The Spearin Doctrine on Design-Build Projects: It’s not me, It’s you

Most construction disputes arise from uncertainty or disagreement about the plans and specifications of a project. In fact, it is no secret that one of the most litigated issues in the construction industry involves ambiguity in plans and specifications. The quandary becomes: Who is responsible for inadequate design documents?

Project owners and contractors should be aware that construction contracts contain many implied obligations. One well-established obligation, known as the Spearin doctrine, is that the owner impliedly warrants that the plans and specifications that it provides to the contractor, if followed, are adequate and suitable for their intended use.[1] The Spearin doctrine originates from the landmark construction case, United States v. Spearin, 248 U.S. 132 (1918). Because the doctrine is an implied duty, it is important to note that express contract terms can waive or limit its protections. Owners and contractors should, therefore, understand the importance of certain contract clauses that can curtail the scope of the Spearin doctrine. 

Background:

In Spearin, the United States Supreme Court ruled that “if the contractor is bound to build according to plans and specifications prepared by the owner, the contractor will not be responsible for the consequences of defects in the plans and specifications.”[2] As a corollary, the Court further ruled that general clauses requiring the contractor to investigate the site, review the plans, and assume responsibility for the work until completion do not override the owner’s implied warranty.[3] In other words, general clauses do not shift the risk of design defects to contractors who follow the specifications. Hence, the Spearin doctrine was born and remains one of the most significant decisions issued in construction law.

The Spearin decision is significant because Justice Brandeis recognized that a contractor may very well agree to assume contractual risk for the consequences of a defective design.[4] That is, the Court recognized the assumption that the contractor’s duty to complete the contract begins when the owner’s control of the design ends, and that the contractor’s duty is conditioned upon the contractor’s “reasonable reliance” on the owner’s defective design. Consequently, where the contractor is not contractually bound to build according to the plans and specifications, the contractor might assume liability for the consequences of defective design.

Since Spearin, virtually every jurisdiction in the United States has adopted the Spearin doctrine either expressly or implicitly.[5] However, depending on the jurisdiction, the doctrine is subject to specific exceptions, carve outs, and limitations. In order to understand Spearin’s current application, owners and contractors should be familiar with such limitations, which vary from state to state.

The Applicability of Spearin in Design Build:

The majority of Spearin claims involve the traditional design-bid-build delivery method. Nonetheless, as project delivery as evolved to design-build, recent cases highlight how courts have applied Spearin claims in the design-build world.[6]

“Design-build” refers to a project delivery model where the owner manages one contract, and the contractor, who is responsible for the design, works with the designer to provide project recommendations “to fit the owner’s schedule and budget.”[7] The main difference between design-build and design-bid-build project delivery is single source-contracting or a single source of responsibility for both the design and construction.

As noted, the majority of states have adopted the Spearin doctrine, including California.[8] In a federal district court case from California, U.S. for Use and Benefit of Bonita Pipeline, Inc. v. Balfour Beatty Const. LLC (“Bonita Pipeline”), 2017 WL 2869721 (S.D. Cal. May 19, 2017), the court recognized that the Spearin doctrine applied to design-build subcontractors.

In Bonita Pipeline, the Navy awarded Balfour Betty Construction (“BBC”) a $35 million dollar design-build contract to design and construct a hangar replacement project at Camp Pendleton.[9] BBC then hired an architect and an engineer to create the design specifications.[10] At the bidding stage, BBC provided the design documents to Bonita in order to obtain a bid from Bonita.[11] BBC claimed that the design documents were designated as incomplete at the time that they were provided to Bonita.[12] Thereafter, BBC and Bonita entered into a subcontract whereby the parties agreed that the design may require “further refinement.”[13] In particular, the subcontract contained a specific provision that expressly provided that Bonita “knowingly assumes the risk of further refinement of the plans and specifications associated with the design build process,” and that it would not be entitled to additional costs for refinements resulting from the design build process.[14] Instead, Bonita agreed that it would only seek compensation for enhancements requested by the owner.[15]

After numerous disputes arose during the project, Bonita filed suit against BBC and its sureties for additional compensation for alleged breach of contract, breach of implied warranty, and quantum meruit pursuant to the Prompt Payment Statute, the Miller Act, and declaratory relief.[16]

Bonita filed a partial motion for summary judgment, seeking a judgment from the court that BBC could not shift legal responsibility for defective design documents onto its subcontractors as a matter of law.[17] In support of its motion, Bonita argued that a contractor could seek relief for extra work if the extra work was necessitated by defects in the design documents that were provided to the contractor as the basis for bidding its work.[18]

In response, BBC argued that the Spearin doctrine did not apply to the subcontract because the very nature of a design-build contract was “expressly incomplete” when the parties signed the subcontract.[19] Accordingly, in support of its argument, BBC pointed to the provision of the subcontract in which Bonita “knowingly assume[d] the risk of further refinement of the plans and specifications associated with the design build process.”[20]

In reply, Bonita counter-argued that while it assumed the risk of refinement, it did not assume the risk that the design documents were “defective.”[21] Furthermore, Bonita argued that the Spearin doctrine focuses on whether the plans are “correct,” not on whether they are “complete.”[22]

The court first acknowledged that “Spearin may apply to design-build projects.[23] Accordingly, the court agreed with Bonita that the “critical factor” in applying Spearin is to determine whether the “specifications [are] deficient,” and that a contractor may recover when the plans or specifications are “incorrect.”[24] Next, the court reiterated the general principle that “[u]nder Spearin the responsibility to provide correct plans and specifications ‘is not overcome by the general clauses requiring the contractor to examine the site, to check up the plans, and to assume responsibility for the work.’”[25]

However, the court ultimately found that the record was insufficient to determine whether the Spearin doctrine applied to the facts of the case.[26] Thus, the court arrived at the following key points: (1) the court rejected BBC’s assertion that the subcontract language constituted a disclaimer of the doctrine; and (2) the court concluded that based on the record it would be premature to issue partial summary judgment on whether Bonita’s extra work was due to defects in the plans and specifications or whether the extra work was due to the expected design refinements as provided in the subcontract.[27]

In reaching its conclusions, the court did not formally address the express disclaimer in the subcontract regarding responsibility for the “incomplete” design documents. Therefore, while progressive in its own respect, this decision is not conclusive as to indicate any clear takeaway for the ability of a party to avoid Spearin warranty based on an express disclaimer in a design-build project.  

Conclusion:

In sum, Bonita Pipeline is an important decision because it demonstrates how a subcontractor may keep the risk of the owner where the owner provides incomplete preliminary designs to the design-builder, and the design-builder thereafter provides that incomplete design to its subcontractors at the time of bidding. As such, in this context, Bonita Pipeline demonstrates how a subcontractor can invoke Spearin warranty in an attempt to shift design responsibility to the hold a design-build contractor responsible for design defects. Given the “very nature” of design-build projects, the parties to a design-build contract should be mindful of the heightened importance of well-crafted contract provisions. Failure to clearly define specific disclaimers, exculpatory clauses, and other avoidance clauses may subject a party to liability for a defective design.

The Content in this Article is Not Legal Advice. This article is intended for informational purposes only and should in no way be relied upon or construed as legal advice.

[1] United States v. Spearin, 248 U.S. 132, 137 (1918)248 U.S. 132, 137.

[2] Id.

[3] Id. at 136.

[4]  Id. (citing Simpson v. United States, 172 U. S. 372 (1899); Dermott v. Jones, 69 U.S. 1 (1864)).

[5] See 3 Bruner & O’Connor Construction Law § 9:90 (2002).

[6] See U.S. for Use and Benefit of Bonita Pipeline, Inc. v. Balfour Beatty Const. LLC, 2017 WL 2869721 (S.D. Cal. May 19, 2017) at *3 (“The California Supreme Court has applied Spearin multiple times.” (citations omitted)); See also AAB Joint Venture v. U.S., 75 Fed. Cl. 414, 425-28 (2007) (holding that Spearin applies to a design-build contract where the specifications were defective); Drennon Constr. & Consulting, Inc., v. Department of the Interior, CBCA No. 2391, 13-1 BCA ¶ 35,213 (2013) (holding that a contractor may recover under the Spearin doctrine’s implied warranty and the owner’s control over elements of the design).

[7] See DBIA, What Is Design-Build?, DBIA.org, https://dbia.org/what-is-design-build (last visited June 15, 2022).

[8] See 2017 WL 2869721 at *3.

[9] Id. at *1.

[10] Id.

[11] Id.

[12] Id.

[13] Id.

[14] Id.

[15] Id.

[16] Id. at *2.

[17] Id.

[18] Id.

[19] Id. at *3.

[20] Id.

[21] Id.

[22] Id.

[23] Id. at *4.

[24] Id. at *3.

[25] Id. at *4.

[26] Id.

[27] Id.