Contractors may recover their increased costs of performance attributable to government-supplied defective specifications, provided they are design specifications rather than performance specifications. However, most government-furnished specifications contain both design and performance requirements. To recover under the Spearin doctrine, a contractor must prove that the requirement adversely affecting its performance relates to an area in which the government has expressly described how to perform. On the other hand, the contractor will be denied recovery if the government can show that the dispute concerns requirements that granted the contractor discretion to develop its own performance methodology to achieve necessary contractual objectives. Since it is not always clear whether the government has supplied a design or performance specification, the contractor may have to determine the amount of discretion granted by the specification. Such an analysis must be conducted by viewing the contract in its entirety and assessing the contractor’s overall discretion, along with the obligations imposed by the specification, before the requirement may be categorized as a design or performance specification. In this regard, the relevant inquiry may be the degree to which the contractor can exercise its ingenuity to achieve the contractual objectives and its ability to select the appropriate methodology to do so.
In Armed Services Board of Contract Appeals (ASBCA) No. 51310, it was determined that the requirement in dispute was a performance specification despite the contractor’s assertions that it was a mix of design and performance specifications. The 3rd Contracting Squadron at Elmendorf Air Force Base in Alaska awarded the fixed-price contract at issue for the demolition, relocation, and construction of on-base buildings. The pertinent specification concerned grading outside building lines, requiring a minimum of 2% grading for ten feet from the building. The contractor had to import additional fill material to meet the 2% grading requirement. The contractor argued that it was entitled to an equitable adjustment for its additional costs because the government had provided a combination of design and performance specifications that were defective because they did not specify the fill material necessary to complete the work. Additionally, the contractor maintained that the specifications contained a flawed assumption that the site would be flat. Meanwhile, the government took the position that the contract specified only a 2% grade and left it to the contractor to determine how to achieve it. The Board reviewed the specification and the contract as a whole and agreed with the government that the requirement was a performance specification, as the contractor was free to design its own method of grade away from the building, provided it met the 2% grade requirement. Finally, contrary to the contractor’s contentions, the Board’s overall review of the contract indicated that the government-supplied specifications did not assume a flat site and had no topographical information, which meant that offerors were expected to conduct a pre-bid site visit.
Meanwhile, in ASBCA No. 61184, covered in more detail here, the Board determined that the government had furnished defective design specifications, despite the government’s assertions to the contrary. In the large United States Army Corps of Engineers (USACE) construction contract, the government provided designs for the STRATCOM building, which included ductwork specifications that required the contractor to select a mastic that met ASTM C916 standards. Those standards contain specifications for duct adhesives but do not impose any anti-microbial requirements. Consistent with the standards, the contractor selected a mastic lacking antimicrobial properties, which the government approved. During construction, mold was discovered in the ductwork attributable to the mastic, increasing the cost of performance by nearly $41 million. Following the discovery, the USACE withdrew its approval and directed the contractor to use a specific mastic with anti-microbial properties. In the appeal that followed, the government argued that it had supplied performance specifications because the contractor could submit any compliant mastic for approval. However, the Board disagreed, finding that the government had furnished design specifications. The Board noted that the contractor had provided no input in drafting any contract specifications. Additionally, any discretion that the contractor had in selecting the mastic was limited by the government’s specifications, which required that the mastic meet the ASTM C916 standards. The contractor could not have selected the antimicrobial mastic that the government later directed the contractor to use, as that mastic did not meet those standards. Finally, the government had expressly approved the use of the defective mastic. Under these circumstances, the Board concluded that, although the contractor had some discretion to select the mastic, that discretion was limited by the government. Therefore, the defective specification was deemed a design specification, and the contractor recovered under the Spearin doctrine.
Since most government-supplied specifications include both design and performance components, to obtain recovery under the Spearin doctrine, the contractor must demonstrate that its increased cost of performance is attributable to an area covered by defective design specifications. As shown in the cases described above, it may not always be straightforward to determine whether a particular defective specification is a design or a performance specification. In this regard, the central inquiry is the amount of discretion granted to the contractor to exercise its ingenuity in achieving the project’s relevant objectives or performance standards, including selecting the appropriate means to do so. The more discretion the contractor is afforded under the defective specifications, the more likely it is that the specifications would be deemed performance specifications. In case of performance specifications, the contractor is typically unable to recover its increased cost of performance unless it can demonstrate that the specifications at issue embody requirements that are objectively impossible or commercially senseless. On the other hand, if the government-furnished specifications do not allow the contractor to deviate and expressly describe how performance must be undertaken, then the specifications are design specifications. Government-supplied design specifications may include detailed measurements, tolerances, specified materials, etc. In case the contractor relies on defective design specifications, it may recover under the Spearin doctrine, as the government is in breach of the implied warranty that the specifications it supplied would yield satisfactory results.
This Federal Contract Claims Insight is provided as a general summary of the applicable law in the practice area and does not constitute legal advice. Contractors wishing to learn more are encouraged to consult the TILLIT LAW PLLC Client Portal or Contact Us to determine how the law would apply in a specific situation.
