawing indicated that the bearing piles were “not creosoted.” Third, regardless of whether the piles were treated, Skanska should have expected that the bearing piles would be significantly degraded due to their prolonged exposure to the conditions under the piers. Id. at 27-28.

Of these three reasons, it was the first one that likely was the most damning to Skanska. Seven to 10 years before the date of the subject contract, Skanska worked on the piers in question and acquired “firsthand knowledge of those piles.” Id. at 28. According to the board, this put Skanska on notice that the bearing piles were not being treated. Id. 

“Based on its work on this prior project, Skanska had compelling reasons to doubt whether the bearing piles contained creosote.” Id. This finding spelled game over for Skanska’s Type I differing site conditions claim.

Skanska’s Type II claim

A Type II differing site condition involves “unknown conditions at the site, of an unusual nature, which differ materially from those ordinarily encountered.” FAR 52.236-2(a). As the board noted, Type II claims are “notoriously more difficult to prove than their Type I counterparts.” Skanska Civil, slip op. at 31; Randa/Madison Joint Venture III v. Dahlberg, 239 F.3d 1264, 1276 (Fed. Cir. 2001). 

“The unknown physical condition must be one that could not be reasonably anticipated by the contractor from his study of the contract documents, his inspection of the site, and his general experience[,] if any, as a contractor in the area.” Randa/Madison Joint Venture III, 239 F.3d at 1276 (quoting Perini Corp. v. United States, 381 F.2d 403, 410 (Ct. Cl. 1967)).

Since the board previously determined that Skanska “should have reasonably anticipated that the bearing piles would be degraded due to their prolonged exposure ([70 to 90] years) to the conditions under the piers,” it found no evidence of a Type II differing site conditions claim. Skanska Civil, slip op. at 31.

Takeaways

What does all this talk about defective specifications and differing site conditions mean for the plumbing contractor and engineer? 

First, carefully review the bidding documents before submitting a bid proposal. Make sure you have everything, and that you have compared everything, cross-checking one prospective contract document against another. If there is an inconsistency, raise a question before submitting the bid. That will help eliminate — or at least minimize — any discrepancies discovered after submitting bids. Moreover, a close contract review is commonly part of a contractor’s contractual obligations.

Second, when possible, review the project site in accordance with any contractual requirements. While you may not be contractually required to do test borings to learn about subsurface conditions, you may still be required to visit the site, review engineering reports, review drawings and other contract documents with any site visit. Undertake this due diligence with vigor. 

Third, consider your prior experience, especially if it occurred at the same project site. Skanska’s institutional knowledge was imputed to it, even as long as seven to 10 years before the current project. Ensure you do your homework and know whether you previously worked on the project site. You may be held to have constructive knowledge of the site and any conditions present thereon. 

While many more factors go into submitting a bid proposal for a project, these three key points will aid a contractor and engineer in doing the requisite due diligence needed to submit an educated bid proposal and avoid any surprises should you ultimately be awarded the contract.

Disclaimer

This article is for informational purposes only and not for the purpose of providing legal advice. Nothing in this article should be considered legal advice or an offer to perform services. The application and impact of laws may vary widely based on the specific facts involved. Do not act upon any information provided in this article, including choosing an attorney, without independent investigation or legal representation. The opinions expressed in this article are the opinions of the individual author and may not reflect the opinions of his firm.