If a project owner specifies the use of a proprietary product, a particular brand and model, the contractor may find itself dealing with a sole-source supplier. If that supplier proves unable or unwilling to deliver the product in a timely manner, who is responsible for the resulting delay? The project owner who mandated the product or the contractor who has contracted with the supplier?
A California court recently grappled with this issue. The contract in question, like most public works contracts, allowed the contractor to propose substitute products that were “equal” to the specified proprietary product. The court therefore concluded this was not a sole-source specification and the contractor – not the project owner – was responsible for delay caused by late delivery. The appellate court did not question, however, a trial court ruling that the owner bears the risk of late delivery if a specification calls for a sole-source product.
It is not clear that project owners always bear the risk of late delivery of specified sole-source products. On federal contracts the rule is to the contrary. The federal project owner warrants only that the sole-source supplier is capable of providing the specified product. The owner does not warrant that the supplier will be willing or able to provide the product in conformance with the project schedule. The contractor, after all, was capable of conducting a pre-bid investigation of the availability of the specified product.
What do you think? If a project owner insists on one particular product for its project, shouldn’t the owner bear the risk of delivery problems? What can contractors do to protect themselves when faced with sole-source specifications? I welcome your comments.
That having been said, these things rarely occur. Things may be functionally sole sourced, but are given an or equal option; contractors rarely ask pre-bid questions of this nature in order to preserve their competive edge; the PO rarely goes out at the earliest opportunity etc. It really seems stacked against the contractor, but then they have the ultimate control over the execution.
On the other hand, if an Owner is reasonable, and the GC is cooperative, often an accommodation can be reached to prevent discord on the project.
Posted by: Bradley Spain, PE CCM LEED-AP | 08/19/2011 at 07:54 AM
How about in a Retail construction scenario where the Client ("Owner") requires a specific floor for their store design and they also pay the Vendor. The owner also informed their vendor of the schedule in coordination with the GC to meet owner's schedule. It arrives 3 weeks late, results in Owner directling an out of sequence build out (put in floor fixtures before finish flooring and when flooring arrives cut it up to and around the fixtures.) How could this be anything but the risk of the Owner?
Posted by: James | 08/19/2011 at 07:55 AM
Projects should be a cooperative effort and not a game of "got ya."
The unfortunate thing about this situation is that the contractor that does his pre-bid due diligence will probably lose out to the guy that just blindly bids without a care in the world.
Posted by: william pangelinan, jr. AIA | 08/19/2011 at 08:39 AM
Theeasiest way we have found is to propose an "equal" product. The Architect most ofthetime will deny the substitute. This puts the burden on the design team as to product.
One of the questions that should be asked when putting the bid together is to ask subs and suppliers if there are any long lead items. Once supply problems have been identified, they can be managed. You should also go back to the design team with the information on the long lead items. That may induce an acceptance of a substitute.
Posted by: RL Ward | 08/19/2011 at 08:59 AM
A difference needs to be made between sole-sourced products and owner-provided products.
A sole-sourced product, whether substitutions are permitted or not, is subject to the contractor’s “means and methods” as described in the general conditions, which includes scheduling. The contractor knows what the product is and needs to coordinate delivery with the manufacturer/vendor according to the schedule the contractor has prepared. If the delivery is late, then he only has the manufacturer/vendor to blame—the owner has control over the issue. If a product’s lead time is so long that it cannot be submitted, approved, and ordered within a timeframe to allow the contractor to properly complete the project within the contract time, the owner should allow at least an extension of the contract time or permit substitutions.
On the other hand, if the product is owner-provided, which means the owner pays for and coordinates delivery of the product, then the owner assumes the risk. This assumes, of course, that the contractor gave the owner at the beginning of the project the required delivery dates according to the contractor’s schedule.
Posted by: Ron Geren | 08/19/2011 at 09:01 AM
Not mentioned are possible flip sides of the equation outlined in the first comment, above.
First, even if the 'item' is in fact available timely the GC still must diligently pursues its procurement activities. If there is a long lead time, and any potential for a delay in delivery... the GC has to assess that risk as part of its project management function. A savvy GC knows that there is never a 100% guarantee of timely performance in this industry, so has to take that into account. If the GC waits until that critical last minute to confirm his order, a delay due to a glitch in the pipeline could be adjudged the responsibility of the GC.
Second, if the 'item' involves a submittal process (i.e. layout or fabrication drawings), and they are either not submitted timely, or are flawed (and must be re-worked multiple times), the consequent delay would also belong to either the GC or the vendor, or both (assuming the AE's doing the submittal reviews did their part properly).
Third, what if the GC is tardy in completing paperwork related to the purchase, or is not timely in delivering a deposit, or perhaps field measurements or other coordination information needed by the vendor before it can commence fabrication or preparation on its end?
Fourth, what if the 'delay' relates to the GC's inadequate management of the site (logistics) and the vendor is not provided with the required time slot for deliveries, or the lay-down area for its components, etc.
Fifth, what if the 'item' involves mid-construction decisions from the Owner or AE's (for example color/texture decisions, or detailing of interfaces that can only be finalized following component mock-ups during the early portion of the work)?
ETC.
As in any query related to construction, there are usually too many moving parts to allow for a simply answer. Each situation has to be evaluated based on the instant facts.
Posted by: howard i. littman, aia | 08/19/2011 at 09:10 AM
As an engineer and contractor working for a construction law firm, there is never a black and white answer.
With all the factors that are beyond the control of any one of the parties, as is typical, the claim of delay is going to hinge on who does the best job convincing the neutral decision maker to believe them over the other guy.
One thing that will help either party, is to have good documentation that is clear and concise. This keeps finger pointing to a minimum.
From experience, I have to piece together problems for litigation from old project documents, and the one with the best documentation usually gets the nod.
Posted by: Bryan Weaver | 08/19/2011 at 11:30 AM
Sole-sourcing should not be taken lightly by an owner and architect when producing a specification. The decision to sole-source should not be a one-off deal and should be based on a justified need and past experience with the vendor (e.g. standardization of maintenance and track record of timely delivery). As someone said, problems with delivery are not typical. This may be because the owner and designer have usually done the needed due-diligence up front. The chance of a problem increases exponentially in a first time experience with a vendor and then one must fall back on the contractual provisions, project documentation, etc. Problems with a vendor you have had good experience with in the past can usually be worked out in an amenable fashion, especially if the potential for repeat work is involved. They may often try to make things less painful for the contractor who will probably have to absorb the cost of delay.
Posted by: Andre Larroque | 08/24/2011 at 09:00 AM