In an unpublished opinion, the Washington Court of Appeals holds that rock was not an unanticipated “changed condition” for which a contractor could recover additional compensation when the geotechnical report warned contractors not to draw conclusions about subsurface conditions, the City disclaimed liability for expenses from unanticipated subsurface conditions, and the contract included a contingent bid item for rock excavation.
In Pacific Northwest Earthworks, LLC v. The City of Bellevue, 166 Wn. App. 1030 (Division I, February 21, 2012) (Unpublished Opinion), Pacific Northwest Earthworks, LLC (“Earthworks”) was the low bidder on a Bellevue project to excavate and install sanitary sewer lines and manholes along 500 lineal feet of roadway in the Cougar Mountain area. Included in the bidding materials was a report from GeoEngineers that analyzed the results of two drilled borings along the route. The analysis of these borings was that the material was sandstone and siltstone, which is “generally friable” (crumbles easily by rubbing with fingers), and is very soft with respect to rock hardness. The material did not meet the criteria for “rock excavation” under the WSDOT Standard Specifications, Section 7-09.3(7)(B).
GeoEngineers’ report contained a number of disclaimers, including warning contractors not to draw conclusions about the subsurface conditions based upon the analysis of two widely-spaced borings.
The City also disclaimed liability for reliance upon its representations, stating:
[T]he bidder shall examine the site of the work and ascertain for himself all of the physical conditions in relation thereto…. He will not be entitled to additional compensation if he subsequently finds the conditions to require other methods or equipment that he did not anticipate….
In addition, the contract contained a bid item for contractors to enter a price for rock excavation.
Earthworks submitted a bid for the project of $158,804 with a $2.50 per cubic yard price for rock excavation. During its excavation, Earthworks encountered material that met the definition of rock and claimed it excavated 284 cubic yards of the material. Earthworks argued that the presence of rock was unanticipated and constituted a “changed condition” entitling it to additional compensation. It requested $55,456 to cover the cost of equipment rental and extra labor. The City denied the request, and Earthworks sued for breach of contract because of the City’s failure to make an equitable adjustment to compensate Earthworks for the City’s representation of the site condition.
The City moved for summary judgment, arguing that there was no evidence of misrepresentation and, as a matter of law, there were no changed conditions entitling Earthworks to additional compensation. The trial court agreed, dismissed the case, and awarded the City attorneys’ fees and costs. On appeal, the trial court was affirmed, stating:
Where plans or specifications for an excavation contract lead a contractor to reasonably believe that certain conditions exist and may be relied upon in making a bid, the contractor will be entitled to compensation for extra work or expense made necessary by the unanticipated condition. Reliance is reasonable if the contractor has made a reasonable investigation under the circumstances. Where no such representation exists, or reliance is not reasonable, a contractor who agrees to do a job for a fixed sum will not be entitled to additional compensation because of unforeseen difficulties.
The Court found that both the City and GeoEngineers warned bidders against relying upon the geotechnical report, and the City specifically disclaimed liability for expenses from subsurface conditions unanticipated by the contractor. Furthermore, the geotechnical report warned contractors not to draw conclusions about subsurface conditions based upon two widely-spaced borings, and the contract included a contingent bid item rock excavation. The Court found that the City foresaw the possibility that harder rock might be present, and Earthworks submitted its bid for exactly that.
For excavation contracts, the Court limited recovery of additional compensation for unforeseen conditions to situations where the “condition complained of could not reasonably have been anticipated by either party.” The Court affirmed the trial court’s decision that Earthworks was not entitled to additional compensation because it found that the possibility that Earthworks would encounter rock was foreseeable.