Proprietary Specifications

What They Are and Why They Are Important
      by     
Robert L. Smith, Esq.
Mary E. Schwind, Esq.

Proprietary specifications are specifications that exclude all but one company from supplying a particular product on a job.  Propriety specifications are not an issue on privately funded projects, where the owner has the latitude to ask for any product the owner wants.  However, it has been universally acknowledged that proprietary specifications are detrimental in public construction contracts because restricting competition increases the cost to the taxpayers, the people who ultimately foot the bill on public jobs.  Many states, including New Jersey and Massachusetts, have enacted laws that restrain the use of proprietary specifications.  New Jersey’s law, for example, bars the use of “brand name” products in specifications, but permits the use of a “brand name” as long as the bidders are permitted to substitute an equivalent product.  Massachusetts requires that specifications provide for a minimum of three named brands of materials or their equals.

Manufacturers have adopted a variety of strategies to circumvent the general prohibition against propriety specifications.  These strategies include convincing the architect, whose responsibility it generally is to approve “equivalents,” that there simply is no product equivalent to its product, and working with owners and architects to draft specifications that only appear to be neutral.  Specifications can be drafted to appear to be “generic” but can be so narrowly drafted that only one product actually fills the bill.  Manufacturers are often passionate about the quality of their products and can persuade owners and architects that no other product will do.  Manufacturers may also draft the specifications (which only their product will meet) and then simply give the specifications to the architect for inclusion in the bid documents.  At its most extreme, the problem of proprietary specifications has lead to charges of kickbacks between manufacturers and design consultants, who were being sec retly compensated for writing specifications favoring the manufacturer’s products.

Minnesota’s proprietary specification law prohibits specifications that exclude all but one product, but only in the context of purchasing supplies for counties, cities, towns or schools.  Violation of the statute is a gross misdemeanor.  Minnesota courts have not interpreted the statute very frequently, but there are two notable cases on the subject.  In Waldor Pump & Equipment (a 1986 Minnesota Court of Appeals case), the court held that a subcontractor could recover its damages from a design professional when the design professional wrongfully rejected products that conformed “in all material respects” to the product specified. In essence, the design professional refused to approve an “equal” product that truly was equal. 

In the recent case of Major Industries v. Krech, Ojard a skylight manufacturer complained when its product, which had been approved as an “equivalent” to the skylight specified for a school gymnasium, was later rejected.  The subcontractor, which had used Major Industries’ skylights in its bid, was forced to substitute a more expensive product named in the specification.  Major Industries sued and the trial court found that Minnesota’s statute simply does not apply to products that are installed as a part of construction projects.  Further, because violation of the statute is a criminal offense, the court also found that there is no “private cause of action” for a violation.  In other words, only a county prosecutor or city attorney can sue for a violation of the law, not an aggrieved individual or company.  On appeal, the Minnesota Court of Appeals upheld the trial court’s decision on the issue of a private cause of action, but never decided the issue of whether the statute applies to products used in the course of construction. That very important question remains open.  As a result, the reach of Minnesota’s prohibition against proprietary specifications remains undefined.

 Mary E. Schwind is a practicing attorney with the firm of Leonard Street and Deinard. Mary represents the interests of clients in construction-related disputes. She has significant experience negotiating design and construction contracts and is a frequent presenter on construction-related topics to trade and bar associations. Ms. Schwind received her J.D., magna cum laude, from Hamline School of Law in 1996. She is a member of the American Bar Association, Public Contracts Section and Forum on the Construction Industry; and the Minnesota State Bar Association, Construction Law Section. Ms. Schwind is also a member of the Association of Women Contractors.

Ms. Schwind can be reached at: mary.schwind@leonard.com or 612.335.1967.

 Robert L. Smith is a practicing attorney with the firm of Leonard Street and Deinard. Rob represents the interests of clients in construction-related disputes. In 2005 and again in 2007, Rob was selected by his peers as a “Rising Star” in the construction law field as noted in Minnesota Law and Politics magazine. Mr. Smith received his J.D., cum laude, from the University of Minnesota Law School in 1999. He is a member of the American Bar Association, Forum on the Construction Industry, and the Minnesota State Bar Association, Construction Section.

Mr. Smith can be reached at: robert.smith@leonard.com or 612.335.1933.