FAR 36.502—Differing site conditions.
Plain-English Summary
FAR 36.502 tells contracting officers when to include the Differing Site Conditions clause at FAR 52.236-2 in construction-related solicitations and contracts. It applies to fixed-price construction contracts and fixed-price contracts for dismantling, demolition, or removal of improvements, and it distinguishes between contracts expected to exceed the simplified acquisition threshold and those at or below it. The rule is designed to reduce pricing uncertainty and disputes by allocating the risk of unknown physical conditions at the site through a standard contract clause. In practice, this means the contracting officer must decide whether the clause is mandatory or optional based on contract type and dollar value, and then ensure the solicitation and resulting contract include the clause when required. For contractors, the clause is important because it provides a contractual path for equitable adjustment if actual site conditions differ materially from what was indicated in the contract or from what a reasonable site investigation would have revealed. For agencies, the rule helps promote fair competition, more accurate pricing, and fewer claims by making the differing site conditions process part of the contract up front.
Key Rules
Mandatory above threshold
The contracting officer must insert FAR 52.236-2 in solicitations and contracts for fixed-price construction contracts and fixed-price dismantling, demolition, or removal of improvements contracts when the expected contract amount exceeds the simplified acquisition threshold.
Optional at or below threshold
When the same types of fixed-price contracts are expected to be at or below the simplified acquisition threshold, the contracting officer may include the clause, but is not required to do so under this section.
Applies to fixed-price work
This section is limited to fixed-price construction and fixed-price dismantling, demolition, or removal of improvements contracts. It does not address other contract types or other construction-related clauses.
Clause insertion required in both places
When the clause is required, it must be inserted in both the solicitation and the resulting contract so offerors know the risk allocation before pricing and the contract contains the operative remedy after award.
Risk allocation for unknown conditions
The purpose of the clause is to address differing site conditions by shifting certain unforeseen physical site risks into a formal adjustment process rather than leaving them entirely with the contractor.
Responsibilities
Contracting Officer
Determine whether the contemplated contract is a fixed-price construction contract or a fixed-price dismantling, demolition, or removal of improvements contract, identify whether the expected amount is above or at/below the simplified acquisition threshold, and insert FAR 52.236-2 when required. The contracting officer should also ensure the clause appears in the solicitation and final contract so the risk allocation is clear before award.
Agency
Use this rule to support consistent acquisition planning and contract drafting for construction and demolition-related fixed-price procurements. The agency should ensure its templates, reviews, and acquisition personnel practices align with the mandatory or discretionary use of the clause.
Contractor
Review the solicitation for the Differing Site Conditions clause, understand the site-risk allocation before pricing, and preserve documentation if actual site conditions differ from what was represented or reasonably foreseeable. If the clause is included, the contractor must follow the contract procedures for seeking an equitable adjustment when appropriate.
Practical Implications
For contracting officers, the main day-to-day task is a threshold check: if the fixed-price construction or demolition-type contract is expected to exceed the simplified acquisition threshold, the clause is not optional and must be included.
For contractors, the presence of the clause can materially affect pricing, site investigation efforts, and claim strategy because it provides a contractual basis for adjustment when hidden or unusual site conditions are encountered.
A common pitfall is forgetting that the rule applies to both construction and fixed-price dismantling, demolition, or removal of improvements contracts, not just new construction.
Another frequent issue is failing to include the clause in the solicitation as well as the contract, which can create confusion about the risk allocation and the offerors’ pricing assumptions.
When the contract is at or below the simplified acquisition threshold, the clause is discretionary, so agencies should make a deliberate policy decision rather than treating inclusion as automatic or overlooking it entirely.
Official Regulatory Text
The contracting officer shall insert the clause at 52.236-2 , Differing Site Conditions, in solicitations and contracts when a fixed-price construction contract or a fixed-price dismantling, demolition, or removal of improvements contract is contemplated and the contract amount is expected to exceed the simplified acquisition threshold. The contracting officer may insert the clause in solicitations and contracts when a fixed-price construction or a fixed-price contract for dismantling, demolition, or removal of improvements is contemplated and the contract amount is expected to be at or below the simplified acquisition threshold.