Avoiding Differing Site Conditions for a Microtunneling Project (Part 3)

By Gary Brierley, Todd Kilduff and Becky Brock

Parts 1 and 2 of this paper have discussed the Owner’s responsibility for preparing a contract document that is appropriate for and applicable to a microtunneling project and the Contractor’s responsibility for preparing its bid based on a “reasonable and prudent” interpretation of that document, respectively. In essence, the Owner must inform the Contractor about the work to be performed in order to provide the Owner with a satisfactory finished facility and the Contractor must provide the Owner with an accurate proposal for how much it will cost and how long it will take in order to accomplish that objective.

However, and as explained in Parts 1 and 2 of this paper, most of the cost and most of the risk for constructing a tunneling project is associated with creating the underground openings inside of which the finished facility will be installed and Part 3 of this paper will discuss what happens when the Contractor for a microtunneling project encounters what it believes to be a Differing Site Condition (DSC) during the construction of those openings.

To begin, and as explained in the DSC Clause, the Contractor must “notify” the Owner that a DSC has been encountered, which for a microtunneling project is not easy. No one, not the Owner or the Contractor, can see what is being encountered at the face of excavation for a microtunneling project. Most of the time, microtunneling occurs below the groundwater table making it difficult to see the face without specialized airlocks and face access machines. Microtunnels are often small diameter and don’t always allow space for manned entry, meaning that a DSC claim for a microtunneling project must be based on 1) observations of the disturbed material being removed from the tunnel at the separation plant and/or 2) noticeable differences in ground behavior experienced during tunneling operations as indicated by the MTBMs numerous sensors such as thrust, torque, pore pressure, slurry pressure and other MTBM functions tracked in the machine’s data logging system.

With respect to Item No. 1 above, the Contractor for a microtunneling project should start saving and logging samples of all of the disturbed soil being removed from the tunnel on a regular basis from the very beginning of tunneling operations for comparison with those ground conditions indicated by the contract document; i.e. show from the beginning of tunneling that you are not experiencing a DSC. If things are going well during these early comparisons, then the Contractor has established the basis for making a DSC claim. It is also during these early phases of operation that the Contractor can establish the basis for how it intended to accomplish the tunneling operation during the bidding period. For most tunneling projects, including microtunnels, good daily records of machine performance from data loggers must be maintained throughout the tunneling process.

For many DSC claim situations, the establishment of a “measured mile” could demonstrate the impact of the DSC and be utilized in determining what is compensable. Thus, good documentation of production rates when things are going right is critical. This information should be supported by the Contractor’s CPM schedule submitted prior to the commencement of tunneling.

As was discussed earlier in Part 1 of this paper the “standard” DSC clause is not well suited for a microtunneling project, since more often than not, neither the Contractor nor the Owner can actually see the ground conditions that are being encountered either at the face of excavation or along the tunnel alignment. Hence, the Contractor must go out of its way to establish a valid basis for a DSC claim without which it is a simple matter for the Owner to reject the claim as not having shown a material physical variation in ground conditions. For a project containing a Geotechnical Baseline Report (GBR) it may be possible to assert a DSC claim based on ground behavior both as the result of baseline statements made in the GBR and/or as a result of tunneling methodologies established by the project specifications. Hence, and as a result of the above, microtunneling Contractors must be very proactive from the very beginning of tunnel construction in order to establish a valid basis for the occurrence of a DSC and not just reactive after something “bad” happens.

The standard DSC clause for a microtunneling project also comes up short when it specifies that the Owner must conduct an investigation of the claim after being notified by the Contractor. What type of Owner investigation is even possible at that point in time if the Contractor has not been diligent in maintaining thorough project records with respect to the ground that was being encountered prior to the claim and/or to the performance characteristics for the MTBM in ground where the Contractor believed that the MTBM was performing in a proper manner? What has changed, what is different, and how do those changes and differences compare to what was indicated in various parts of the contract document including the project GDR, the project GBR, and the project plans and specifications?

In essence, and in accordance with DSC language, it is necessary for the Owner to conduct additional subsurface investigations in order to make a decision about whether or not a DSC was encountered, but that almost never happens. However, and based on legal precedence, the “burden of proof” for a DSC claim falls on the Contractor which, as a result, means that the Contractor may be forced to conduct subsurface investigations in the vicinity of the claim in order to document its occurrence. If that is the case, then it may be better for the Contractor to “bite the bullet” and pay for those investigations; the cost for which would become part of its claim. If it is decided to do such investigations, then it is also imperative for the Contractor to hire a reputable geotechnical engineering firm to oversee that work in order to make certain that all aspects of the subsurface investigation are being performed in accordance with various ASTM standards.

As an adjunct to the above, a microtunneling Contractor must also realize that the notification requirements for a DSC is not a one shot deal. As long as the Contractor believes that the DSC is having a negative impact on its operation, then the Contractor should provide the Owner with regular updates about the type and magnitude of those impacts; including a listing of all of its cost increases and scheduling delays. Then, when the work gets back to “normal” it will be obvious that the Contractor has documented a valid DSC claim and the cost and scheduling impacts associated with that claim.

There are some cases related to a DSC claim where the Contractor attempts to find the Designer at fault for providing inaccurate and/or incomplete contract indications for subsurface conditions. If that happens then the Economic Loss Rule would come into play where it may be difficult for the Contractor to sue a Designer with which it does not have a contractual relationship. Some states have laws that allow this type of claim to take place and adequate legal representation would be needed in order to pursue such a course of action. Such an action may also require that the Contractor show that the Designer fell below the Standard of Care in order for the Contractor to prevail.

It is also necessary for a microtunneling Contractor to take note about whether it was retained directly by an Owner or indirectly by the Prime Contractor. Prime Contractors can be even more onerous when dealing with their subcontractors as compared to contracts directly with an Owner. As such, microtunneling subcontractors must be especially diligent when signing a “purchase order” with a Prime Contractor in order to make certain that its rights with respect to DSC claims are adequately represented in the subcontract language. A Prime Contractor may also simply refuse to support its subcontractor in pursuing a claim against the Owner, in which case the subcontractor may have little recourse.

Another interesting variation for a DSC claim is where a contract indication is alleged to be wrong as compared to a contract that contains no indication whatsoever about a certain ground condition; i.e. a contract that is silent with respect to a particular problem. If that happens, then it might be better for the microtunneling contractor to allege a Type II DSC which simply states that the DSC is different than usually encountered or as being inherently different than the work provided for in the contract document.
The MTBM Contractor may also avail itself to other sources for additional compensation such as superior knowledge, unjust enrichment, implied warranty, and/or defective specification. For instance, suppose other tunneling projects were completed in the vicinity of the proposed tunnel for which the contract did not provide any relevant subsurface information. Such a situation could be the basis for a claim of superior knowledge. A claim for implied warranty can be directly related to a claim for defective specification wherein the contract required the use of a specific microtunneling methodology that is not working in the encountered ground. Hence, and in some cases, it could be easier to sustain a claim for defective specifications as compared to a DSC. It might also be possible to make reference to the Spearin Doctrine, which states that if the work was performed in conformance with the contract document and the result turned out to be inadequate for any reason, then responsibility for that outcome falls to the Owner. Obviously, for these types of claims the Contractor must retain the services of competent legal representation.

And, finally, the Contractor must be very sensitive to any form of “non-standard” DSC clause. Some Owners try to “play games” with the DSC clause by changing its wording in a detrimental manner. If this happens, then the Contractor must be put on notice that the so-called DSC clause as provided in the contract may be worthless in the pursuit of a claim, i.e. the Owner is offering a DSC clause for which there are no legal precedents for enforcing the clause. In contrast, it is noted that the “standard” DSC clause is back-stopped by literally hundreds of legal precedents; none of which would apply to a non-standard clause.

In conclusion, the following items must be taken into account during the bidding process for a microtunneling project:

  • The microtunneling contractor should satisfy itself during the bidding period that an adequate and appropriate subsurface investigation was prepared for the project. Grossly deficient and/or defective subsurface investigations are the number one cause of tunneling difficulties for microtunneling projects,
  • The microtunneling contractor should also satisfy itself that the contract document contains a standard form of DSC clause which would be supported by existing legal precedents. Non-standard verbiage within the DSC clause has the effect of diminishing and/or even eliminating implementation of the clause during construction,
  • The microtunneling contractor must be diligent in monitoring and documenting the ground materials being removed from the tunnel and the MTBM performance characteristics from the very beginning of tunneling. It is only by having ground indications and machine performance characteristics for the entire tunnel that the occurrence of a DSC can be validated,
  • Establishment of a measured mile can be used as a tool to determine compensation with regards to delays resulting from the DSC,
  • The microtunneling contractor must realize that the DSC notification requirement for a microtunneling project is not a one shot deal. Regular updates of the cost and scheduling impacts of a DSC should be provided to the Owner for as long as the DSC is impacting tunneling operations,
  • If the microtunneling contractor is retained as a subcontractor, then it is necessary that all of the DSC provisions provided for in the contract document are transferred to the microtunneling contractor via adequate language in its “purchase order”. Prime Contractors can be even more onerous as compared to project Owners in the implementation of contractual provisions associated with the occurrence of a DSC,
  • And finally, microtunneling contractors may also need to avail themselves of other methods for additional compensation such as superior knowledge, unjust enrichment, implied warranty and/or defective specifications if the DSC provisions are shown to be inadequate or inappropriate for any reason.

In concluding Part 3 of this paper, it is necessary to emphasize the following:

  • All contracts prepared by an Owner for a microtunneling project should attempt, in the best possible manner, to avoid the possibility of encountering a DSC. Good subsurface investigations and adequate contract preparation are essential to the successful implementation of a microtunneling project.
  • Contractors intending to submit a bid for a microtunneling project should prepare an independent assessment of the contract document in order to satisfy itself that the contract has been prepared in a proper manner. Does the contract provide a good assessment of ground conditions and are those ground conditions consistent with the project plans and specifications? Does the contract provide a standard DSC clause that is compatible with existing legal precedents for the establishment of a valid DSC Claim.
  • And, finally, during construction has the Contractor been diligent in documenting the occurrence of a DSC based on ground sample evaluations and machine performance characteristics. As explained above, it is typically not possible to observe any undistributed ground during microtunnel construction, but equally reliable and valid observations can be made of the disturbed ground and/or of MTBM behaviors for documenting the occurrence of a DSC.

Gary Brierley is President of Doctor Mole, Inc.; Todd Kilduff is President of Kilduff Underground Engineering, Inc.; and Becky Brock is President of Brock Geo-Consulting, LLC.

RELATED: Avoiding Differing Site Conditions for a Microtunneling Project – Part 1

Avoiding Differing Site Conditions for a Microtunneling Project – Part 2

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