In Berkeley Cement, Inc v. Regents of the University of California, Case Nos. F073455 and F073586 (January 7, 2019), the 5th District Court of Appeals examined the difference between “design” specifications and “performance” specifications on a University of California project in Merced, California.
The Berkeley Cement Case
Contractor Berkeley Cement, Inc. was awarded the low bid on structural concrete work for the new Social Sciences and Management Building on the campus of the University of California, Merced. Because the building included exposed concrete as a design element, where there was visible concrete, the concrete was to be a high-quality self-consolidating concrete. In other words, good looking concrete.
In construction, if there’s a trade that harkens back to the alchemists of yore, it’s the concrete guys. Mixing concrete to achieve the right color, consistency and uniformity is part art and part science. The concrete specifications for the project included 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.”
- “Acquire all aggregates for the entire project . . . from George Reed-Merced River . . . or equal source.
- And, finally, set forth standards for compressive strength and shrinkage, maximum and minimum limits on spread, and maximum aggregate size for the final product.
During the course of Berkeley’s work, problems arose. The aggregate specified in the contract documents was not immediately available and Berkeley had to use a substitute. However, during mock-ups, the University rejected the concrete due to excessive voids “bug holes” in the concrete, rock pockets, discoloration, striations “tiger striping” and honeycombing. Berkeley also experienced formwork “blowouts” in which the formwork broke and walls had to be redone. Because of these difficulties, the concrete work fell behind schedule, and Berkeley eventually engaged a subcontractor to complete the formwork.
At the end of the project, the University paid Berkeley the full contract price for its work. However, Berkeley submitted a claim for equitable adjustment, for extra work it claimed was outside the contract, that was rejected by the University.
Berkeley later sued the University for: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; and (3) breach of the implied covenant of the correctness of the plans and specifications. In short, Berkeley sued the University for extra work and delays on the project, which it blamed on defective specifications for the concrete mix and the University’s interference by improperly rejecting Berkeley’s proposed concrete mix design, shop drawings and mock-ups. In turn, the University filed a cross-complaint against Berkeley for breach of contract on the ground that the concrete did not meet the contract standards and for costs associated with Berkeley’s failure to perform its work within the contract time.
Trial dragged on for over a month, over the holidays in fact, from the beginning of December through January to the consternation of the trial judge and jury. Not saying this had an impact, but at the conclusion of trial, the jury found that: (1) that Berkeley, rather than the University, breached the parties’ contract; but (2) that the University was not harmed by Berkeley’s breach of the contract.
On appeal, Berkeley argued that one of the reasons it lost was that the jury was given an incorrect jury instruction on its claim that the University breached the implied warranty of the correctness of plans and specifications. The trial judge, Berkeley argued, erroneously instructed the jury that certain specifications in the contract documents were “performance” specifications rather than the “design specifications” that Berkeley believed them to be. The distinction is extremely important.
While a “design” specification is an explicit, detailed specification that tells a contractor exactly how to perform its work and allows no deviation, a “performance” specification sets forth an objective or standard to be achieved, but allows a contractor to exercise his or her ingenuity in achieving it. In other work, a design specification is like a recipe in a cookbook, and so long as you follow the recipe, if it turns out to be disaster, you can blame the author. A performance specification, on the other hand, is like any of the numerous reality cooking shows you see on TV, whether it involves kid chefs, cupcakes, or surprise ingredients. You’re given an objective: create something that tastes and looks good; but how you do it is up to you. In short, it’s a question of where to place blame.
With respect to design specifications, 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, when it comes to performance expectations: “In a performance contract, the contractor must assume responsibility for the means and methods to achieve the end result.”
The Court of Appeal, however, didn’t agree with Berkeley. “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.
Berkeley Cement provides a good explanation of the differences 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.