This article was featured in the March 2025 edition of the Utility Contractors Association of New England, Inc.’s Construction Outlook.
In Massachusetts, public building construction projects under M.G.L. c. 149, construction manager at risk construction projects under M.G.L. c. 149A, public works construction projects under M.G.L. c. 30, § 30M, and design-build public works projects under M.G.L. c. 149A are required to include a statutory provision relating to differing subsurface conditions. That statutory provision – set forth in M.G.L. c. 30, § 39N – provides as follows:
If, during the progress of the work, the contractor or the awarding authority discovers that the actual subsurface or latent physical conditions encountered at the site differ substantially or materially from those shown on the plans or indicated in the contract documents either the contractor or the contracting authority may request an equitable adjustment in the contract price of the contract applying to work affected by the differing site conditions. A request for such an adjustment shall be in writing and shall be delivered by the party making such claim to the other party as soon as possible after such conditions are discovered. Upon receipt of such a claim from a contractor, or upon its own initiative, the contracting authority shall make an investigation of such physical conditions, and, if they differ substantially or materially from those shown on the plans or indicated in the contract documents or from those ordinarily encountered and generally recognized as inherent in work of the character provided for in the plans and contract documents and are of such a nature as to cause an increase or decrease in the cost of performance of the work or a change in the construction methods required for the performance of the work which results in an increase or decrease in the cost of the work, the contracting authority shall make an equitable adjustment in the contract price and the contract shall be modified in writing accordingly.
This provision is of particular importance to public works contractors, whose scope of work typically entails various forms of earth work, depending on the project. As better weather approaches, now is as good a time as any to review critical principles relating to this important statutory mechanism.
First, contractors should remember that Section 39N specifically enables awarding authorities to “adopt reasonable rules or regulations in conformity with [the statutorily-required] paragraph concerning the filing, investigation and settlement of such claims.” As a result, contractors should not simply assume that their rights and obligations pertaining to differing subsurface conditions begin and end with the statutory contract language pasted above. It is imperative to review your contract to determine if the awarding authority imposed any additional related requirements, including with respect to notice and submission of claims based on differing subsurface conditions. In this regard, the Massachusetts Department of Transportation (“MassDOT”) includes additional requirements in its Standard Specifications, including without limitation, requirements to notify the Engineer and describe in “full detail” the conditions encountered “promptly, and before such conditions are disturbed.” MassDOT’s Standard Specifications go on to state that a contractor’s differing subsurface conditions claim shall not be allowed if the contractor failed to provide the “detailed notice specified” or disturbed the conditions prior to the Engineer’s investigation. Many municipalities incorporate the requirements of the MassDOT Standard Specifications in their contracts.
Second, Massachusetts courts have recognized that statutory rights prevail over conflicting contract provisions. As a result, while an awarding authority is free to impose “reasonable rules or regulations in conformity with [the statutorily-required] paragraph concerning the filing, investigation and settlement of such claims,” contractors should keep in mind that those rules or regulations should not reduce a contractor’s statutory rights under M.G.L. c. 30, § 39N. Contractors should take note of provisions that attempt to “whittle” away or otherwise reduce a contractor’s statutory rights. These can take many forms, including disclaimers regarding sub-surface information provided in the specifications, indications that estimated quantities are for “bid comparison purposes” only, and language to the effect that the contractor has familiarized itself with the project site. The Massachusetts Appeals Court has made clear that Section 39N is designed to protect both the awarding authority and the contractor by “remov[ing] unknown risks from competitive bidding and [] obtain[ing] favorable bid prices stripped of such risk factors.” This keeps costs down for the public while, at the same time, “assuring [contractors] that they can be compensated by formulae for overcoming sub-surface conditions and for extra work not anticipated in their bid estimates.” As a result, contract provisions that conflict with the statute could operate to defeat the very purpose of the statute. This is typically a fact-intensive analysis.
Third, the Massachusetts Supreme Judicial Court has recognized that the statute covers both “Type I” and “Type II” differing conditions. “Type I” differing conditions refer those conditions that “differ substantially or materially from those shown on the plans or indicated in the contract documents,” while “Type II” conditions are those that differ substantially or materially from those “ordinarily encountered and generally recognized as inherent in work of the character provided for in the plans and contract documents.” Contractors should be mindful of both types when determining whether they have encountered conditions that fall within the scope of the statute. Even if the actual conditions do not differ substantially or materially from what was shown on the plans or indicated in the contract documents, a contractor may still have a valid differing conditions claim depending on the facts of a given scenario.
Fourth, contractors should understand that the statute explicitly contemplates an equitable adjustment to the contract – either upward or downward – when the differing conditions cause “an increase or decrease in the cost of performance of the work or a change in the construction methods required for the performance of the work which results in an increase or decrease in the cost of the work.” As a result, contractors should not assume that they will automatically see an increase to their contract sum simply because they have encountered differing conditions; in some circumstances, the costs of performance may actually decrease. It is also important for contractors to remember that, when it comes to determining the “cost of performance,” as-bid unit prices for specific items may not reflect the actual costs of performance associated with those items. When encountering differing conditions that increase the cost of performance, contractors should be prepared to document and substantiate those cost increases as well as demonstrate why bid prices may not serve as an appropriate benchmark for costs. Contractors should also anticipate that discussions of differing subsurface conditions claims also sometimes involve discussions of “Variations in Estimated Quantities” clauses in contracts. As many of you are aware, MassDOT’s Standard Specifications include a provision addressing negotiation of pay items in circumstances where “the actual quantity of a pay item varies by more than 25% above or below the estimated quantity stated in the Contract . . . .” The potential interplay between the statutory differing conditions clause and a variation in estimated quantities clause will typically depend on the facts and circumstances of a given situation.
Lastly, practically speaking, even if the contract does not include additional notice or claim submission requirements specific to differing conditions (like MassDOT’s Standard Specifications), contractors should nevertheless be prepared to notify the appropriate persons of the actual conditions encountered and the possibility of their impacts on the contract price and/or time. Contractors should also track their costs and time impacts, reserve the right to recover those impacts, and keep the awarding authority updated. These measures can help the awarding authority investigate and monitor the situation, as well as to direct how the contractor should proceed. In this regard, contractors should be sure to obtain directives in writing by duly authorized or designated representatives before proceeding with work relating to differing conditions.
In sum, the differing subsurface conditions statute – M.G.L. c. 30, § 39N – is an important feature of public construction projects in Massachusetts. Contractors are well-advised to be fluent in the ins-and-outs of the statute and recognize the various issues that can arise when they encounter differing subsurface conditions. Failure to comply with applicable requirements can be costly, including for contractors who work in good faith to overcome actual conditions they did not anticipate or create in the first place.
