In a 42-page decision, the Missouri Court of Appeals interpreted two questions of first impression in connection with a construction contract claim against a public entity. Adopting the Spearin Doctrine for the first time in Missouri, the Court’s Penzel decision opens an avenue of pursuit for contractors who may claim a breach of contract against public entities for recovery of damages when losses occur as a result of deficient design plans supplied by the public entity. On the methodology for proving damages, the Court allowed an alternate tool for damage calculation if the Plaintiff can prove damages with reasonable certainty: the Modified Total Cost Method, in which a Plaintiff contractor may find damages by subtracting the contractor’s bid from total costs incurred. This damages calculation also nixes the requirement of expert testimony in order to prove damages in a case.
The Spearin Doctrine (United States v. Spearin, 248 U.S. 132) arises from a 1918 U.S. Supreme Court landmark decision in which the Court ruled that if a contractor is bound (per a contract or bid that has been accepted by the public entity) to build to a design or plans created by the public entity’s owner, the contractor can be relieved of the financial burden if the design or plans require modifications due to deficiencies, as the government impliedly warrants that its design or plans are reasonably accurate. This shifts the burden of responsibility to ensure the design or plans are sufficient to the owner who approved the plan.
For more about the case, please see: Penzel Construction Co. v. Jackson R-School District, et al., No. ED103878 (Mo. Ct. App. Feb. 14, 2017).