About the situation when hazmat is discovered

Construction & Evaluation
1

Hi, I’m stuck on this question from Practice Exam 1.

The general contractor is about to start work on a new construction retail building. The excavation subcontractor began work a week ago and just discovered an underground storage tank that was not included in any of the contract documents. After reviewing with the local AHJ, the tank must be removed according to a specific procedure before the work can proceed further. The parties are using the standard suite of AIA contract documents for the project – AIA A101, A201, and B101.

Question:
Which of the following is true about how the cost for remediation will be handled?

a. The contractor will pay the cost and the owner will reimburse the contractor
b. The contractor will pay the cost out of their contingency
c. The owner is responsible for the cost and will pay it directly

The correct answer was a, but I’m not sure who actually contracts with the third party who performs the hazardous materials removal – the contractor or the owner?
And following that, who actually pays the third party – the contractor or the owner?

According to AIA A201 §10.3.3:

When hazardous materials or substances, not addressed in the Contract Documents, are required to be removed or disturbed to complete the work, the Contractor and Owner shall negotiate how to complete that new work. If the Contractor agrees to perform this work, a Change Order shall be negotiated, potentially adjusting the Contract Sum and Contract Time. Such new work shall be at the sole direction of the Owner.

Because of the last sentence (“at the sole direction of the Owner”), I thought it meant the Owner would hire and pay the third party directly.

So here are my questions:

  1. Who will contract with the third party (hazmat removal company)?
  2. Who will pay the third party?

Also, can you explain why the answer is (a)?

2 Likes
2

Welcome to the ARE Community @nkim180609! Thanks for your question.

Per answer explanation, refer to A201 § 10.3.6:

If, without negligence on the part of the Contractor, the Contractor is held liable by a government agency for the cost of remediation of a hazardous material or substance solely by reason of performing Work as required by the Contract Documents, the Owner shall reimburse the Contractor for all cost and expense thereby incurred.

This is because the contractor is in control of the site during construction and typically pays for work that occurs, even if it would be reimbursed by the owner. Therefore, the contractor would hire the hazmat removal company, pay them directly, then be reimbursed by the owner.

I’m not sure where you found that quote, but that is not indicated in A201 §10.3.3.

See A201 § 10.3 Hazardous Materials and Substances for more context on this topic as a whole.

Hope this helps!

Kiara Galicinao, AIA, NCARB
Product Coordinator
Black Spectacles