Bruce Jervis, Editor
Construction Claims Advisor
Most project owners feel, and understandably so, that they should be entitled to purchase what they want when it comes to the brand of material or equipment installed in their project. For public project owners, however, there is a problem. Due to concerns regarding open competition and lowest price, there are statutory and regulatory limitations on proprietary specifications when taxpayer money is involved.
The solution is the notorious “or equal” specification. The contract calls for the product the owner really wants or an equal product if approved by the owner’s architect or engineer. This complies with the prohibition against sole-source specifications on public contracts, but it creates problems for contractors and their suppliers. A low bid which assumes approval of a less expensive alternative product is risky. How will equality be judged? And can the contractor expect an impartial evaluation when everyone knows the owner’s true preference?
A recent case in a federal appellate court involved these issues. A bidder and its key subcontractor both assumed they could gain approval for a less expensive alternative product. The owner’s engineer refused to approve the substitution. The results: increased costs, default of the subcontractor and protracted litigation.
As always, I welcome your comments on these issues. Are “or equal” specifications a good way to go on public construction projects? Or should specifications written around proprietary products be avoided altogether?
Featured in next week's Construction Claims Advisor:
- California Supreme Court Rules on Public Project Owner's Undisclosed Information
- "Standstill" Provision Amounted to Unenforceable Lien Waiver
- Proposal Downgraded Due to Scheduled Early Completion
Bruce Jervis, Editor
Construction Claims Advisor
Posted by: Dean Sherwin | 08/06/2010 at 09:19 AM
I am involved with this situation right now. We took the glory to pay an engineer to design a product based on what we wanted. The Gov't engineer is very cooperative with what we are trying to accomplish. Looks like we may have developed a new product that the Gov't would actually approve as an equal, and it may be better than the one they have specified. This also doubled our margin. Look for our approved equal products catalog in the very near future. We are the guys that will be calling you up after award to increase your margins.
Posted by: Troy Gray | 08/06/2010 at 09:36 AM
the Federal Acquisition Regulations for Federal work takes this situation into account. The specifier must state the features of the material that the material will be judged against. The specifer has the responsibility to list all of the qualifications that must be met to be considered "an equal." If the substitute does not meet even one of the features, then it is not "an equal." If it meets all features, it is "an equal." The specifier is not allowed to write a specification that only one manufacter can meet which is called a "closed spec" without getting into the sole source issue.
Posted by: Robert Cargile | 08/06/2010 at 09:37 AM
Can questions be asked during the bid process and issued as an addendum, so that a bidder can get the designers opinion on whether a product is equal or not.
Posted by: joe nehama | 08/06/2010 at 09:40 AM
I deal with this problem all of the time. I always try to price the expected product. The rub is that in these economic time, with so many competitors for the same work, at least one of them will price the less expensive solution. The net result is that I do not win the job, and the owner gets forced into the less expensive product. Doing the right thing is getting hard.
Posted by: Ronald | 08/06/2010 at 09:43 AM
Remember, no two products are equal in all respects. On Gov projects the or equal crap is a designer cop out to preclude work on really developing a true non-propriatary spec that meets bthe performance requirements of the agency. All I do is military work and we always bid an equal to item at the price of the example product. Agency guide specs nebver have this clause. On design-build when there is aperformance spec, then we go after the lowest cost item meeting the requirement.
Posted by: Ronald Vietmeier | 08/06/2010 at 09:45 AM
The Architect, Engineer and Owner expect a certain look, quality and function. If the contractor decides to use a less expensive alternative they need to make sure that it meets the intended appearance, function and quality of the specified product or material. Another option is to request a substitution during bidding. The Architect and Engineer are looking out for the best interests of the Owner and spend a lot of time looking for the products that work best for the project. Substitution of one product can trickle down to other products or materials that interface with the proposed substitution causing problems that the Contractor may not have considered when rushing to get the lowest pricing to win the job. This also creates more work for the Architect and Engineer rather than having the product they already know works and they have designed around. All of these factors need to be considered when a Contractor wants to use a less expensive product.
Posted by: Brandon | 08/06/2010 at 09:48 AM
When a proprietary product or a proprietary subcontractor is specified and they cause major delays to the project, what, if any, recourse does the prime contractor have when the Owner starts threatening LD's and the reason for the delay is the proprietary sub?
Posted by: Mark Murphy | 08/06/2010 at 10:06 AM
"Or Equal" two of the most beautiful words in the english language because no two people can agree what they mean. So, you hire a really good spec writer who knows the language better than you do and when he/she (there is that or equal again) writes the spec, the intent is also indicated, which should give the bidder a better idea of what is being looked for and come one, people, when one thing is considerably cheaper than another, there is usually a reason!
Posted by: Jon F Edelbaum, Architect | 08/06/2010 at 10:10 AM
I would like to make a point or two about the "or equal" clause. The first is that the designer has to design around something. This is usually done arount the clients first option and as such is shown in the sprecifications first.
The second point is that an "or equal" on the projects I have been involved with have been approved when they are "or equal". Submitting on an item that is too large to fit into the space provided or does not perform the functions required is not an "or equal" but is often submitted as such by the contractor.
Posted by: Bob Strange | 08/06/2010 at 10:11 AM
"Or equal" can be a useful tool IF the specification is not written toward one brand. Proprietary specs on public work projects are just wrong. If the architect or engineer do their home work with a number of manufacturers, they may soon discover the system they think they want may not be the system they really need. A less expensive product or system may not mean that the product or system is inferior. It could mean that the manufacturer is just ripping off the owner.
Posted by: Don Lambrecht | 08/06/2010 at 10:13 AM
The problem with the "or equal" statement is that no two products are truly "equal."
As an architect and professional specifier, I use the phrase "or approved comparable product." Then I specify the salient features of the specified product that I want matched or exceeded by submitted comparable products.
Another thing to keep in mind is to allow substitutions requests (also called "prior approvals") during the bidding phase to ensure the proposed product will be acceptable prior to submitting a bid. Then, all approved substitutions are made public to all bidders in an addendum.
However, during the bidding phase, architects may be inundated with substitution requests by contractors, subcontractors, and product manufacturers. This can be minimized by requiring that all substitution request must be submitted through a prime bidder (i.e. general contractor). If none of the general contractors want to use it, then you won't receive a request, thus you avoid wasting your time reviewing a product that no general contractor would want to use.
Posted by: Ronald L. Geren, AIA, CSI, CCS, CCCA, SCIP | 08/06/2010 at 10:34 AM
As an architect I can honestly say that sometimes there simply isn't an "equal", and I'm ok with that, even on a public project. That being said I have been on both sides of that argument. I had an owner that dictated to me a certain proprietary roofing system, along with the specification I was to use. They included "or equal" language, leaving the "final decision" up to the architect. A substitute system was bid, and I approved it as "equal" since it met the intended warranty and performance of the specified system. I was directed by the owner to reject all substitutions, but when I refused they became very upset with me, even trying to get me fired! The issue was that the specified product had a particular characteristic that was TEN TIMES higher than it needed to be to perform correctly, and the substitute product was only NINE TIMES higher. There's more to "equal" than numbers. As the professional in this equation I felt I did right by the owner and the tax payers, considering the approved system was around 9% cheaper that what they asked for? Since them I have actually specified the "substitute" product on another job with the same great results.
Posted by: SPerry | 08/06/2010 at 10:57 AM
We have had this problem twice on military projects with door hardware. In both situations, there were 3 brands that we had verified would meet the "or equal" spec. The product from each manufacturer was in the $800 price range.
The contractor submitted cut sheets for a product that cost around $200. It was visually and functionally inferior in all aspects. In one case, the contractor whined and cried like a two year old throwing a tantrum and kept saying the same old worn-out excuses: "This is what we always use." "Other architects let us substitute this product." "This product is up to industry standard." "The Base approved this product for Bldg 101, why can’t we use it here?" The only argument he didn’t make was that the alternative product was equal.
In most situations, the truth is that if it costs less than the product specified, it is not equal. Luckily, most of our work is bid with an invited list of honest contractors, but when it is public open bid work we have learned to expect just about anything. If the architect does his or her job, researches the products, and properly writes the spec, he or she should be able to hold the contractor to the spec. (Sometimes the owner’s rep thwarts our efforts, but that is a post for another day.)
Posted by: Bob (Architect's viewpoint.) | 08/06/2010 at 11:09 AM
Having written many public work specifications, I can say categorically that the "or equal" clause should simply be avoided. The client (and architect in some cases) needs to be educated to the notion that fully proprietary specifications are a recipe for trouble, additional time, cost and dispute. We like to specify 3 products, and not leave "equal" in the eye of the beholder. Architects and engineers decide what is equal up front.
One of the big issues with qualifying equal products during bidding or construction is unintended consequences. It is easy for a product to be functionally and qualitatively equal, but not fit with adjacent or dependent systems in the same way.
Most anti-proprietary regulations allow an exception when only one product is capable of fulfilling the functional requirements of the project, as documented by the architect. We find that this is rare.
Posted by: Eden Milroy, Pilot Development Partners, Inc. | 08/06/2010 at 11:09 AM
All good points. What I want to add is that in many contracts, certainly the ones I have worked on, there is also a time period (typically 14 - 21 days after signing) that a contractor or supplier can propose alternates or substitutes. They are then subject to the approval of the Architect or Engineer, based on clearly stated operational requirements. Outside of this, approval and acceptance of a substitute is completely at the discretion of the owner's representative. This means that the contractor should price what is specified, while investigating comparable (or equal) alternatives, so that a submission for alternatives can be made at the earliest possible time. Of course, such a position will need to be defended.
Posted by: Steve Lezama | 08/06/2010 at 11:17 AM
We performed on a project with a proprietary spec. When the product did not meet the owners expectation they caused us to bear the brunt of the problem. The quality assurance of the manufacturer was not the best but a significant part of the problem was the sensitivity of the equipment due to it's sophistication of performance. It was force fitted into an old and incompatible system. If an owner and designer resort to proprietary specs they should be contractually responsible for their choice.
Posted by: Norm | 08/06/2010 at 11:22 AM
Norm. You were unjustly saddled with that responsibility. Contrary to stereotypes, our firm does try to make the owner treat the contractor fairly. We try to perform our job in accordance with the golden rule. And our firm does pay for changes when it is our fault.
Posted by: Bob (Architect's viewpoint.) | 08/06/2010 at 11:36 AM
All great points. We deal with pre-manufactured concrete products. We've seen situations were say a 4x8 paver is specified based on a particular manufacturer. All manufacturers make a 4x8, in the same color, no difference in testing standards or color or fit. When set side by side nobody can tell the difference. When submitted as an "or equal" we've been told that the product doesn't meet the design criteria. They will force the subcontractor to use the basis of design which in many cases means turning down cost savings.
Posted by: JT (manufacturers viewpoint) | 08/06/2010 at 12:53 PM
I have yet to see a situation where specifying exactly what you want doesn't garner the best result. My point being, there is no substitution for writing a spec that comprehensively describes requirements whether open or closed. The challenge is that specifiers (nor anyone for that matter) are experts in all materials, equipment and/or systems. Specifiers often rely on the product reps & manufacturers to understand the nuts and bolts of their products. Therefore the effort required to specify exactly what you want becomes more than just crossing out what isn't needed from a master spec.
I believe it really comes down to a specifier must understand the important attributes of what (s)he is specifying.
Posted by: Matt | 08/06/2010 at 01:23 PM
I am a municipal Govt Project Manager and I have dealt with the issue of using proprietary equipment too often. When dealing with the older and historic areas, the local Architectural Review board generally okays the proprietary items based on conforming to the period look and feel.
I have also worked on a Federally funded projects managed by the locality. When dealing with proprietary items the options are (1) a "finding in the public interest" [FOPI] to use the proprietary product or (2) is to specify the proprietary product so long as there was competition between the distributors/suppliers of the product. Option 1 is used often for some items where compatibility and interoperability is critical.
I have also been on the private side as construction manager for my church for a new building being built. The Architect specified an "ell" bracket (brand, model #, etc.)on a critical post/beam connection where the contractor thought a "tee" bracket should have been specified. I checked with the manufacturer of the product and though the RA should have specified the "tee", the "ell" would suffice for the loading conditions. In my opinion, that instance of specify the proprietary product was technically the wrong use, but that RA would not certify the building as required by local code unless things were done his way.
Normally, I specify Product X "or equal" when I can only find only one product that is suitable for the situation, and I let the contractor use "or equal" to find appropriate alternate products that I may have missed.
Normally, I deal with (and prefer) minimum performance standards. When a contractor presents another product as an equal, I do check to see if the performance minimums are met by the alternate product.
Posted by: Tom | 08/06/2010 at 01:37 PM
At face value, "or equal" provisions in public contracting are a necessary feature in light of the consistent public policy objective of promoting open and honest competition, not only among contractors but among products, as well. Anyone long involved in public works readily understands why this will continue to be public policy. The probability of corrupt or inept constraint upon products specified, absent an "or equal" pronouncement, is unquestionable.It is not if it will happen but when.
Whether one likes "or equal" or not matters little. Responsible public policy is likely to always require such a provision and, where there is an "or equal" provision, there is always going to be the possibility of disputes over what is equal.
Where opinion has some value, however, is in the area of proprietary specifications when they are used in public works. The use of proprietary specifications can be quite manageable if one pays attention to two key areas: (1) a rational, documented justification for the proprietary spec, backed up by documented prior action by the governing board to receive such analysis and act upon it and, (2) careful control of bid requirements so that any alternate to a proprietary specification is submitted at least two weeks prior to bid date, in order to allow for adjudication of the alternate spec.
A proprietary specification by a public agency must be underpinned by documented analysis, consistent with any guidelines or requirements stated in relevant state or federal law. It is not enough for a public agency to simply state that it prefers a certain product or to mouth generalities about how it is needed in order to standardize systems or that it features higher reliabilty. The study and report should be objective and thorough and any recommendation made should be consistent with the rationale presented.
The second key factor in managing the situation is management of the bid requirements. California's Public Contract Code Sections 3400 and 10129 reflect a common approach used by a number of states. It allows for requiring substitution proposals a specified period before bid submittal, which is manageable. Significantly, it also provides that, if no deadline for substitution submittals is stated, the deadline is 35 days following award of the contract, which is, of course, the worst situaion you can be in. Like any tool, such statutory provisions can provide a useful solution but one has to use it and use it intelligently.
T. Zinger
Posted by: Terry Zinger | 08/06/2010 at 01:52 PM
About two years ago, the Portland District USACE issued an RFP which included a flood control device produced by Golden Harvest "or approved equal". The contract documents showed no information whatsoever about the obscure device - other than the name, so anyone looking at the RFP would have no any idea what an equal might look like. It was effectively a sole-source contract.
The device that Golden Harvest was peddling is an obvious copy of something that I came up with years ago. As such, I was probably the only person in the world who was in a position to know what an equal would look like. I teamed with my original fabricator and we beat Golden Harvest's quote for the tide gates by 50%. (See what happens when you write a sole-source contract??)
Golden Harvest dropped their price to match my fabricator's and their lawyer somehow coerced the prime contractor to use them rather than my fabricator - Plasti-fab. Portland District USACE could have cared less about this debacle.
When the government intentionally writes an obvious sole source contract and is determined to give the work to a particular supplier, the words "or equal" are meaningless.
Posted by: Jeff Juel | 08/06/2010 at 08:02 PM
I would like to respond to a couple of the comments and questions. On federal contracts (although not all public contracts) the procuring authority is supposed to define "equal" by listing the salient, or functional, characteristics of the specified product which are required. This puts some objectivity into the process.
There was a question regarding obtaining pre-approval of an "equal" product by addenda during the bidding process. This is frequently not possible under competitive bidding regulations. But it is possible to obtain a clarification of the functional characteristics which will define "equal."
There was also a question about a contractor's recourse against the project owner if a proprietary supplier or subcontractor fails to perform in a timely manner. Generally speaking, there is no recourse. This is a risk the contractor assumed.
Posted by: Bruce Jervis, Editor, Construction Claims Advisor | 08/09/2010 at 06:54 AM
The easiest way to avoid all of this conflict on a public project is to write a performance based spec. This allows specific manufacturers names to not be called out but, all of the physical attributes which is what the owner was looking for will be emphasized. This can keep poor-quality products from being included. Some things may be to have a track record longer than the warranty for the product,certain physical and characterist minimums based on ASTM standards,etc.
This can certainly minimize any conflict as the expectations are specified in the specifications. I mean afterall, isn't that what the specification is for anyways?!
Posted by: Pat | 08/10/2010 at 06:34 AM