Performance Specifications and the Non-Delegable Duty: The Pitfalls of Design Delegation for Contractors and Design Professionals Alike
Category | Briefing Papers
Kylee is an associate of the firm’s Construction Law Department. She can be reached at 612.359.7668 or KEvans@fwhtlaw.com.
Over the last few decades, owners and their design professionals have more frequently begun delegating portions of a project’s design to contractors through the use of performance specifications. With the increase in this practice, contractors and design professionals must understand what, if any, liability they either absorb or retain as a result. This Briefing Paper will outline the pitfalls both parties may encounter when the project employs performance specifications and the important factors to consider when interpreting those specifications.
As many construction industry players can attest, there is not always a clean line between a design-bid-build contract, in which the owner and its design professional hold all of the liability for failed design, and a design-build contract, in which the contractor holds all or most of the liability. In many cases, the contract has elements of design performed by both the design professionals and the contractors, resulting in complicated liability issues which may leave both parties liable if the design fails. In those cases, courts will look to the contract to determine which specifications were prescriptive or “design” specifications, and which were “performance” specifications, which shift some of the design liability to the contractor.
“[Design] specifications [] set forth in precise detail the materials to be employed and the manner in which the work was to be performed, and [contractor] was not privileged to deviate therefrom, but was 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.” J. L. Simmons Co. v. United States, 412 F.2d 1360, 1362 (Cl. Ct. 1969). When a contractor is given a design specification, it holds no liability for the performance of the design. However, when the contractor completes a design to meet a performance specification, it may be liable if the design ultimately fails to meet the performance objective.
For example, consider the construction of a room in an office building. A design specification would provide a detailed description of how to construct the room. It would call for the use of drywall, centered studs, the number of outlets and their voltages placed in specific sections of the room, the number and placement of specific brands of windows, etc. Although the contractor may have a choice as to the manufacturer of the nails it uses, or the specific method it employs to attach the drywall, it generally does not have much room to deviate from the plans and specifications. However, a performance specification gives the contractor more room for creativity in how it completes the project. A performance specification would require that the room be, for example, one hundred square feet, with insulated walls and water tight windows. The contractor would fill in the remaining details based on their industry knowledge and experience. If the windows in the room began to leak and cause damage, the contractor who chose the windows and installed them based on its own design holds the liability for that failed design choice. However, if the owner specified in detail the kind of window, its framing requirements, and sealing properties, the contractor would not be liable for the leaky window as long as it constructed the room according to the owner’s specifications.
However, contracts are not always clear regarding whether a specification is design or performance. Merely referring to a specification as a “performance” rather than a “design” specification in a contract is not conclusive. Id. A court will instead look to “the level of discretion inhering within a given specification.” Id. “A contract may contain design specifications, performance specifications, or a mixture of both.” Dillingham Const., N.A., Inc. v. United States, 33 Fed. Cl. 495, 501 (Fed. Cl. 1995), aff’d, 91 F.3d 167 (Fed. Cir. 1996). Even if the specifications are described as “performance specifications” by the contract, they will be deemed design specifications if the contractor is not allowed to deviate from the directions they contain. Id. Moreover, a performance standard will be deemed a design specification if it significantly restricts the manner by which the contractor is able to meet the standard. Fruin-Colnon Corp. v. Niagara Frontier Transp. Auth., 180 A.D.2d 222, 230 (N.Y. App. Div. 1992). Contractors and their project managers should understand the risk they are accepting when entering a contract with elements of performance specifications.
On the other hand, design professionals are not entirely relieved of their own design responsibilities by prescribing performance specifications in contract, because there are certain duties that a design professional may not delegate. Those nondelegable duties include: a design professional’s standard of care; the duty to review delegated work for compliance and adequacy; and the duty to adhere to building codes and other statutory codes. Additionally, when a designer is also the Engineer of Record on the project, it may also be responsible for coordination of design work.
A duty is generally deemed nondelegable when it is “so important and so peremptory that it will be treated as nondelegable.” Johnson v. Salem Title Co., 425 P.2d 519, 522 (Or. 1967). An architect’s duty to exercise “ordinary professional skills and diligence” is “non-delegable.” U.R.S. Co. v. Gulfport-Biloxi Reg’l Airport Auth., 544 So. 2d 824, 827 (Miss. 1989). Included in this duty of care is the duty to prepare and plan design and engineering work. Simon v. Drake Constr. Co., 621 N.E.2d 837, 839 (Ohio Ct. App. 1993). A failure to question the adequacy of a third party’s reports and findings may be deemed a violation of that duty. Kerry Inc. v. Angus-Young Assocs., Inc., 694 N.W.2d 407, 415 (Wis. Ct. App. 2005) (holding that an architect can be liable for failure to question the adequacy of a report from a third-party engineer before drafting plans based on the report). Similarly, the duty to adhere to relevant building codes is nondelegable because building codes are generally enacted for the protection and safety of the public. See, e.g., Johnson, 425 P.2d at 522 (finding an architect liable for the failure to meet building codes even though the structural engineer’s designs were the underlying issue).
Moreover, when an architect accepts a duty to administer portions of the construction contract, it must do so with the same care it does any of its other professional duties. The owner-architect contract is “determinative of what, if any, supervision is required of the architect.” A. R. Moyer, Inc. v. Graham, 285 So. 2d 397, 403 (Fla. 1973). An architect cannot “escape the obligation and supervisory duties he contracted to perform merely by accepting, at face value and without verification, the approval of [another design professional].” Cent. Sch. Dist. No. 2 of Town of Oyster Bay, Nassau Cnty. v. Flintkote Co., 56 A.D.2d 642, 642 (N.Y. App. Div. 1977). Doing so would deprive the owner of “the professional judgment he had the right to expect.” Id. To the extent any design is delegated to the contractor, that design ultimately must be incorporated into the overall design for which the design professional maintains liability. If the design professional fails to adequately review or coordinate the contractor’s design with the overall project design, the design professional may still be liable for those coordination failures.
With the surge in delegation of design to contractors, both contractors and design professionals may be unknowingly taking on risks related to design failure. This Briefing Paper outlines those potential risks and urges both parties to read their contracts carefully and to consult with an experienced construction attorney when questions of delegated design arise.
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