Embed from Getty Images
It’s typical for subcontracts to include a clause binding the subcontractor to the decisions of the project architect. Such terms help general contractors and construction managers at-risk avoid obligations to subs below that can’t be passed through to owners above. That’s a sensible and enforceable risk allocation most of the time.
But not all of the time.
Sometimes, the architect doesn’t play fairly. Sometimes, the prime contractor fights hard for itself, but not hard enough for its subs. And sometimes, a statute might provide a remedy when the subcontract does not.
On such occasions, as discussed below, subcontractors might avail themselves of an escape hatch:
If I were to tell you that unforeseen subsurface conditions — for example, wetter-than-expected soils requiring a change to a building’s foundation — resulted in a substantial cost-overrun on a publicly bid project, you’d probably say, “that’s lousy news.” In the context of that one project, I’d have to agree with you; unexpected cost increases can create uncomfortable financial, PR and political pressures for a public project’s participants, not to mention unwelcome additional costs for John Q. & Jane Q. Taxpayer.
But what if I told you that the contractor’s entitlement to increased compensation on that one project would ultimately save the government much more money on future projects? “Sounds great,” you might respond, “but I don’t believe in fairy tales.”
You don’t have to. You just have to believe in the differing site conditions (“DSC”) clause.