This recent Court of Federal Claims decision involves a USDA contract for the construction of a vegetable laboratory in Charleston, South Carolina. The contractor was terminated for default and the bonding company, Travelers Casualty and Surety of America, took over under the terms of the performance bond.
While there is nothing particularly noteworthy about the Court’s lengthy recitation of the facts, the Court did restate some important rules governing the determination of defective specifications. The Court referred to one of the landmark cases in federal government contracting, Spearin v. U.S., where Justice Brandeis wrote the Supreme Court opinion that established the “Spearin Doctrine’ (a contractor will not be liable to an owner for loss or damage which results solely from insufficiencies or defects in plans and specifications). As the Supreme Court explained:
[I]f the contractor is bound to build according to plans and specifications prepared by the owner, the contractor will not be responsible for the consequences of defects in the plans and specifications. This responsibility of the owner is not overcome by the usual clauses requiring builders to visit the site, to check the plans, and to inform themselves of the requirements of the work . . . . In Spearin, the Supreme Court held that contract provisions “prescribing the character, dimensions and location of” a structure to be constructed “imported a warranty that, if the specifications were complied with, the [structure] would be adequate.”
The Court also discussed the difference between design and performance specifications and stated that design specifications dictate the “how” governing a contractor’s tasks, in contrast to performance specifications, which concern the “what” that is to be done. Distinguishing design from performance specifications is not always easy, and, indeed, a contract may have more than one type, but the precedents have established clear guideposts. The relevant inquiry concerns the quality and quantity of the obligations that the specifications impose. Hence, “detailed measurements, tolerances, materials, i.e., elaborate instructions on how to perform the contract” qualify as design specifications. In other words, where the specifications are described in precise detail and permit the contractor no discretion, they are “design.” In contrast, where the specifications set forth simply an objective or standard and leave the means of attaining that end to the contractor, they are “performance.”
The Court pointed out that the Spearin implied warranty doctrine has its limits. The warranty does not extend to performance specifications which “merely set forth an objective without specifying the method of obtaining the objective.” Only if design specifications are “so substantially deficient or unworkable as to constitute a breach of the contract” may the contractor recover.
The pertinent facts in this case involved contract documents that did not require that the concrete aprons have any particular slope for their north sides. The Court ruled that the absence of slope information for erosion control devices was not a patent (obvious) ambiguity, as it would not be apparent to a reasonable contractor that the slope would have any relevance. The Court has found that the subcontractor reasonably followed the design drawings in its initial construction of the concrete aprons, and that these aprons as initially constructed were adequate to control erosion. The defect in construction claimed by the government — that a 2:1 slope was not accomplished on the north sides — was unrelated to erosion control and was due entirely to the government’s design drawings. The Court has found that the subcontractor’s work in constructing the concrete aprons was covered by the implied warranty that specifications are free from design defects. As a consequence, the government’s order that the subcontractor remove and reconstruct the north sides of these aprons was a constructive change to the contract, entitling LPL to an equitable adjustment. See the Court’s Opinion in Travelers Casualty and Surety of America v. United States, CFCL No. 02-584C, November 22, 2006.