A friend came to me with a question regarding a case he was working: “can a public owner require that bidders use a specific brand name product?” “Of course not,” I said “proprietary specifications are illegal.” Or, at least that’s what I assumed. To my surprise, the law in the Commonwealth of Pennsylvania is not as clear as it is in other jurisdictions.
What is a proprietary specification?
A proprietary specification lists a product by brand name, make, model and/model that a contractor must (shall) utilize in construction. A basic example of a proprietary specification would state:
“Air Handlers shall be “Turbo Max” as manufactured by Chiller Corp.”
There are two problems with a proprietary specification (other than potentially being illegal): (a) they limit competition, and (b) invite steered contract awards. They limit competition because it limits the type of material that can be used on the project. In the example above, there could be equivalent air handlers available at a better price but the contractor could not use that lower priced product in its bid. Thus, the taxpayers end up paying more for tile. Also, contractors may not be able to secure a certain brand name product because of exclusive distribution agreements. Again using the example above, contractor A’s competitor may have the exclusive distribution agreement with Chiller Corp.
Besides being more costly, this situation invites favoritism and fraud, which public bid laws are designed to prevent. If the design professional that is drafting the specification knows that a certain favored contractor has the exclusive right to distribute a product, the design professional can draft the specification in a way that steers the bid to that favored contractor.
Most federal agencies prohibit proprietary specifications. For example, with limited exceptions, FHWA regulations prohibit contracting state transportation agencies receiving federal funds from requiring the use of a patented or proprietary material, specification, or process. Likewise, under FAR’s “Material and Workmanship Clause,” “[r]eferences in the specifications to equipment, material, articles, or patented processes by trade name, make, or catalog number, shall be regarded as establishing a standard of quality and shall not be construed as limiting competition. The Contractor may, at its option, use any equipment, material, article, or process that, in the judgment of the Contracting Officer, is equal to that named in the specifications, unless otherwise specifically provided in this contract.”
New Jersey Law
Many states have also banned proprietary specifications. In New Jersey (where I frequently practice), the Local Public Contracts Law bans local government agencies from using proprietary specifications. However, on NJDOT projects that do not receive federal funding, proprietary specifications are not per se prohibited. But, a contractor can request substitution of the specific product.
Pennsylvania State Projects
In contrast, Pennsylvania does not expressly address proprietary specification by statute. However, under Department of General Services’ guidelines, which apply to state projects including PennDOT, proprietary specifications are strictly limited. Section 205.1 of DGS’s Project Procedure Manual states:
“Specifications for DGS projects are “or equal” specifications, and products available from a single manufacturer, or a limited number of manufacturers, are not to be used in project designs. DGS requires at least three (3) manufacturers of an available product to be specified, but bidders may use equal products/manufacturers as approved by the Professional, as per the General Conditions to the Construction Contract.”
Pennsylvania Local Projects
Pennsylvania Municipal and County projects are not subject to DGS’s guidelines. Instead, a patch work of statutes applying to Pennsylvania’s Byzantine system of Cities/Township of the First/Second/Third class, govern procurement at this level. All of those statutes require that bids be awarded to the lowest responsive and responsible bidder. However, none specifically restrict the use of proprietary specifications.
Therefore, bidders facing a proprietary specification at this level must rely upon the Pennsylvania common law public policy of assuring the best price possible for the taxpayers and guarding against favoritism, extravagance, fraud, and corruption in the awarding of municipal contracts.
What to do about it?
If you encountered a proprietary specification, whether on a Federal, New Jersey, or Pennsylvania contract, you need to act before the time of bidding or your claim may be barred by statute or waived. When and how that objection is lodged depends on the project and contracting authority. If the bids have been opened and a proprietary specification has resulted in you losing the award, the potential still exists to challenge the award but the burden could be higher. Therefore, understanding how to spot a proprietary specification and what the law is in the area is the best chance at successfully challenging it.