Beware the difference between design, performance specifications

Construction specifications generally come in two flavors: "design" specifications and "performance" specifications. Design specifications set forth the materials to be used and the manner in which work is to be performed which are to be followed by a contractor without deviation. Performance specifications, on the other hand, specify the results to be obtained but do not necessarily set forth the materials to be used or the manner in which work is to be performed to achieve those results.

Design specifications are a bit like following a recipe in a cookbook. If you follow the recipe and it turns out to be a disaster, you can blame the author. Performance specifications, on the other hand, are a bit like the reality cooking shows you may have binge watching as of late. The objective is to create something that looks and tastes great, but it's up to you how you do it, and if it turn out terribly and you get yelled at by Chef Ramsay, you only have yourself to blame.

Berkeley Cement, Inc v. Regents of the University of California, 30 Cal. App. 5th 1133 (2019), the 5th District Court of Appeal examined the difference between design specifications and performance specifications, whether the specifications for a new building at the University of California, Merced were design specifications or performance specifications, and whose responsibility it was when the project didn't turn out as expected.

The Berkeley Cement Case

Contractor Berkeley Cement, Inc. was awarded a contract for the installation of structural concrete at the U.C. Merced's new Social Sciences and Management Building. Because the building included exposed concrete as a design feature, where concrete was visible, it was to be a high-quality self-consolidating concrete. In other words, good-looking concrete.

Mixing concrete to achieve the right color, consistency and uniformity is part art and part science. The concrete specifications for the U.C. Merced project included instructions setting forth various concrete materials to be used, but did not specific how such materials were to be used, or amounts to be used. Rather, the specifications included concrete mix instructions such as:

• "provide in necessary dosage to achieve specified shrinkage."

• "provide in necessary dosage to accelerate set."

• "provide in necessary dosage to facilitate placement, achieve finish requirements and necessary workability."

As to the materials for the architecturally exposed concrete, the specifications provided: "Acquire all aggregates for the entire project ... from George Reed-Merced River ... or equal source. The specifications also set forth standards for compressive strength and shrinkage, maximum and minimum limits on spread, and maximum aggregate size for the final product.

During Berkeley Cement's work, numerous problems arose. The aggregate specified in the specifications was not immediately available and Berkeley had to use a substitute. However, during mock-ups, the university rejected the concrete due to excessive "bug holes" (voids) in the concrete, rock pockets, discoloration, "tiger striping" (striations) and honeycombing. Berkeley Cement also experienced formwork "blowouts" in which concrete formworks broke and walls had to be redone because the formworks could not withstand the pressures exerted by the self-consolidating concrete.

Due to these difficulties, the concrete work fell behind schedule, and Berkeley Cement eventually retained a subcontractor to complete the formwork. At the end of the project, Berkeley Cement was paid the full concrete price for its work. However, the university rejected a claim submitted by Berkeley Cement seeking an equitable adjustment for extra work it claimed it had performed outside of the contract.

Berkeley Cement later sued the U.C. Regents for: (1) breach of contract; (2) breach of implied covenant of good faith and fair dealing; and (3) breach of implied covenant of the correctness of plans and specifications, which Berkeley Cement alleged stemmed from defective specifications for the concrete mix and the university's interference by improperly rejecting Berkeley Cement's proposed concrete mix design, shop drawings and mock-ups. In response, the U.C. Regents filed a cross-complaint against Berkeley Cement for breach of contract, alleging that the concrete work performed by Berkeley Cement did not meet the specifications, and for costs associated with Berkeley Cement's failure to perform its work within the contract time.

Following trial, the jury found that: (1) Berkeley Cement, rather than the university, breached the parties' contract; but (2) the university was not harmed by Berkeley Cement's breach of the contract.

Berkeley Cement appealed.

The Appeal

On appeal, Berkeley Cement argued that that the jury was given an incorrect jury instruction on its breach of implied covenant of the correctness of plans and specifications. According to Berkeley Cement, the trial judge erroneously instructed the jury that the specifications at issue were "performance" specifications when they were in fact "design specifications." This distinction was, as acknowledged by the 5th District, important.

With respect to design specifications, stated the 5th District, courts have said: "A contractor of public works who, acting reasonably, is misled by incorrect plans and specifications issued by the public authorities as the basis for bids and who, as a result, submits a bid which is lower than he would have otherwise made may recover in a contract action for extra work or expenses necessitated by the conditions being other than as represented. This rule is mainly based on the theory that the furnishing of misleading plans and specifications by the public body constitutes a breach of an implied warranty of their correctness."

But with respect to performance specifications, explained the court, the expectations are different: "In a performance contract, the contractor must assume responsibility for the means and methods to achieve the end result."

The 5th District, however, did not agree with Berkeley Cement that the specifications for the project were design specifications rather than performance specifications. "While the descriptions of certain ingredients permitted in the mix included limitations on the amounts to be used," explained the court, "no set amount or combination of increments was required." Further, explained the court: "Crucial elements required Berkeley's ingenuity and expertise to achieve the expressed goal. For example, the specification set goals for strength, slump and shrinkage, leaving it to Berkeley's discretion to determine how to meet those goals. Regarding placement of the concrete, the specifications directed Berkeley to take special precautions in hot weather, "to prevent slump loss, rapid setting, and plastic shrinkage," but left it to Berkeley to determine the means and methods to do so, while suggesting some possibilities. The specifications also set uniform appearance as a goal for the architectural concrete and directed Berkeley to place the concrete using techniques to minimize bug holes and eliminate lift lines."

Conclusion

Berkeley Cement provides a good illustration of the difference between design specifications and performance specifications, their impact on contractual obligations, and how courts interpret specifications when determining whether they are one or the other. 