Tunnelling Contractors, Geotechnical Risk, and Disclaimers: When Municipal Tendering Leaves No Recourse

In practice, that obligation was illusory. The tender period was just a few weeks long.  Mobilizing drilling equipment and obtaining access in a busy city intersection to drill test holes to verify subsurface conditions, all before submitting a bid, was impossible.

This scenario is increasingly common. Municipal tendering practices have settled into an inequitable pattern in which municipalities possess geotechnical data about a project site but disclaim responsibility for its accuracy, while contractors bear the financial consequences of materially different subsurface conditions they had no realistic opportunity to investigate during the tendering process. The result has been repeated exposure for tunnelling contractors, often with little legal recourse against the municipal owner. 

Tunnelling contractors must therefore approach municipal tenders fully alert to the risks created by strict site investigation clauses. Here’s how to protect yourself.

1. Insist on Geotechnical Information

Every tunnelling contractor understands that geotechnical information is essential to pricing and executing a tunnel project. That is why, in practice, municipalities will nearly always supply some form of geotechnical data during the tendering period, despite having no legal obligation to do so.

Where tender documents contain no description or information regarding subsurface conditions, it is essential that contractors request that information. If none is provided, the contractor will typically be responsible for the costs associated with adverse ground conditions. The logic is straightforward. Where a municipality makes no representations about subsurface conditions, the tunnelling contractor has no basis to complain when unfavourable conditions are later discovered. By submitting a bid, the contractor undertakes to perform the work and must determine, at the time of tendering, whether the work is practicable on the terms offered.

That said, the allocation of risk for unanticipated subsurface conditions ultimately depends on the specific terms of the contract, a point addressed further below.

2. Beware of Site Investigation Clauses

Once a municipality provides subsurface information, bidders will inevitably rely on it to price the work and plan their means and methods.  Where no alternative source of information exists, and bidders reasonably rely on the information provided, an owner cannot later demand strict contractual performance if materially different and adverse ground conditions are discovered.

For this reason, construction contracts routinely include “Site Investigation” and “Full Investigation” clauses. These provisions function as a limitation of liability. They generally state that the municipality does not warrant the accuracy of its geotechnical information and that the contractor must conduct its own investigations to satisfy itself of the site conditions before bidding.

Courts across Canada have recognized that where tight tendering windows make independent site investigations impractical or economically infeasible, owners may not be able to rely on full investigation clauses to defeat representations made during the tendering process.

That said, contractors should not assume that courts will relieve them of their contractual bargains as a matter of course. The contract remains the primary source of the parties’ rights and obligations. Courts, including the Supreme Court of Canada, have strictly enforced full investigation clauses to bar claims for extras, even where subsurface conditions materially differed from those described by the owner.

Bidders on municipal projects must therefore assess whether the potential profit justifies the blind risk of adverse subsurface conditions. Where independent verification is impossible, the only remaining protection is to price that risk into the bid. As the Supreme Court has noted, contractors reap the benefit if soil conditions are more favourable than expected, so courts often expect them to bear the cost when they are worse.

3. Claims Outside the Contract: Negligent Misrepresentation

Where strict contractual language precludes a claim for changed site conditions, a contractor may seek relief in tort by alleging negligent misrepresentation. These claims are typically grounded in allegations that the owner or its consultant provided inaccurate information and that the contractor’s reliance on that information was reasonable.

Courts have consistently held that pre-contractual representations can form the basis of a negligent misrepresentation claim even where the contract provides otherwise. The mere fact that parties have addressed an issue expressly in their contract does not, on its own, exclude the right to sue in tort.

While owners routinely rely on contractual disclaimers of liability called non-reliance clauses to defend such claims, courts have found that reliance may nonetheless be reasonable where a short tender period made independent verification of the site conditions practically impossible.

4. Pay Attention to Adjustment Clauses and Contractual Notice Periods

Some construction contracts include a mechanism to allocate the risk of unknown or concealed site conditions, referred to as an “Adjustment Clause”. These clauses, which are standard in CCDC 2 (Stipulated Price) contracts, permit adjustments to the contract price where subsurface conditions differ materially from those indicated in the contract documents, provided the owner receives timely notice.

While adjustment clauses bring some measure of balance to the allocation of risk between owner and contractor, that protection is strictly conditional. Ontario courts have routinely concluded that failure to provide notice in the prescribed form and within the required timelines is fatal to a claim for extras.

Conclusion

In its current form, municipal tendering in Ontario often leaves tunnelling contractors exposed to significant geotechnical risk while systematically limiting avenues for recovery when subsurface conditions differ materially from what was expected. Contractors must be clear-eyed about this reality. Successful bidders proactively demand available information, scrutinize site investigation clauses, consider tort-based remedies where appropriate, and comply strictly with notice requirements where contractual adjustment mechanisms exist for changed subsurface conditions.

HOW WE CAN HELP

With extensive experience in construction law, RAR Litigation advises tunnelling contractors and other industry participants on the allocation of geotechnical risk in municipal projects. Our team assists with tender review, risk assessment, and dispute resolution strategies where subsurface conditions differ materially from what was anticipated.

Contact us to discuss how RAR Litigation can support you and your business.