The contract specifications will often instruct the contractor to do more than simply build a particular building element using certain materials. While sometimes the specifications will simply instruct the contractor to build an element in a particular fashion, other times the specifications will instruct the contractor to construct a building element in a manner that achieves certain objectives. The difference between these two types of specification is important because it dictates the level of risk a contractor is assuming.

A performance specification sets forth the standard of performance to be achieved. The contractor is expected to exercise it judgment in how best to achieve the performance standard. A basic example of a performance specification is if a specification states that the contractor shall construct a HVAC system shall maintain a certain level of temperature and humidity level, but leaves the design of the system necessary to achieve the required temperature and humidity levels up to the contractor performing the work.

Conversely, a design specification describes in detail the materials and equipment the contractor must use and the manner in which the work must be performed. As one court put it, “design specifications state how the contract is to be performed and permit no deviations. Performance specifications, on the other hand, specify the results to be obtained, and leave it to the contractor to determine how to achieve those results.”

This distinction is critical because when a contractor agrees to design a system to meet a performance specification, it warrants that the system will perform as promised. Conversely, a contractor that designs a system simply to meet the design specification guidelines makes no warranty that the system will perform in any particular way. In fact, under the so called Spearin Doctrine, which gets its name from a 1918 Supreme Court decision United States v. Spearin, a contractor who has constructed a system according to a design specification has a defense to any claim that the system is not performing as intended.

The Spearin Doctrine applies onto to design specifications. Often, determining whether a specification is a performance versus design specification is difficult as a specification may blend elements of both. In order to differentiate between performance versus design specifications, courts look to the level of discretion that exists within the given specification. A contractor arguing that a specification is a design specification – and thus subject to the Spearin Doctrine – must show that the specification “does not permit meaningful discretion.”

Specifying a certain manufacturer of a product alone is not depositive of whether a specification is design rather than performance, especially when a specification permits substitution of a specified product with “an approved equal.” In determining whether a specification is design over performance, courts also look to how much oversight the owner exercised over the contractors work and whether the specifications lay out the contractors means and methods of contraction.

Additionally, the difference between design and performance specification and the liabilities each creates is of particular importance to design builders because specifications in design build contracts are performance specifications. Therefore, design-build contractors should not only confirm that the system is capable of being constructed to perform as required, but also that it can be constructed a price acceptable to the design-build contractor. A design-build contractor that learns after contracting that although the system is capable of construction, albeit at an exorbitant price, will not be entitled to an adjustment in the contract price. Moreover, if they are financial incapable of constructing the system at the price necessary for it to perform, it is at risk for a bond claim.

 

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