Legal Aspects of Performance-Based Specifications for Highway Construction and Maintenance Contracts

Abstract

As state agencies have moved toward greater use of alternative contracting, including design-build, warranty contracting, performance-based maintenance, and public–private partnerships for highway construction projects, these contracts use performance-based specifications to give contracting entities more flexibility to meet contract requirements. Whether delivered under a design-build or a traditional design-bid-build contract, construction contracts often contain both prescriptive and performance-based specifications. Under the doctrine from the landmark United States Supreme Court case, United States v. Spearin, 248 U.S. 132 (1918), an owner using detailed design or method-based specifications is deemed to warrant that the specifications and other design information it provides to the contractor are accurate and suitable. However, when an owner decides to use a performance-based specification, setting forth general performance objectives and allowing the contractor to select design solutions, materials, and methods to meet or exceed specified performance criteria, responsibility for the accuracy and sufficiency of the design and construction generally falls upon the contractor. Should the constructed product prove defective or fail to meet specified performance requirements, disputes have arisen over responsibility for curing defects or achieving the required performance. Sorting out issues of liability often hinges upon 1) which aspects are considered design or prescriptive requirements prescribed by the owner; 2) which aspects of construction are based on a performance requirement and, hence, are under the contractor’s control; and 3) whether these requirements conflict in the specifications. A technical and legal overview is provided to help in determining the appropriateness of performance-based specifications. Since highway agency legal and contracting staff are drafting or will most likely be called upon to draft or review specifications, a better understanding of performance-based specifications—including how they differ from traditional design or method-based specifications and how risk allocation changes—should be useful. Overall, this digest should be useful to transportation agencies’ administrators, attorneys, contracting officers, contract administrators, construction managers, engineers, contractors, and financial managers.