By: Kenney & Sams, P.C.

One of the ancient, bedrock principles of construction law is that where “the contractor is bound to build according to plans and specifications prepared by the owner, the contractor will not be responsible for the consequences of defects in the plans and specifications.”[1]   Known as the Spearin doctrine, the Supreme Judicial Court recognized it as a maxim of Massachusetts law in 1970.[2]  In 1981, immediately following the issuance of the Ward Commission’s final report, Massachusetts General Laws Chapter 149 Section 44F went into effect, requiring that, “[e]very contract [for public building construction] shall include specifications and, if deemed necessary or convenient by the awarding authority, plans, detailing all labor and materials to be furnished thereunder.”[3]  Until 2004, the Spearin doctrine applied to every contract for the construction of municipal or state buildings in the Commonwealth.[4]

In 2004, the legislature passed Massachusetts General Laws 149A Sections 1 – 13, the “construction management at risk” (“CMAR”) statute, authorizing awarding authorities to solicit for the construction of public buildings from contracts based only on “detailed information concerning the project scope including any preliminary design information, geotechnical reports, existing condition surveys and specifications,” and “a detailed description of the work.”[5]  Instead of accepting bids based on plans and specifications “detailing all labor and materials,” awarding authorities now could select a contractor before complete development of the project design.[6]  After being selected, the CMAR contractor may provide “a range of construction management services to the public owner as the design is being developed… include[ing] cost estimation and consultation regarding the design of the building project, preparation and coordination of bid packages, scheduling, cost control, and value engineering.”[7]  The expectation under the CMAR statutory scheme is that “the final design may reflect or incorporate substantial input from the [contractor].”[8]

In Coughlin Elec. Contractors, Inc. v. Gilbane Building Co., the Supreme Judicial Court tackled the question of whether the Spearin doctrine applied to a Chapter 149A Sections 1 – 13 CMAR contractor, or whether participation in the design process negates the contractor’s common law protection.[9]  That case arose from a project at the Worcester State Hospital (“the Project”) where the Division of Capital Asset Management and Maintenance (“DCAM”) elected to utilize the CMAR statutory scheme in contracting to build a psychiatric facility.[10]  Pursuant to the statutory scheme, DCAM selected Gilbane Building Company (“Gilbane”) as the CMAR contractor, before completion of the Project design.[11]  Gilbane subcontracted electrical work to Coughlin Electrical Contractors, Inc. (“Coughlin”).[12]

Coughlin alleged that it suffered a 49 percent increase in labor hours on the Project because of Gilbane’s poor management and due to design defects.[13]  The alleged design defect was that the project design called for a two-foot deep interstitial space between floors to allow for the building’s mechanical, electrical and other systems.[14]  This conflicted with another part of the design, however, that called for mechanical and electrical systems occupying five feet of interstitial depth.[15]  Coughlin did not receive direction on how to proceed with installation of the electrical systems for more than six weeks, before being told to “place the electrical work as high as possible in the ceiling,” allowing the project designer to “address the issue later” with the mechanical subcontractor.[16]

Coughlin filed a contract claim, and then later a suit in superior court against Gilbane (and its surety).[17]  Gilbane brought a third-party complaint against DCAM “effectively alleg[ing] that DCAM should indemnify Gilbane for ‘damages caused by design changes and design errors’ that were ‘unrelated to any wrongdoing on Gilbane’s part.’”[18]  DCAM moved to dismiss the third-party complaint, arguing that the CMAR statutory scheme and the terms of its contract with Gilbane requiring Gilbane to “indemnify, defend and hold harmless” DCAM from “all claims… arising out of or resulting from the performance of the Work,” trumped the Spearin doctrine.[19]  The superior court allowed DCAM’s motion to dismiss the third-party complaint, and Gilbane appealed.[20]  Upon Gilbane’s motion, the Supreme Judicial Court took direct appellate review.[21]

The court compared the traditional design-bid-build method of government construction contracting where “the owner retains an engineer or an architect on a separate contract to complete the design of the public facility, and once the design is complete, the design is made available to potential bidders and the construction contract is advertised for bid,” leaving “the risk of design” with the architect or engineer with design-build contracting (authorized only for certain public works projects by Chapter 149A §§ 14 – 21), where “the owner contracts with a single party that assumes both the design and the construction responsibilities.”[22]  By comparison, the court found the CMAR method to be more “[s]imilar to the design-bid-build method [because] the owner enters into separate contracts, one with the designer and another with the CMAR” contractor.[23]  Before reaching the decision, the court noted the CMAR contractor’s consultation role during the finalization of the project design and the CMAR contractor’s ability to price a contingency to cover “project costs not associated with scope changes or latent conditions.”  Nonetheless, the court found that an implied warranty of the design by the owner to the contractor still existed.  More specifically, the court stated that it was “not persuaded that the relationships [between the owner, the CMAR contractor and the designer] are so different that no implied warranty of the designer’s plans and specifications should apply in construction management at risk contracts made pursuant to Chapter 149A and that the CMAR should bear all the additional costs caused by design defects.”[24]  The court further concluded “a public owner of a construction management at risk project gives an implied warranty regarding the designer’s plans and specifications,” but noted that “the scope of liability arising from that implied warranty is more limited than in a design-bid-build project.”[25]

The extent of the limitation depends on a number of case-specific factors, which could vary depending on the terms of the contracts in issue.[26]  The factors identified in the instant case were (i) whether the owner is under any obligation to accept the CMAR’s design suggestions or whether the owner’s separately-contracted designer maintains control over the design, (ii) whether the CMAR acted reasonably in relying on the design given the CMAR’s contractual design participation role and (iii) whether the contract language itself contains an express disclaimer of the Spearin doctrine protection for the contractor.[27]

As to Gilbane, the court found that DCAM retained control over the project design and that even the “significant design-related obligations” were limited by DCAM’s “authority and control over the Project’s design.” The court held that “Gilbane may be able to recover, but only to the extent that the additional costs were caused by Gilbane’s reasonable and good faith reliance on the defective plans and specifications.”[28]

The court also interpreted the indemnification provision of the contract in light of the ruling applying the Spearin doctrine and held that, “claims, damages, losses, and expenses that arise out of the Designer’s performance, as opposed to Gilbane’s design.

[1] United States v. Spearin, 248 U.S. 132 (1918).

[2] Commonwealth v. Alpert, 357 Mass. 306 (1970).

[3] Mass.Gen. Laws ch. 149 §44F.

[4] Mass.Gen. Laws ch. 149 §44F; United States v. Spearin, 248 U.S. 132 (1918); Commonwealth v. Alpert, 357 Mass. 306 (1970).

[5] Mass.Gen. Laws ch.  149A §6(b) ¶¶ 3 & 5.

[6] Mass.Gen. Laws ch.  149A §7.

[7] Experience of Massachusetts Public Agencies with Construction Management at Risk under G.L. c. 149A, Office of the Inspector General (Oct. 2009), pg. 9, available online at http://www.mass.gov/ig/public-design-and-construction/alternative-construction-methods/cmatrisk.pdf.

[8] Id.

[9] Coughlin Elec. Contractors, Inc. v. Gilbane Building Co., 472 Mass. 549 (2015).

[10] Id. at 507.

[11] Id.

[12] Id.

[13] Id. at 508.

[14] Id.

[15] Coughlin Elec. Contractors, Inc., 472 Mass. at 508.

[16] Id.

[17] Id. at 507.

[18] Id. at 508 (quoting Superior Court’s Order dated June 23, 2014 in Coughlin Elec. Contractors, Inc. v. Gilbane Building Co., WOCV2013-1300D).

[19] Order dated June 23, 2014 in Coughlin Elec. Contractors, Inc. v. Gilbane Building Co., WOCV2013-1300D, pg. 3.

[20] Coughlin Elec. Contractors, Inc., 472 Mass. at 509.

[21] Id.

[22] Id. at 509-510.

[23] Id. at 510.

[24] Id. at 512.

[25] Id. at 507.

[26] Id. at 512-516.Unlike design-bid-build contracting under Chapter 149 §§44A-44H, where the contract form is unilaterally drafted by the awarding authority and published to solicit the lowest bid, Chapter 149A §6 provides for non-price negotiations of the contract form between the awarding authority and the selected CMAR.

[27] Id. at 512-516.

[28] Id. at 515.