Latent conditions

Latent conditions usually show up once excavation, piling or early site works begin. When the contractor finds one, most contracts require written notice to the superintendent as soon as possible, and before the condition is disturbed any further.

The superintendent then decides whether the condition differs materially from what a competent contractor could reasonably have anticipated at tender. That test usually looks at the site investigation reports, the tender documents, an inspection of the site and anything else a prudent tenderer would have checked.

If the condition could not reasonably have been anticipated, the contractor can usually claim the extra work as a variation and the delay as an extension of time. If it could have been anticipated, the cost and time stay with the contractor.

For a deeper look, read Latent Conditions: Who Carries the Risk of What Is Underground.

Both main Australian standard contracts have a dedicated latent conditions clause with a notice step, a superintendent assessment and a path to extra cost and time. Principals often amend these clauses to shift the risk to the contractor, so always read the special conditions as well.

• AS 4000-1997. Clause 25, Latent conditions.

• AS 2124-1992. Clause 12, Latent conditions.

• Your contract. Check the special conditions for amendments that delete the clause, narrow what counts as a latent condition or make the contractor rely on its own investigations.

• Rock or groundwater. Rock harder or higher than the geotechnical report showed, or groundwater where none was expected.

• Contamination. Asbestos in fill, hydrocarbons or other contaminated soil not identified in the site information.

• Buried services and structures. Old footings, tanks, abandoned services or redundant pipes that do not appear on any drawing or dial-before-you-dig plan.

• Existing building conditions. On refurbishment work, concealed structural defects or hazardous materials behind linings.

• Stop and make safe. If the condition is a hazard, such as asbestos, contamination or a live service, stop work in the area and follow your safety procedures before anything else.

• Notify in writing. Send written notice to the superintendent describing the condition, where it is and why you consider it a latent condition. Do it the same day where you can.

• Record the evidence. Photos, survey levels, test results, geotechnical advice and site diary entries made at the time are the backbone of any claim.

• Compare with the tender information. Note exactly how the condition differs from the site investigation reports and drawings you tendered on.

• Wait for direction. Most contracts expect the superintendent to direct how to deal with the condition. Treat that direction as a variation and price it promptly.

• Track the delay. If the condition affects the critical path, give notice of delay and lodge an extension of time claim within the contract time limit.

• Missing the notice deadline. Late notice can sink a claim even when the condition is genuine. Notify in writing on the day you find it.

• Not recording the evidence. Take dated photos, measurements and survey data before anything is moved or removed, and record it in the site diary.

• Assuming the standard clause applies. Many contracts amend or delete it and put all latent condition risk on the contractor.

• Pricing the work before notifying. Notify first, then price. A variation quote is not the same as the notice the clause requires.