Over the past year, questions have increasingly emerged about construction
specifications and the subsequent professional liability exposures they pose to
contractors.
First, it's important to identify the two basic types of construction
specifications: design and performance.
Design Specifications
The most common concerns prescriptive or design specifications, which
constitute all the construction methods, procedures, parts, material, or
equipment to be used as well as the dimensions, tolerances, and sequencing of
events and installations related to the project's assembly.
This type of specification is like the incredibly detailed and tedious
"directions" and materials that come with new do it yourself
furniture kits, minus the tools, materials, and fun. OK, there is one other
exception. It's not that big of a deal when a few nuts and bolts are left
over when the assembly is complete. Unfortunately, the same cannot be said when
"spare" parts or "extra" material exists at the end of the
design and build of a heat exchanger for a petrochemical plant.
It's also important to note that, when design specifications are created
by the owner or the owner's engineer, the owner or that engineer assumes
the risk of any errors in the specifications. The contractor must simply
construct the component of the structure as specified.
This implied warranty was established by the Spearin
doctrine.1 Generally speaking, this landmark
Supreme Court decision states the owner warrants that the design documents are
free of defects and in the event the contractor builds according to the design
documents, the ultimate responsibility for design errors resides with the
owner, provided the contractor does not have any responsibility or participated
in the design or engineering. As a result, under these guidelines, the
contractor will not be liable to the owner for loss or damages that result
solely from insufficiencies or defects in such information, plans, and
specifications. So, in this instance, professional risk for the contractor is
minimal at best.
Performance Specifications
The other type of specification is referred to as performance
specifications, which does not focus on the construction methods, procedures,
equipment, parts, or materials but rather the end result. In other words, the
contractor is free to select the equipment, materials, and process (let alone
the engineering that may accompany those services) to ensure the structure or
components of the structure perform as intended.
For example, a performance-based specification was used on air handling
units for a commercial structure. The contractor selected the only units that
appeared suitable for this condition or structure. Unfortunately, they did not
fit into the space provided by the overall design, and, as a result, the
contractor was found liable for the costs associated with altering the unit,
framing system, and space needed to accommodate all air handling units.
When contractors assess, select, and install the equipment or components
based on their own expertise and experience, their exposure to professional
liability increases or expands in the event the structure or component of the
structure fails or does not perform as intended. With that said, it may not be
as simple as "the contractor failed to select the proper equipment, so
it's a professional liability claim." There could be many contributing
factors ranging from product malfunction and improper installation to
maintenance errors before one can establish the contractor was negligent in
providing a professional service. However, in the end, the "professional
risk" will reside with the contractor in these situations. (Keep in mind,
the contractor may have recourse against the product manufacturer or an
engineering subcontractor, but the contractor retains ultimate liability.)
An example of a performance-based specification would be (in short, as the
actual spec can be pages long) when the owner requires a certain internal
"climate" (72 degrees Fahrenheit at all times) in a commercial office
structure. Under such an agreement, the contractor is thereby obligated to
select the equipment and products needed to produce this outcome. This includes
taking into consideration the changing external temperatures throughout the
various seasons of the year.
So, it's hopefully obvious that performance specifications can present
contractors with an increased exposure to professional liability under certain
project scenarios. Where are you most likely to find performance-based
specifications? Typically, it's common to find performance specifications
in the more collaborative delivery methods like design/build, public/private
partnerships, or integrated project delivery. But, don't be surprised to
see performance-based specifications in traditional design/bid/build.
Also, it's not uncommon for some projects or contracts to have a
combination of both prescriptive and performance-based specifications. For
instance, there could be situations where the desired outcome contains both
design or engineering aspects, especially when jurisdictional codes or
standards are involved.
Conclusion
It's important to point out that the above has been oversimplified to
highlight a potential area of professional risk for contractors. There are many
other factors that can influence professional risk one way or the other.
Project type, engineering expertise, products, and the materials used are the
challenges that could potentially present exposure problems and professional
liability risks.