Economic Sustainability of Transportation Infrastructure Procurement: The Differing Site Condition Clause Debate as an Underlying Environmental Trigger to Cost Overruns

Alolote Ibim Amadi; Amadi Kelvin Chijioke

Abstract

Case law is rife with contractual disputes arising due to lack of adequate geotechnical risk containment during procurement. The use of a ‘Differing Site Conditions (DSC) clause’, implies that, in the event of encountering a subsurface/geo-environmental condition different from that which was indicated in the contract, the owner bears the additional cost for executing the work under such conditions. However, the literature indicates a divergence in industry practise, with some clients opting to allocate the liability for geotechnical risk to the contractor by incorporating exculpatory clauses in contracts. This study evaluates the dynamics of risk aversion by clients and contractors as a pervasive culture of most infrastructure projects, and how the strategic behaviour of both parties to a contract has important implications for the accuracy of the client’s final outturn cost. The study thus outlines the contractual consequences of lack of geotechnical risk containment, by weighing the arguments posed in the literature. The study findings support the view that adequate geotechnical characterisation of projects prior to contract award via the inclusion of ground investigation reports, with a further provision for DSC clause, is a key investment strategy for the sustainable procurement of road projects, necessary to avert the risk of variations and claims leading to delays and cost overruns. Keywords:Cost overruns, geotechnical risk, procurement, risk management, transportation infrastructureCite this ArticleAloloteIbimAmadi, Amadi Kelvin Chijioke.Economic Sustainability of Transportation Infrastructure Procurement: The Differing Site Condition ClauseDebate as an Underlying Environmental Trigger to Cost Overruns.Journal of Construction Engineering, Technology & Management. 2020; 10(1): 11–19p.