Frequently, I am asked the difference between "design" specifications and "performance" specifications. This distinction is important because the owner generally warrants the adequacy of design specifications.
As explained in Fru-Con Construction v. United States, answering that question is not always easy. In its motion filed incident to trial, the government contended that Fru-Con could not impose an implied warranty upon the government for damages resulting from overblasting because the governments specifications were performance and not design specifications. In its argument, Fru-Con pressed a new theory of recovery, stating that if the government specifies alternative methods of performance, an implied warranty arises that the desired results can be achieved employing either method.
The court first addressed design versus performance specifications, quoting from J.L. Simmons Co. v. United States, 412 F.2d 1360, 1362 (1969), a case where the Court of Claims defined and clarified the distinction between design specifications and performance specifications.
"(Design specifications) set forth in precise detail the materials to be employed and the manner in which the work (is) to be performed, and (the contractor is) not privileged to deviate therefrom, but (is) required to follow them as one would a road map. In contrast, typical performance type specifications set forth an objective or standard to be achieved, and the successful bidder is expected to exercise his ingenuity in achieving that objective or standard of performance, selecting the means and assuming a corresponding responsibility for that selection."
The court then noted that recent opinions of the Federal Circuit have embraced the general definitions enunciated in J.L. Simmons, yet cautioned that "the distinction between design specifications and performance specifications is not absolute" and that courts should understand that "(i)t is the obligation imposed by the specification which determines the extent to which it is a performance or design, not the other way around."
Unable to cover the blast
By its motion for summary judgment, the government asserted that Fru-Con could not recover for expenses associated with overblasting because, pursuant to the contract, it designed the blasting plan. In its opposition, (Fru-Con) argued that "the concrete removal specifications in fact provide numerous detailed design requirements establishing that the specifications are design-type," and that "the detailed design requirements of the concrete removal specification left Fru-Con virtually no discretion as to how to achieve the required removal of concrete."
Considering the opposing arguments, the court held that specifying the elements that a successful blasting plan should include did not so curtail discretion that a contractor has little, if any, opportunity for ingenuity. Fru-Con retained complete discretion in the development of the blasting plan, subject only to the review and approval of the Corps.
The solicitation unambiguously assigned to the contractor the responsibility for designing and submitting a detailed blasting plan. Fru-Con executed the plan and deviated from it when deemed necessary or appropriate.
Next, the court turned to Fru-Cons argument, noting that Fru-Con had failed to cite a case that imposes warranty liability upon the government where execution of the contract could be satisfied pursuant to two alternative methods supported only by performance-type specifications. Rather, these cases contemplate impossibility or impracticability in the context of defective specifications or differing site conditions.
While noting that Fru-Con had accurately recited the proposition that "when the government provides alternate methods by which a project may be completed there is an implied warranty that either method will achieve the desired result," the court found it is nothing more than a restatement of a legal principle of limited scope. Essentially, the government warrants a prescribed method of performance against impossibility or commercial impracticability resulting from a defective design specification. The warranty of alternative methods, as contemplated in these cases, should not be imposed if recovery is founded on a non-specific performance-type specification that affords significant latitude or discretion.
I believe state DOTs will increasingly use performance specifications because it limits their responsibility for claims. As evidenced by the Fru-Con case, such specifications create greater risk for contractors.