The allocation of differing site condition risk

"Construction projects involve a great many risks. The risk that material prices will increase during construction or that the work under construction will be destroyed by fire, storm or some other act of God are just a few examples. In tunneling or other underground projects, one of the most significant risks is that the subsurface conditions encountered during construction will differ from what is expected. Each of these risks must be accounted for, managed and, ultimately, the duty of one party or the other to bear. The primary tool used to allocate the risks among the parties is the construction contract.How construction contracts allocate the risk that subsurface conditions will differ have changed substantially over the past century. Today, construction contracts typically allocate the risk through a series of provisions. The first is the differing site condition or changed condition clause. That clause, when included, typically provides that the owner bears the risk that the subsurface conditions will differ from what is indicated in the contract documents or what is reasonably expected. The second clause is one that provides that the contractor must conduct a reasonable site investigation and bear the risk of any conditions that such an investigation would reveal. The third provision includes disclaimers that are often included in geotechnical data provided by the owner (or the owner’s engineer) to the contractor which attempts to limit the information on which the contractor can rely. Because these risk-allocating devices seem to be somewhat conflicting, a brief discussion of each provides critical insight in understanding how the modern construction contract allocates the risk of differing site conditions.At the start of the 20th century, construction contracts looked substantially different than they do today. For example, one contract for the construction of a public water tunnel in Chicago, IL, drafted around 1895 contained the following clause:The contractor must take the work entirely at his own risk. No extra allowance will be made for quicksand, hardpan or boulders."