One of the basic principles of construction law is the Spearin doctrine, which provides the following: If a contractor is bound to build according to the plans and specifications prepared by the owner, the contractor will not be responsible for the defects in the plans and specifications. More specifically, when the government contracts for supplies to be manufactured or a building constructed in accordance with the government design specifications, there is an implied warranty that if the specifications are followed, a satisfactory product will result. If the warranty is breached, i.e., the specifications are defective, the plaintiff is entitled to damages equal to the amount reasonably expended in trying to comply with the defective specifications.
Important for contractors to note, however, is that liability attaches only if the contractor relies on government “design specifications” and not merely “performance specifications.” Government specifications will be deemed “design specifications” where (1) the government sets forth in precise detail the materials to be employed and the manner in which the work is to be performed and (2) the contractor is not privileged to deviate from those specifications. Examples of design specifications include detailed measurements, tolerances, materials, and elaborate instructions on how to perform the contract. By contrast, performance specifications merely set forth an objective to be achieved, and the successful bidder is expected to exercise its ingenuity in selecting the means to achieve that objective.
In addition, for liability to attach, the contractor must comply with the design specifications. If a contractor complies with the government’s defective design specifications, the contractor should not be found liable for any ensuing loss arising from those defective specifications and should be able to recover damages equal to the amount expended in trying to comply with the defective specifications.
In Martin Const., Inc. v. U.S., 102 Fed. Cl. 562 (2011), the U.S. Army Corps of Engineers (the “Corps”) entered into a contract with Martin Construction, Inc. (Martin) for the construction of a marina, a concession building, a parking lot, and an access road on the northern shore of Lake Sakakawea in Fort Stevenson State Park in Garrison, North Dakota. To construct the Fort Stevenson Marina, the contract required Martin to build a cofferdam to restrain the water from Lake Sakakawea which would allow Martin to excavate the marina under dry conditions. A cofferdam is a watertight enclosure used for foundation construction in waterfront areas. Water is pumped out of the cofferdam allowing free access to the work area. The contract was originally scheduled to be completed on September 20, 2008, but due to three modifications that were issued on the project, the revised completion date was October 11, 2008. After Martin failed to construct the marina by the contract completion date, the Corps terminated Martin’s contract for default on January 13, 2009.
Martin filed suit against the Corps seeking to convert the termination for default into a termination for convenience, which would entitle Martin to reimbursement of the costs it incurred in performing the project, plus reasonable overhead and profit. Martin claimed that the default termination was improper because the Corps’ defective design and subsequent modifications caused most of the project delays, making it impossible to finish the project by October 11, 2008. More specifically, Martin argued that the Corps mistakenly specified a porous gravel material for the first zone of the cofferdam, making it practically impossible to dewater the marina area. Martin’s inability to dewater created successive project failures and safety concerns that prevented timely performance.
The court agreed with Martin and found that the Corps’ decision to terminate Martin’s contract for default was improper, because the evidence established that the Corps' cofferdam design suffered from a critical defect as asserted by Martin, which significantly impeded the construction of the project. The court explained that the Corps’ defective design of the cofferdam entitled Martin to a significant time extension that would push the completion date of the project well into the spring of 2009, and that the Corps’ termination of Martin for default in January of 2009 was not proper. Consequently, the court concluded that the termination should be converted into a termination for the convenience of the government, entitling Martin to recover the reasonable costs it incurred in performing the project, plus reasonable overhead and profit.
The holding in Martin Construction reinforces the well-settled law regarding the government’s liability for faulty design specifications. So long as the contractor relies on and complies with the government’s design specifications, the contractor is not responsible for the consequences of the defective design and is also entitled to be compensated for the efforts expended in trying to comply with the defective design specifications. Contractors should remember that this rule only applies to design specifications and not to performance specifications.
If the government terminates a contractor for default and establishes that the contractor was in default, the contractor must show that the default was excusable. A contractor can demonstrate that the default was excusable by showing that improper government actions were the primary or controlling cause of the default. An example of such improper government action is defective design specifications. If the court finds that the contractor’s fault was excusable, the termination for default is converted into a termination for convenience, which would entitle the contractor to be reimbursed for the costs it incurred in performing the project, plus, in most situations, reasonable overhead and profit.