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Specifying Methods: Proprietary Specifying 101

By Kevin O'Beirne, PE, FCSI, CCS, CCCA, CDT posted 07-16-2019 10:56

  

Editor's Note: CSI would like to welcome Kevin O’Beirne, PE, FCSI, CCS, CCCA as our first guest blogger on csiresources.org. To learn a little more about Kevin, please see his bio at the bottom of this post. If you have an idea or opinion you would like to share with your colleagues in the construction industry, please contact CSI Content Strategist Peter Kray at Pkray@csinet.org. He would love to help publish your thoughts.



The four types of specifying are: descriptive, performance, reference standard, and proprietary.  Proprietary specifying is when construction specifications indicate product requirements by naming specific manufacturers and, perhaps, products. Often more than one specifying method—sometimes all four—are used in the same specifications section.

Proprietary specifying has three different types:

  1. Open proprietary, which includes the words, “or-equals,” thus allowing the contractor to propose equivalent items not named in the specifications;
  2. Closed proprietary, in which one or more manufacturers are indicated but no “or-equals” or substitutes are allowed; and
  3. Sole-sourced, where only one manufacturer or product is specified and no “or-equals” or substitutes will be considered.

The specifier should always request of their client direction on whether open, closed, or sole-sourced specifications are allowable and the ground rules for each. For public work, some jurisdictions, such as North Carolina and New Jersey, discourage or prohibit proprietary specifying of any sort for public work.

Where competition among suppliers is desired, any type of proprietary specifying tends to reduce competition, but also helps to ensure the desired quality or product features. Closed proprietary and sole-source specifying greatly limit competition.

When a public owner requests either closed proprietary or sole-source specifying, the specifier should advise the public owner that guidance from the owner’s legal counsel should be sought by the owner, because overtly limiting competition may be counter to the spirit and intent of public contracting statutes.

While limiting competition for public works construction is, in general, counter to the spirit and intent of public contracting statutes, in certain, limited situations, they may be allowable, especially when the public good may be best-served by limited or no competition. Public contracting statutes vary both by jurisdiction and the attorney interpreting them.

When a public owner desires to limit competition, it is often advisable for such decision to be made by the owner’s governing board (such as a city council, school board, utility authority board, or other such entity), explicitly authorizing it via a resolution passed at a public board meeting. Such resolutions are rare, and typically need to clearly set forth why limiting competition is in the public’s interest. Valid reasons could potentially include stockpiling spare parts inventory from a single supplier, based on a long-term, negotiated contract with the parts supplier. In particular, sole-sourcing should typically be authorized by the public owner’s governing board.

In the case of open- or closed-proprietary specifying, the minimum number of manufacturers or products indicated in the specifications is often unclear. Private owners may direct the number to be named, while public owners should typically confer with their procurement leaders and legal counsel.  The required number is not less than two manufacturers, or else it’s sole-sourcing. 

In general, more competition is better in public work, both from the standpoint of price-based competition and allowing the purchasing contractor increased clout to negotiate reasonable terms and conditions of the purchase order. With very limited competition, it’s more likely that the purchaser’s ability to negotiate terms and conditions consistent with the prime contract decreases significantly when there are only two or three firms eligible to quote the item. This may cause delays in signing purchase orders and, possibly, trouble during shop drawing reviews and construction.

Proprietary specifying has certain advantages and attractions, and several associated drawbacks.  Understanding the basic rules of the road is step one when considering proprietary specifying, especially in public work.

Copyright 2019 by Kevin O’Beirne.  Used by CSI with the author’s permission.

The content of this blog post is solely the author’s work and should not be attributed to any other individual or entity.

 

Kevin O’Beirne, PE, FCSI, CCS, CCCA is a a professional engineer licensed in NY and PA with over 30 years of experience designing and constructing water and wastewater infrastructure for public and private clients.  He is the National Manager of Engineering Specifications for HDR, a global engineering and architecture design firm.  He is a member of CSI’s MasterFormat Maintenance Task Team and is the certification chair of CSI’s Buffalo-Western New York Chapter.  He is an ACEC voting delegate on the Engineers Joint Contract Documents Committee (EJCDC) and lives and works in the Buffalo NY area.  Contact: kevin.obeirne@hdrinc.com.

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Sheldon brings up an important and relevant point, concerning “or-equals” and the matter of equivalency when proprietary specifying is used.  In blog posts in the coming weeks, we will further explore the topics of “or-equals” and substitutes.

 

Briefly, AIA A201—2017, General Conditions, does not address substitutes and “or-equals” in direct terms.  AIA A701—2018, Instructions to Bidders, sets forth a basic procedure for prospective bidders to proposed substitutes and “or-equals” during bidding and establishes that the Architect is the sole entity that determines whether an “or-equal” or substitute is acceptable.  This is because, as the design professional with the best understanding of the design intent and with sole possession of the professional liability for the project’s design, the Architect is in the best position to determine whether proposed product is equivalent to what’s specified or an acceptable substitute.

 

EJCDC C-700—2018, General Conditions, directly addresses “or-equals” and substitutes, at Paras. 7.05 and 7.06, and establishes the Engineer as the sole entity that determines with such proposals are acceptable.  EJCDC C-200—2018, Instructions to Bidders, has two alternative provisions concerning substitutes and “or-equals” during bidding: The default provision prohibits proposal of such items during bidding and expressly states that the bids must be based on the specified items, only.  The alternative provision in C-200—2018 allows proposal of “or-equals” and substitutes during bidding, with certain restrictions, but also expressly requires that the bids must be based only on the items specified in the bidding documents as modified by any addenda.

 

Overall, I believe EJCDC’s approach is appropriate and suitable, especially on Engineer-led work.  AIA’s is perhaps a bit more open, intended to be tailored by the specifier via Sections 01 25 00 – Substitution Procedures, and 01 62 00 – Product Options (regarding “or-equals”).

 

I believe that when the project’s Instructions to Bidders are clear on what products the bids must be based on, there’s probably going to be less arguing after the construction contract is signed and effective.

 

Regarding substitutes and “or-equals” during construction, regardless of whether these matters are addressed in the General Conditions (such as EJCDC C-700) and the Div 01 specs, or in the Div 01 specs alone (as with AIA A201), they, too, need to be clear.

 

Finally, it’s also essential for the entity administering to the bidding process and the construction contract to understand the processes for “or-equals” and substitutes and to clearly and fairly enforce them.

 

In the end, a bidder or contractor may argue about what they view as an equivalent product, but the construction documents should clearly establish that only the design professional should have the authority to accept or reject such proposals.  It’s not a committee decision—rather, it’s the decision of the design professional in responsible charge, period.  Of course, for a substitute, the final buy-in of the Owner is necessary, because, by definition, since a substitute does not comply with the contract documents, a contract modification, such as a change order, is necessary to formally approve a substitute and, typically, the Owner has to sign change orders.

As long as I've been a specifier, the term "or equal" has been a cause for discussion. It usually is argued that all products are unique, and that there are no equals. Even though many products are essentially commodity products, with no significant differences, or at least none that affect use of the product, it may be true that they are not identical.

I have avoided this issue by using the term "or approved," which, in addition to being more accurate, is also not as ugly as "or-equal."