“Design” vs. “Performance” Specifications
The difference between a “design specification” and a “performance specification” is a commonly overlooked nuance that contractors must take into account as they attempt to manage their risk. This distinction was most notably set forth by the United States Supreme Court in the case of United States v. Spearin, 248 U.S. 132, 137 (1918), and is commonly referred to as the Spearin doctrine. Under the Spearin doctrine, a design specification sets forth the detail, manner, and materials to be used, as opposed to a performance specification which describes the desired end result, but gives the contractor discretion to decide how best to complete the work. The Spearin doctrine generally holds that if 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. Furthermore, this requirement generally cannot be overcome by customary clauses requiring contractors to visit the site, to check the plans, to inform themselves of the requirements of the work or even to assume responsibility for the work until completion and acceptance. The Spearin doctrine has been adopted by most, if not all, states, including Nebraska.
As a general rule, where a contractor enters into a contract to construct a building or perform a given undertaking, the contractor assumes the risks of performing the contract. However, the Nebraska Supreme Court has stated, “where [the contractor] makes a contract to perform a given undertaking in accordance with prescribed plans and specifications, this rule does not apply.” Lindsay Mfg. Co. v. Universal Sur. Co., 246 Neb. 495, 506, 519 N.W.2d 530, 539 (1994). Where the contract provides the contractor with design specifications, and the contractor follows them as prescribed by the owner, the contractor “remains liable only for defects resulting from improper workmanship or other fault on his part.” Id. at 506-07, 519 N.W.2d at 540.
Whether a contract contains design specifications or performance specifications depends upon the facts of the situation, and a project may include both design and performance specifications for different features. In order to differentiate the two, courts often examine the extent to which the owner furnished the contractor with materials, dimensions, or step by step instructions for the manner of the work to take place. If the contractor has been left with little or no discretion on how to complete the work, it is likely that such instructions are design specifications, and the contractor is not at risk of liability if the instructions are properly executed. However, if the owner merely sets out general requirements and relies on the contractor’s knowledge and expertise to build a project, the contractor will likely be liable for all defects or issues that arise in the construction.
Parties to a construction contract should be aware of whether the agreement contains design specifications or performance specifications, and be mindful of the implications. If you have questions about your potential risks or liabilities under a construction contract, please do not hesitate to contact one of the members of Koley Jessen’s Construction Industry Practice Area.