Bonding Design-Build Projects - Design-Build for Water and Wastewater Projects - page 144

Scope of design and performance risks. Given the advertised advantage of the DB
approach providing a single point of responsibility to the owner, it is not unusual that
owners attempt to transfer to the design-builder all risks related to the construction,
design, and economic performance of the project, sometimes over a defined period of
time. Even if all of the risks are not assumed by the surety, the contractor's assumption of
design and performance risks is still a vital concern to any surety, and the performance
guarantees associated with design are perceived as the greatest risk. Design-build assumes
that the owner will provide general program requirements and performance specifications,
and, in turn, the design-builder will prepare the detailed design. Managing the design
and performance risk is of paramount importance. Particularly where new technology is
involved, performance warranties and guarantees can carry significant risk.
A fundamental question in allocation of design liability is “whose design is it?” In the
analysis of design liability, a critical question is whether the owner's design requirements
are stated as “performance” or “design” specifications. Design performance risks implic-
itly are allocated, as a matter of law, to the party responsible for and in control of the prep-
aration of the detailed design documents upon which the other party is expected to rely.
The distinction between “performance” and “design” specifications has been defined by
a ruling of a federal circuit court of appeals:
Design specifications “set forth in precise detail the materials to be
employed and the manner in which the work . . . [is] to be performed.”
These specifications permit no deviations. By contrast, performance
specifications “set forth an objective or standard to be achieved, and
the successful bidder is expected to exercise his ingenuity in achiev-
ing that objective or standard of performance, selecting the means
and assuming a corresponding responsibility for that selection.”
( Haehn Management Co. v. U.S. 1988)
Owner requirements are often stated as a blend of performance and design speci-
fications, which, if conflicting, may leave the design performance risk with the owner.
For example in W. H. Lyman Construction Co. v. Village of Gurnee (1980), the Village's
contract documents for construction of a sewer: (1) contained both detailed plans and
specifications describing the work; and (2) imposed an infiltration test that the completed
sewer was required to pass before the Village would accept the work and make final pay-
ment to the contractor. The contract also contained a disclaimer of responsibility by the
owner and engineer regarding the contractor's inability to meet the infiltration test. After
the sewer was completed in conformance with the contract documents, the contractor was
unable to pass the infiltration test, and the owner refused to pay. The court resolved the
subsequent suit in favor of the contractor as follows:
We construe this provision [the acceptance test and disclaimer] as an
impermissible attempt on the part of the Village to shift the respon-
sibility for the sufficiency and adequacy of the plans to the contractor
without providing the contractor the corresponding benefit of having
something to say about the plans he is strictly bound to follow. The
contractor's duty is to perform his part of the contract in a workman-
like manner, not to evaluate the suitability of the specifications or, in