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Performance Specifications Issues and Problems
By Michael J. Baker, Esq.


In almost any project, there exist both performance and design specifications. Moreover, the mixing of design and performance criteria will result in a mixed or composite specification. This combination, or mixing of design and performance specifications, can create a volatile mixture when involved in disputes concerning performance.

A formalistic approach as to whether the characterization of a specification is "design" or "performance" is superficial in determining the allocation of risk. While to those in the construction profession the definitions remain clear, the application of those definitions by courts to real situations are inconsistent and can affect the allocation of risk between the owner, designer and contractor to such degree as to lead to a result not contemplated by the parties.

Brand Name Specification

A classic example of a design specification is the use of a brand name or a requirement of a brand name product. In such a situation, everything is determined by specifying the brand name, whereas, the brand name incorporates all the technical aspects of the manufacturer's specifications and construction. A change in this type of specification becomes significant when an "or equal" is amended to the brand name, allowing an alternative to the brand name. As a result, transformation into a performance specification then takes place.

However, application of this rule is simplistic and often unpredictable, and courts have decided in numerous cases that an "or equal" clause by itself does not provide complete guidance on selecting materials, rather, by the degree of discretion allowed for selecting these "equal" products. A structural engineer, or any other type of independent contractor for that matter, is best served by seeking competent legal assistance to make certain that the contractor and the owner are playing by the same rules.

Legal Consequences of Performance Specifications

As a general rule the government does not warrant the accuracy or adequacy of performance specifications, but only to a design specification, such as; detail measurements, tolerances, materials and elaborate instructions regarding how to perform the contract. True performance specifications generally fall into three basic categories:

  1. That there will be no owner's warranty of the sufficiency of the plans and specifications;
  2. The liability for design failure is shifted from the owner and designer to the contractor; and
  3. The risk arising from performance, such as the risk of unforeseen conditions or necessary changes, are shifted to the contractor.

Change Orders

Another area to be cautious in is the submission of change orders. A design specification can become a performance specification if the contractor persuades the owner to change the specification to comply with the contractor's idea. In such an instance, the contractor assumes the risk that performance under his proposed changed specification or design may be impossible.

A typical situation that can lead to legal problems later is when the architect reviews a project, only checks for conformance with the design concept and general compliance with the contract documents, then makes changes to the contract documents that may not be authorized. Thus, when the contractor proposes an alternative method of a product or design submitted within a shop drawing, he may be assuming the risk that any changes can be performed. If the change cannot be performed, or if it causes delays or impacts, it is to the contractor's account. Simply put, he who designs the product, bears the risk of performance problems and impacts.

Courts have routinely applied the doctrine of comparative fault or comparative negligence in apportioning damages resulting from defective designs in contract performance.

Recognition of Performance Specifications

It is important to note that the owner has no obligation to organize the drawings or specifications in any manner in the context of performance specifications. Therefore, it is incumbent upon the contractor to review the plans and specifications in great detail and make all necessary inquiries to clarify any ambiguities.

Particular attention should be paid to the language in the contract setting forth requirements to comply with certain performance tests.

Here are some performance type phrases:

The foregoing phrases or words used in similar effect in the specifications indicate that the owner is not warranting the proposed specification for the project. Accordingly, thorough review of the contract documents rests with the contractor.

Conclusion

The contractor is bound to build a project according to the plans and specifications. Even though there is an implied warranty that specifications, without fail, will produce a satisfactory product, this concept applies only to design specifications and not performance specifications. Since the courts are unclear and inconsistent in determining what is a design or performance specification, the bottom line is, when in doubt, ask.

About the Author

Michael J. Baker is a partner of the construction/infrastructure practice group at the Irvine, California office for the national law firm of Arter & Hadden, LLP. Mr. Baker is a recognized expert, specializing in the representation of local, national and international owners, design professionals and contractors in business and contractual matters, as well as disputes before mediators, arbitration panels and state and federal courts. This representation has included contract negotiations, bid document preparation, contract performance disputes, surety bond claims, and the full range of insurance issues and claims involving major public and private construction projects, engineering systems and specialized facilities. Mr. Baker can be reached at Arter & Hadden, LLP 949.252.3154 or via e-mail: mbaker@arterhadden.com.

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