JRCruz Corp. v. Dep't of Design and Construction
OATH Index No. 123/07, mem. dec. (Dec. 20, 2006)
Petitioner sought review of the Department’s denial of a
claim for incurred costs due to an unanticipated subsurface
condition. The Board found that the condition was
foreseeable and manageable had petitioner used due
diligence in investigating the area of construction.
_________________________________
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NEW YORK CITY OFFICE OF
ADMINISTRATIVE TRIALS AND HEARINGS
CONTRACT DISPUTE RESOLUTION BOARD
In the Matter of
JRCRUZ CORP.
Petitioner
- against DEPARTMENT OF DESIGN AND CONSTRUCTION
Respondent
_________________________________
MEMORANDUM DECISION
KARA J. MILLER, Administrative Law Judge/Chair
KENNETH JOCKERS, Deputy General Counsel, Mayor's Office of Contracts
JACK MINOFF, Prequalified Panel Member
INTRODUCTION
Presently pending before the Contract Dispute Resolution Board ("CDRB" or "the
Board") is the petition of JRCruz, Corp. (“JRCruz"). JRCruz is seeking compensation from
respondent, the Department of Design and Construction (“DDC”) in relation to contract number
20040224184 (“the contract”). JRCruz seeks $318,019.18 for additional costs related to an
unforeseen subsurface condition. DDC denied the above claim on June 22, 2005. Petitioner
appealed this denial to the Comptroller on October 12, 2005. The Comptroller denied JRCruz’s
claim on May 26, 2006. In accordance with Procurement Policy Board (“PPB”) rules and
Article 27 of the above contract, JRCruz invoked the jurisdiction of this Board to resolve the
contract dispute at issue. The Board heard oral arguments on November 9, 2006, at which time
the record was closed. After considering the parties' submissions, the Board denies JRCruz’s
claim for the reasons provided below.
BACKGROUND
This dispute arises out of a contract between JRCruz and DDC to reconstruct the
combined sewers on Fort Hamilton Parkway and 92nd Street in Brooklyn, which included
installing a concrete chamber (“the Chamber”). The contract required petitioner to inspect the
area before making a bid, and to make a thorough investigation before imposing a method of
-3construction (Information for Bidders § 8(A)). The contract also required petitioner to avoid
damage to existing structures and maintain an 11-foot traffic lane for the duration of construction
(Addendum No. 4 § 1.06.29(11)(2)).
Included in the pre-bid materials provided by DDC was Contract Drawing Sheet 4, “Plan
and Profile of Ft. Hamilton Parkway,” (“Sheet 4”) which depicts a 54-inch sewer that clears the
chosen location of the Chamber by approximately 5 feet. Sheet 4 states, “accuracy of the utility
data is not guaranteed, nor is there any guarantee that all existing utilities and substructures,
whether functional or abandoned, are shown on this map” (Contract Drawing Sheet 4). Also
included in the pre-bid materials was Contract Drawing Sheet 1 (“Sheet 1”), which states that
“The exact location of existing sewers is unknown, but is plotted from the best available
information. However, accuracy is not guaranteed. The contractor shall determine the exact
location.” (Contract Drawing Sheet 1).
On April 1, 2005, during the construction of the Chamber, petitioner discovered that the
54-inch brick sewer is approximately 7 feet northeast of the location shown on Sheet 4. The
sewer encroaches 28 inches into the proposed location of the Chamber. This discovery halted all
work. As of the date of the argument before this Board, petitioner claimed to have incurred
$318,019.20 in extra work costs associated with the mistaken sewer location (Pet. Book 1).
Petitioner sought reimbursement for the extra work, claiming that the discrepancy in the
location was an unanticipated subsurface condition, which materially differed from that depicted
in the contract documents and from what could be determined by reasonable investigation. DDC
denied petitioner’s request for reimbursement finding that the subsurface condition did not
materially differ from the contract drawings. Furthermore, the drawings contained disclaimers as
to their accuracy and petitioner was contractually required to do its own investigation of
subsurface conditions.
DISCUSSION
As a general proposition, “clear, complete writings should generally be enforced
according to their terms.” W.W.W. Associates, Inc. v. Giancontieri, 77 N.Y.2d 157, 162, 565
N.Y.S.2d 440, 443 (1990).
Contract provisions requiring a contractor to do independent
investigations, coupled with specifications stating contract drawings are not definitive, have been
held to be valid. Owners Realty Management & Construction Corp. v. Bd. of Education, 192
A.D.2d 471, 596 N.Y.S.2d 416 (1st Dep’t 1993) (claim for additional compensation denied where
-4bidders were warned terms of the contract were only approximate quantities and each bidder was
responsible for making a pre-bid inspection). Contractors must not necessarily rely solely on
contract plans. Due diligence requires contractors to examine contract project specifications and
investigate areas and conditions relevant to construction. Barash v. Bd. of Education, 226 A.D.
249, 235 N.Y.S. 30 (1st Dep’t 1929), aff’d, 255 N.Y. 587 (1931).
The contract in question repeatedly required the contractor to do its own investigation of
the area prior to bidding and prior to choosing a method of construction. Indeed, one section of
the contract places an affirmative duty on the contractor by stating,
The Contractor admits [it] has carefully examined the location
of the work . . . has inspected the public records of various City
Departments having cognizance and control of the City’s water
pipes, conduits and sewers, and [it] has made further personal
inspection and investigation as [it] deemed proper to determine
the correctness of the information so obtained . . . All of the
aforementioned investigations must be performed prior to the
start of construction and the cost thereof shall be deemed
included in the bid for all items of work.
DDC Standard Sewer Specifications § 1.06.13. The Contract also contains provisions that bar
claims for damages for extra work resulting from reliance on the accuracy of public records,
reports, or information. Specifically, the contract states,
…the City does not ensure accuracy of such records, reports or
information, and [the contractor] agrees [it] will not make any
claims against the City for damages or extra work caused or
occasioned by [its] relying upon such records, reports or
information furnished by any City Department or any
companies, either as a whole or in part.
DDC Standard Sewer Specifications § 1.06.13. Respondent argued that that contract explicitly
places the onus on the contractor to conduct a thorough inspection. Moreover, the express
disclaimers regarding the accuracy of the drawings should be given great weight.
Where a construction contract between the government and an individual describes
existing conditions affecting the work to be done, as well as an exculpatory clause relieving the
government of liability, and where the contract requires personal inspection of the contract site,
liability may attach to the government only if the actual conditions are not represented and (1)
inspection would have been unavailing to reveal the incorrectness of the representations, or (2)
the representations were made in bad faith. Grow Construction Co., Inc. v. State of New York, 56
-5A.D.2d 95, 98, 391 N.Y.S.2d 726, 728, (3d Dep’t 1977); Foundation Co. v. State of New York,
233 N.Y. 177, 185, 135 N.E. 236, 238 (1922); American Wrecking Corp. of New Jersey v. Dep’t
of Sanitation, OATH Index No. 229/04, mem. dec. at 7 (Dec. 22, 2003).
Petitioner asserted that prior to construction, it investigated all of the available
information regarding the sewer in accordance with the contract, including examining available
“as built” records for city-owned facilities on the project site, taking measurements of all existing
surface features, and investigating elevations and locations of inlet and outlet sewers. There
were no discrepancies between petitioner’s individual findings and the contract documents.
Thus, petitioner argued that a reasonably prudent contractor would conclude the contract
drawings were accurate.
Petitioner further denied responsibility for determining the exact location of the sewer,
given the sewer’s extreme depth below street level and the fact that the sewer was active.
Because the sewer was built on a radius and is approximately 46 feet deep, petitioner maintained
that it was impossible to ascertain the sewer’s exact location. The only method of determining
the exact location of the sewer that petitioner was aware of, was excavating an exploratory test
hole to uncover the sewer. Petitioner argued that this would not have been the typical or
expected procedure for a contractor to follow because of the expense and its belief that a test
hole would have threatened the contractual obligation not to damage any of the surrounding
structure, so it was not done. See Addendum No. 4 § 5.39.4.
Respondent argued that petitioner did not conduct a proper inspection. The contract
language was intended to require a pre-bid survey of the premises, including inspection of traffic
conditions, physical parameters, and other surface conditions.
Respondent asserted that
petitioner should have conducted a more thorough post-bid investigation, which would include
learning the exact location of the sewer before formulating its construction plans (See Contract
Drawing Sheet 1).
Respondent indicated that another method for calculating the location of the sewer, other
than excavating a test hole in the pre-bid process, would have been appropriate under the
circumstances. This alternative method would involve lowering equipment and men into the
manhole to physically measure the sewer. Respondent argued that despite the unpleasant nature
and expense of conducting such tests, this is a known method of measuring a sewer built on a
radius.
When questioned as to the feasibility of the above testing procedure, petitioner
-6maintained it was unfamiliar with such a method. Petitioner contended that it did not know that
this was a viable option because DDC never advised them about it. It did not, however, ever
inquire of DDC or any other City agency as to how it could have properly measured the curved
sewer.
The contract put petitioner on notice of his duty to acquire all information pertinent to
construction, stating that,
Bidders . . . will be conclusively presumed to have full
knowledge of any and all conditions on, about or above the
site relating to or affecting in any way the performance of
the work to be done under this contract which were or
should have been indicated to a reasonably prudent bidder.
Information for Bidders § 8(A). Petitioner was aware that the sewer was curved prior to
bidding on the contract. It should have known that it was impossible to determine the sewer’s
exact location by measuring the distance between surface objects. Nevertheless, petitioner failed
to address this issue, and sought no guidance from DDC on the matter. Petitioner was not
constrained by its pre-bid inspection. Indeed, it had an additional opportunity to conduct a more
thorough inspection post-bid, but failed to do so. Accordingly, the mistaken location of the
sewer was not an unanticipated subsurface condition, it was an undetermined condition that upon
further inspection could have been ascertained. Respondent did not guarantee the location of the
sewer, instead it placed the burden of inspection and calculation on the contractor. See DDC
Standard Sewer Specifications §1.06.13; Contract Drawing Sheet 1. A reasonably prudent
contractor would have established the exact location of the sewer before attempting to install the
Chamber.
-7Accordingly, petitioner’s claim for compensation for extra work is denied.
ALL CONCUR.
KARA J. MILLER
Administrative Law Judge/Chair
December 20, 2006
APPEARANCES:
TREACY SCHEAFFEL MOORE & MUELLER
Attorneys for Petitioner
BY: GARY J. MUELLER, ESQ.
MICHAEL A. CARDOZO, ESQ.
NYC Corporation Counsel
Attorneys for Respondent
BY: BARBARA PEABODY, ESQ.