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Thelen Reid Brown Raysman & Steiner LLP
The U.S. Army awarded Edsall Construction Co., Inc. a fixed price contract for the construction of a facility to house the Montana National Guard's helicopters. The facility included two hangars. The hangars and their large, tilt-up canopy doors were designed for the Army by independent architectural/engineering design consultants.
The designer's specifications and drawings for the tilt-up canopy doors illustrated a complex system for operating these doors with motors, cables, pulleys and counter-weights that attached to the doors at three points called "pick points." The design also depicted ties between the pick points, cables, pulleys and overhead trusses, and called for the weight of each canopy door to be distributed equally between the three pick points.
The designer placed this disclaimer on one of the drawings:
CANOPY DOOR DETAILS, ARRANGEMENTS, LOADS, ATTACHMENTS, SUPPORTS, BRACKETS, HARDWARE ETC. MUST BE VERIFIED BY THE CONTRACTOR PRIOR TO BIDDING. ANY CONDITIONS THAT WILL REQUIRE CHANGES FROM THE PLANS MUST BE COMMUNICATED TO THE ARCHITECT FOR HIS APPROVAL PRIOR TO BIDDING AND ALL COST OF THOSE CHANGES MUST BE INCLUDED IN THE BID PRICE.
Other annotations on the drawings asked the contractor to verify the door weight and distribution of the weight to each pick point.
After the contract was awarded, Edsall discovered that the designer's three-pick-point design was unworkable and submitted a structural drawing for a four-pick-point design. By the time the Army approved Edsall's new design, trusses already had been fabricated and delivered to the project. The trusses had to be modified to accommodate the new design. Edsall submitted a claim for $70,000 to cover changes required by the new design. The Army rejected the claim. Edsall appealed to the Armed Services Board of Contract Appeals (ASBCA).
The primary issue for ASBCA was whether the general disclaimer on the designer's drawing shifted the risk to Edsall for design defects.
ASBCA found that the disclaimer was inadequate to shift the risk for the canopy door design to Edsall. It awarded Edsall its additional costs. The Army appealed.
The U.S. Court of Appeals for the Federal Circuit affirmed ASBCA's ruling in favor of Edsall. White v. Edsall Construction Co., Inc., 296 F.3d 1081 (Fed. Cir. 2002). The Court enforced the doctrine applied in a long line of cases beginning with U.S. v Spearin, 248 U.S. 132, 136 (1918). Under Spearin, when the government provides a contractor with design specifications such that the contractor is bound by contract to build according to the specifications, the contract carries an implied warranty that the specifications are free from design defects. The implied warranty attaches only to design specifications, not performance-based specifications. In order for a disclaimer to overcome the implied warranty that accompanies design specifications, the disclaimer must be express and specific.
Here, the court found, the designer's drawings and specifications for the three-pick-point canopy door system incorporated significant design characteristics and were not performance-based specifications. Thus, the Army's design specifications carried the Spearin implied warranty.
The court also held that the disclaimer on the A/E's drawing was not an express and specific disclaimer capable of shifting the risk for the door design to Edsall. While the disclaimer required the contractor to verify details, supports, attachments and loads, the court held it did not clearly alert the contractor to substantive design flaws that required correction and approval before bidding. The disclaimer was general in nature, requiring the contractor to check door details, not door design.
In the court's view, the Army could have drafted a contract and specifications that shifted the risk for design defects, but the designer's disclaimer simply was not specific enough to shift such risk to Edsall.
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For more information about the issues covered in this report, please contact Paul Berning in our San Francisco office at 415-369-7229 or at pwberning@thelen.com or contact your Thelen attorney. For more information about Thelen's Construction and Government Contracts Department, click here.
©2004 Thelen Reid Brown Raysman & Steiner LLP
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