Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.
59 cases in both the federal and state courts that reinforce this principle, not only for defective specification claims, but also for differing site condition claims.274 Therefore, using contract language that says, in essence, that âthis is a performance specification and contractor assumes all risk of meeting the required results,â will likely not relieve the owner from liability if it uses a design speci- fication and has, for all practical purposes, taken all discretion away from the contractor. However, if the owner uses the above language in the context of a pure performance specification, then a trier of fact will likely find that the contractor has taken all risk of perform- ance. Of course, there are no âbright lineâ answers, as noted many times in Section VIII, and a contractor may be able to overcome the disclaimer by showing impossi- bility, owner interference/involvement, or that the ownerâs performance specification conflicted with an- other design specification. IX. CONCLUSION An owner that has been exposed to liability for defec- tive specifications may think that converting to per- formance specifications is the best approach to solving its problems. As made clear by the caselaw, while per- formance specifications are not always an adequate defense to a contractorâs claims, they certainly can im- prove an ownerâs liability position if the performance specification is written properly. Triers of fact routinely find contractors responsible for meeting performance specifications, regardless of the financial consequences. However, the decision to use performance specifica- tions affects far more than an ownerâs risk profile. These specifications not only impact the way an owner will procure, contract, and manage their projects, but they have a profound impact on how contractors will execute their work. As a result, owners need to under- stand the practical consequences of using these types of specifications and assess whether they can live with these consequences. The most critical consideration is whether the owner is prepared to give the contractor sufficient flexibility and discretion to perform the work. If an owner wants to dictate how the contractor will perform the work, then it will likely not feel comfortable using perform- ance specifications. While the owner could create a composite specification to narrow the contractorâs free- dom, the owner should remember that it will likely bear the risk of ambiguities and deficiencies in what it has provided. Stated differently, an ownerâs use of perform- ance words like âwatertightâ will not shift risk to the contractor when the owner has given the contractor a fully completed design and the contractor had no mean- ingful discretion in achieving the end result. Perhaps more importantly, by constraining the contractorâs dis- cretion, the owner may nullify one of the key benefits of performance specificationsâthe contractorâs creativity. 274 See generally CIBINIC, NASH & NAGLE, supra note 244, at 272â96. Even if the owner is willing to give the contractor discretion in achieving an end result, it needs to care- fully assess how the contractorâs performance will be measured. On process plants, owners will verify com- pliance with a thorough acceptance test that will run for a specific period of time. While a state highway agency might be able to use this approach on a systems contract, it is much more difficult to do so for tradi- tional construction elements, for the reasons expressed earlier in this digest. The ongoing research into PRS and PBS may help alleviate this issue, but that will take time. A final consideration for owners to remember is that in some areas they may be far more experienced and have more information than the contracting commu- nity. Foster Wheeler, Helene Curtis, and several of the other cases explain that when the owner has superior expertise and has created a performance requirement that cannot be achieved, the contractor will have a rea- sonable chance to absolve itself from liability. This is particularly true in lump-sum contracts. The trouble spot for highway agencies may be in the use of O&M performance-based contracting for existing assets. Agencies undoubtedly have (at least in theory) far more information about their financial and technical experi- ences than contractors who will be bidding for these services. In the event of a problem, it is probable that the contractor would argue that the agency should bear some responsibility for the problem. With the prolifera- tion of DBOM and DBFOM contracts, it is likely that this issue will be the subject of future legal precedent.
