Summary: Balfour Beatty was the design-builder for a Naval Facilities hangar replacement project at Camp Pendleton, California. Balfour Beatty subcontracted a portion of the work, also on a design-build basis, to Bonita Pipeline. Balfour Beatty provided design documents, prepared for Balfour by engineering firms, to Bonita. These design documents were expressly characterized as incomplete, and were accompanied by subcontract clauses under which Bonita acknowledged the incomplete nature of the documents and agreed to assume the risk—at Bonita’s expense—that the documents would need further refinement. The subcontract placed on Bonita the risk of an expanded scope (and cost) of construction, resulting from completion of the design.
Bonita later sued Balfour Beatty, seeking additional compensation arising out of the subcontract. Bonita contended that the design documents had contained errors, that under the Spearin doctrine the design documents had been impliedly warranted by Balfour Beatty, and that Bonita was entitled to additional compensation for breach of the Spearin Doctrine.
The Spearin Doctrine states that an owner impliedly warrants the drawings and specifications, such that a contractor that proceeds in reliance on the soundness of the design is entitled to compensation if the design is flawed. The Spearin Doctrine most commonly is applied in traditional design-bid-build construction disputes.
Decision: The U.S. District Court issued a preliminary decision that included the statement that the Spearin Doctrine “may apply to design-build projects.” The court explained that the responsibility to provide correct drawings and specifications is not overcome by “general clauses requiring the contractor to examine the site, to check up the plans, and to assume responsibility for the work.” However, the court did not directly address the very specific clauses in the Balfour-Bonita subcontract regarding responsibility for the admittedly incomplete design documents. Bonita contended that it had taken on the risk of refinement, but not the risk that the documents that it had been given were defective. The court appeared to support this argument, but the decision is far from conclusive.
Comment: It is typical in design-build that the Owner will furnish incomplete preliminary design documents to the design-builder, and also common that, as in this case, the design-builder will provide incomplete documents to its subcontractors. The parties here agreed to subcontract provisions that allocated substantial but explicit risk to the subcontractor. Harsh though that may have been, we may assume that the subcontractor’s price reflected the risk and uncertainty to which it agreed. Imposition of an implied warranty in this context seems to undercut the parties’ attempt to manage a complicated and fluid situation that requires the progressive development of the design, and the need for the more specialized contractor to take “ownership” of the design.
In its Design-Build series of documents, EJCDC requires the design-builder to take full responsibility for the conceptual design documents that owner has provided to design-builder, but provides for equitable compensation when design-builder identifies errors in the furnished documents. See EJCDC D-700 (2016), Paragraph 2.03.A.
