The Non-Competitive Specification

cropped-imagesCAF3HGDZ.jpgIt is a common practice among specifying engineers to base their designs on a specific manufacturer’s product.  This assures that the equipment proposed for the project exists, allows for dialogue between the engineer and the manufacturer, and establishes a base-line in the contract documents.  It is also common practice to list, in the specification, at least two other acceptable manufacturers provided that they can meet the basic intent of the specifications.  The purpose of naming alternate manufacturers is two-fold.  First, it identifies other manufacturers whose manufacturing quality meets the general expectation of the engineer and the owner.  Second, it involves other manufacturers in the pricing and/or bidding process in order to encourage competition for the owner. 

Unfortunately, the use of named manufacturers, particularly as it relates to alternate manufacturers, has been misused and, at times, abused by vendors in order to create both an unfair advantage over their competition, as well as, to allow over-pricing of their products on a less then competitive level.  If this were known by the specifying engineer, the ethical question becomes what should they do about it?  Remember, the Engineer is supposed to be relatively impartial when it comes to the bidding process and the purchasing of equipment.  His first priority is to the Client who hired him for his professional knowledge and opinion, NOT for who his golf-buddies are, and his second priority is to represent the intent of the specifications from a contractual/performance basis. 

The first problem with naming alternate manufacturers is the assumption that the two or three alternate manufacturers make and/or can meet the specifications and will actually participate in the bid process.  For starters, many independent manufacturer’s representatives handle more than one manufacturer.  In some cases, they may even represent more than one manufacturer for the same type of product.  If the specifying engineer is unaware of the fact that all three named manufacturers in the specification are locally represented by the same vendor, then they have unknowingly created a “sole-source” specification and eliminated any chance of competitive bids from competing manufacturers. 

The second problem with naming alternate manufacturers relates to the finite details of the specification and whether or not they are available from all the manufacturers listed.  We know that the basis of design manufacturer can meet the spec because, 9 times of 10, he furnished the specification to the engineer for use in the contract documents.  Where the trouble occurs here is whether or not the engineer took the time to review and edit the specification or whether he left it as is with the assumption that all the manufacturers listed can meet it.  The reality is, every manufacturer is going to have some things that are different in the manner in which they manufacturer their products.  Whether it is a method of assembly or the type of materials, there is always going to be some difference between one manufacturer and the next. 

Where this issue is likely to break down is in the submittal review stage.  As part of the contract documentation process, major equipment and materials are submitted to the engineer for review.  The purpose of the review is to establish if the proposed item meets the general intent of the project, contains the minimum pre-requisites for meeting the specifications, and ultimately satisfies the engineers expectation of quality.  

During this review process, the liability of compliance with the specifications can be passed from the contractor to the engineer, if his review is not thorough enough or if, in doing his review, the engineer makes a judgment call over what is a minimum pre-requisite and what is not.  As a result, engineers will typically have a statement included in their review document that states that their review is “general” with respect to the intent of the documents but not specific to the details, and so does not relieve the contractor or his vendor from the obligation to meet the particulars of the specifications.  In other words, just because the engineer didn’t note the exception or comment on the deviation doesn’t mean that it is no longer required.    The review qualifier does not, however, completely exonerate the engineer in making his review, and so their review will turn from an “approval process” to a “disapproval process”. 

The term “disapproval process” is being used here to characterize the review method in which every thing written in the specification becomes a mandatory requirement and no deviation or clarification will be allowed.  Now, the use of left-turning screws instead of right-turning screws becomes a matter of debate which the courts have already decided falls in favor of the specifying engineer and his professional stamp.  Remember, however, that the original intent of the specification was to establish a minimum requirement for meeting the contract, while simultaneously encouraging competition.  Once again, the engineer and their specification is faced with the slippery slope of what to hold the contractor and vendor to and what to let slide.  Too stringent an interpretation and the spec becomes proprietary or sole-source, too lenient and the minimum quality of the project will slip.  It is a real dilemma for the engineer. 

What makes this dilemma even worse is that the listed manufacturers, particularly the basis of design and their local rep, know the compromised position the engineer is in and they exploit it. 

For starters, the basis of design manufacturer is aware of what differences exist between their product and their competition’s product.  It becomes to their advantage, therefore, to include as many of these differences in their specification and to exclude their competition’s methodology, even though they will later list their competition as an “or equal”.  Once they have their hooks into the contract documents, it becomes a matter of scare tactics, “Does my competition have left-turning screws because the engineer spec says they are supposed to.”  Or the flat out, “You can’t use them because they cannot meet the specifications.”  Whatever the sales pitch is, it is clear that the basis of design manufacturer is aware of the short-comings of their competition and is seeking to exploit them.  

Where the whole process of naming acceptable manufacturers ultimately breaks down is when you consider “reverse competition”.  Reverse competition is when you base your specification on a lower end product that may be the least expensive or of lesser quality, and then align it against manufactured products that are considered more expensive and are of higher quality.  What can and ultimately does occur is that the Owner ends up spending Escalade dollars on a GeoTracker.  

So what is the answer to the naming of manufacturers in a specification?  Well, for starters it would be prudent, and one could even argue due diligence, for the specifying engineer to identify who the local representatives are for all the manufacturers being considered.  This would avoid an obvious impropriety in the specifications and prevent any appearances of a conflict of interest.  In addition, once a specification has been through the initial draft and editing, it could be submitted to the various named manufacturers for comment and clarification.  The results of this process will insure competition in the specification as well as create some valuable discussion over the pre-requisite details of the project.  It could be that one or more of the alternate manufacturer will not be able to meet the minimum intent thus opening the opportunity of other more likely candidates to be added or included in the spec. 

The other alternative would be to avoid the listing any manufacturer in the specifications, much the way the Federal Government does their specifications, and allowing open competition among all manufacturers “subject to meeting the requirements of the specifications.”