The New MnDOT Specifications: Heads I Win, Tails You Lose
The extensive revisions to MnDOT’s standard specifications, which are now in effect, were intended to shift more risk onto the contractor, increase formal scheduling requirements, limit the contractor’s recovery for MnDOT’s breaches of contract, and stiffen the notice and claim requirements for extra compensation.
The new specifications are intended to allow MnDOT to have it both ways. The best examples of how friendly these provisions are to MnDOT are those that address how bidders review and rely on information provided by MnDOT. Section 1205.2, entitled “Additional Information,” notes that MnDOT “may” make available soil boring logs, record drawings and results of other investigations. Section 1205.1 requires bidders to review this “additional information” as part of their pre-bid investigation and charges them with the knowledge of that information even if MnDOT does not include it in the bid package. Bidders may actually have to request the information from the MnDOT, and they fail to do so at their peril.
In Section 1205.2, however, MnDOT denies any responsibility for inaccurate or misleading data in that same information. The section states that the additional information is not part of contract, is for information only, and is without warranty of accuracy or reliability. The contractor cannot rely upon MnDOT’s estimated quantities.
Contractors must consider this information when bidding, yet contractors cannot rely upon the information.
Sections 1205.1 and 1205.2 are intentionally inconsistent. Contractors must consider the additional information, but cannot rely on it. If a contractor does not rely, and the information is accurate, MnDOT can argue that the contractor should have relied on it. If the contractor does rely, and information is inaccurate, MnDOT can argue that the contractor should not have relied on it. Heads I win; tails you lose.
MnDOT Cannot in Fact Have it Both Ways
Contractors have a powerful argument that MnDOT cannot have it both ways and should be responsible for the information it provides. The specifications also include a “differing site conditions” clause at Section 1402.2. That clause entitles the contractor to extra money and time for subsurface and conditions that differ materially from those indicated in the contract. The clause encourages contractors to rely on information provided by MnDOT and promises to compensate them if the information is inaccurate.
The differing site conditions clause is mandated by federal law to reduce overall public spending on construction. In Zontelli & Sons, Inc. v. City of Nashwauk, the Minnesota Supreme Court recognized that the purpose of a "differing site conditions", or changed conditions, clause is to reduce the bidding practice of adding “contingency” amounts into bids to cover the risk of encountering unanticipated adverse site conditions. As another court stated in Metropolitan Sewerage Commission v. R. W. Construction Co.:
The changed conditions clause is a contractual innovation designed for the mutual benefit of both the Government and the contractor. The Government benefits by the use of such a clause because the contractor no longer needs to add large contingency sums to his bid in order to cover the risk of encountering adverse subsurface conditions. The contractor benefits because he is awarded extra compensation if adverse subsurface conditions are encountered which materially differ from those indicated in the contract. Thus, much of the gamble is taken out of underground construction. The Government does not have to pay the contractor a windfall price when only normal conditions are encountered, and the contractor suffers no disaster when unanticipated conditions arise.[i]
Because of this federal mandate and the public purpose behind it, the differing site conditions clause overrides inconsistent contract provisions that try to renege on its promise. MnDOT, not the contractor, should bear the risk of differing site conditions.
By explicitly stating in Section 1205.2 that the “additional information” is not part of the bidding documents, MnDOT may argue that the information is not a part of the contract and therefore cannot be the basis of a differing site conditions claim. The Minnesota Supreme Court, however, in Stanton v. Morris ruled in favor of the contractor when earlier addressing a similar argument: “[The survey map’s] importance to the vital issue in the case [whether the bidder was misled] does not depend upon its being a part of the contract, but upon the fact that the representations thereon were intended to and did induce defendant to make its bids and execute the contract.”
While it is always difficult to predict what a court will do, Minnesota courts will likely find that the differing site conditions clause prevails over the disclaimers in Section 1205.2. A contractor should be allowed to recover the extra costs and time caused by inaccuracies in the “additional information” that MnDOT furnishes under its new specifications.
If you have any questions about the new MnDOT specifications, please contact your usual Stinson Leonard Street LLP attorney.