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September 30, 2013
Brand equivalents and procurement
Procurement Perspectives | Stephen Bauld
For some unknown reason during 2013, many municipalities have been sole sourcing products via "Brand Description" and shutting out every other supplier with equivalent products. This practice, for the most part, does not fall within municipal procurement policies on sole and single sourcing.
Perhaps there is no subject area in which the opinion of a user department is likely to conflict to such a great an extent with the opinion of the purchasing department, as with respect to the use of a brand description when ordering a supply. I have been personally shocked at meetings when listening to municipalities various obscure reasons for using a specific product than try to explain how it fits into the existing sole source city policies.
Brand name specifications cite a brand name, model number, or some other designation that identifies a specific product of a manufacturer. These brand name products including exact part number descriptions are now being directly transposed from company websites into the tender documents, thus disqualifying all other bidders of equivalent products. This practice is clearly not fair, open, or transparent to all the other bidders with equivalent, and possibly better solutions to each specific process.
Brand name specifications are the most restrictive type of specification. They have the effect of limiting bidding to a single product and should be used only when one product will meet an intended need. While brand name specifications are not appropriate in most cases, they do have a legitimate use in public purchasing when a particular brand name item must be purchased in order to be compatible with existing equipment.
Generally speaking, brand name products are more expensive then off-brand or generic products of similar quality and capability. Nevertheless, user departments will almost always prefer to order suppliers by brand name. For example, the simple reason is that an established brand confers a considerable degree of comfort that the product will work as intended, and if it does not, the supplier will stand behind its product and remedy the deficiency.
Many tender and RFP documents permit suppliers to propose substitutes for those that have been specified by the municipality. This permits suppliers to propose options that give them latitude to provide novel thinking for dealing with the customer’s requirements. Although this is consistent with the notion that the specifications should identify a problem to be solved, rather than prescribing a solution, it is possible to allow too much flexibility.
Doing so loosens the specifications and reduces the municipal customer’s control over final supply. It also affords a basis for introducing unnecessary risk. To balance these competing considerations, thought should be given to the creation of a process for evaluating products offered as substitutes. In addition, the RFP or tender documentation should encourage suppliers to confirm the acceptability of substitutes before making a bid for the contract.
It is common to find RFP and even tender documents, in which suppliers are asked to bid for two or more different configurations of the goods or services that form the basis of the proposed contract. The specification should make clear how the municipality will select between such options, and where its priorities lie, although greater flexibility is required in relation to goods because often higher level features may be bundled in at low or no additional cost when buying off the shelf.
Moreover, it is clear that in many cases the choice of option will be limited by budgetary considerations. Thus any provision relating to the selection of options should provide for a degree of reserved discretion, so that the municipality can adjust its final selection, based on the funds available.
In my opinion, governments should not be sole sourcing any products, goods, or services, unless they conform to the purchasing policies of each municipality.
Stephen Bauld is Canada's leading expert on government procurement. He can be reached at firstname.lastname@example.org.
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