Government Contracting Database
It is settled contract law that a contractor is entitled to an equitable adjustment under the changes article for the increased costs of performance due to defective specifications. Johnson & Son Erectors, ASBCA No. 24564, 81-1 BCA 15,082; Magnus Pac. Corp. v. United States, 133 Fed. Cl. 640, 676 (2017) (citing Hol-Gar Mfg. Corp. v. United States, 175 Ct. Cl. 518, 524, 360 F.2d 634, 638 (1966)). Where the change is necessitated by defective specifications and drawings, the equitable adjustment to which a contractor is entitled “must, if it is to be equitable, i.e. fair and just, include the costs which it incurred in attempting to perform in accordance with the defective drawings.” Appeal of Johnson & Son Erectors, ASBCA No. 24564, 81-1 B.C.A. (CCH) ¶ 15082 (Mar. 31, 1981) (quoting J. W. Hurst & Sop Awnings, Inc., ASBCA No. 4167, 59-1 BCA 2095).
The decision in Helene Curtis Industries, Inc. v. United States, 312 F.2d 774 (Ct. Cl. 1963), is an example of a case on point. In Helene Curtis, the Army invited bids on a contract to supply chlormelamine, a disinfectant. Id. at 776. The plaintiff bid on supplying this disinfectant without taking into account the need to grind up the chlormelamine particles during the manufacturing process. As a result of this omission, plaintiff began to experience costly manufacturing difficulties based on the lack of grinding. Id. The court held that the contractor could recover for the grinding problems associated with the first contract because it was misled by the specifications. However, the contractor could not recover on the second contract because “it made the extension agreement with its eyes open and therefore when the contract award was subsequently made . . . it could no longer assert that it was relying on a misrepresentation.” Id. at 779. See also R.E.D.M. Corp. v. United States, 428 F.2d 1304, 1310 (Ct. Cl. 1970) (allowing an equitable adjustment for the first army contract containing erroneous specifications, but denying the requested adjustment for the “follow-on” contract because the contractor was no longer misled by the specifications); Firestone Tire & Rubber Co. v. United States, 558 F.2d 577, 590 (Ct. Cl. 1977) (denying recovery for “additional costs attributable to drilling difficulties because at the time that [the contractor] entered into its prime contract it was fully aware of those then unresolved problems . . . .”).
When providing specifications, the government has a duty to ensure that they are adequate for the task at hand and reasonably accurate. Appeal of Tidewater Contractors, Inc., AGBCA No. 90-195-1, 93-3 B.C.A. (CCH) ¶ 26050 (Apr. 30, 1993) (citing Second Growth Forest Management, Inc., AGBCA No. 85-118-1, 85-3 BCA p 18,224). A contractor must show that it followed the specifications and that they were defective. Cci Contractors, Inc., AGBCA No. 84-314-1, 91-3 B.C.A. ¶ 24225. If the alleged defective design is not followed, the government is not liable therefor. Id.(citing Gulf & Western Precision Eng’g Co. v. United States, 211 Ct. Cl. 207, 543 F.2d 125 (1976). Cf. Stuyvesant Dredging Co. v. United States, 11 Cl. Ct. 853 (1987), aff’d, 834 F.2d 1576 (Fed. Cir. 1987)).
The general rule with respect to the government’s liability for defective specifications is that if the specifications are strictly observed, the government impliedly warrants satisfactory performance will result. See Martin Const., Inc. v. United States, 102 Fed. Cl. 562, 575 (2011) (quoting United States v. Spearin, 248 U.S. 132, 136 (1918); Hol-Gar Mfg. Corp. v. United States, 175 Ct. Cl. 518, 360 F.2d 634 (1966). The rule, however, applies only to design specifications. Caddell Const. Co. v. United States, 78 Fed. Cl. 406, 411 (2007). Consequently, the government is responsible for errors and omissions in the specifications, as well as any defects. Sterling Millwrights, Inc. v. United States, 26 C1. Ct. 49, 90 (1992); Seven Sciences. Inc., ASBCA No. 21079, 77-2 BCA ‘12,730 at 61,877 (1977).
Based on this warranty, the government violates its duty to act in good faith, and is deemed to have acted in bad faith, when it issues plans and specifications knowing that they are defective, problematic or will require substantial changes, yet fails to inform the contractor of this fact. Lewis-Nicholson, Inc. v. United States, 550 F.2d 26, 32 (Ct. C1. 1977); see also SIPCO Servs. & Marine, Inc. v. United States, 41 Fed. Cl. 196, 216 (1998)
The duty to cooperate, which is a component of the implied covenant of good faith and fair dealing, requires the government to provide plans and drawings as necessary to effectuate the contractor’s performance. Appeal of Hardrives, Inc., 94-1 B.C.A. (CCH) ¶ 26267 (Aug. 4, 1993). Additionally, the implied warranty of specifications creates an obligation to promptly correct design errors and deficiencies, the failure of which constitutes a breach of its duty to cooperate. Id.
Design specifications set forth, in precise detail, the materials to be employed and the manner in which the work is to be performed; they permit no deviations. Performance specifications, on the other hand, state an objective, and the successful contractor is expected to exercise its ingenuity in selecting the means by which the objective is to be achieved. Travelers Cas. & Sur. of Am. v. United States, 74 Fed. Cl. 75, 94 (2006) (citing Norwood Mfg., Inc. v. United States, 21 Cl. Ct. 300 (1990). No warranty is implied by performance specifications.
A contractor satisfies its burden of proving a defective specification by demonstrating that, despite compliance with the specification, it was unable to obtain a satisfactory result American Int’l Contractors, Inc./Capitol Industrial Constr. Groups. Inc., a Joint Venture, ASBCA Nos. 39544 et al., 95-2 BCA P 27920.
Updated: June 19, 2018