What Did We Learn About Substitutions?

Contributed by Liz O'Sullivan

In January a little ways back, the Denver Chapter of the Construction Specifications Institute hosted a chapter meeting with a Panel Discussion on Substitutions including an owner’s rep, a general contractor, a subcontractor, an architecture firm’s construction contract administrator, and a specifier. Here’s some of what we learned.

Many Owners Welcome Substitutions.

The biggest divergence of opinions was about owners’ positions on substitutions. The loud and clear message from the owner’s rep was that owners welcome substitutions, and that many are frustrated with architects’ and specifiers’ reluctance to entertain substitutions. In the eyes of the owner’s rep, there are two crucial things – cost and schedule. Since time is money in construction, schedule is very important to owners, so even a substitution that costs more money but saves time is likely to be favorably received by an owner. Owners wish that more architects and specifiers understood the overall impact of substitutions, time- and money- wise. (It’s important to note that the owner’s rep on the panel primarily represents developers, and recent projects have been multifamily residential projects.)

The specifier pointed out that for private work, substitutions can be good because they give the design team an opportunity to evaluate things they may not have evaluated when they first prepared the documents.

The subcontractor thinks that substitutions are an opportunity for the owner to get a better value. With the developments and changes in products and assemblies that happen all the time, architects and specifiers can’t keep up. Subcontractors, who are specialists in their areas, can keep up, and may be able to offer better solutions.

But Some Owners Don’t Want Substitutions.

The specifier reminded us that many owners, especially in the public sector, want what they know has worked, and do not want substitutions. Owners such as municipalities, public school districts, and universities may own and maintain many buildings, and need maintenance procedures to be the same from building to building. Public owners’ requirements are sometimes outdated, however, and the specifier does not always have the opportunity to explain to the owner that several of their listed acceptable manufacturers no longer exist.

Substitutions Scare Architects.

Substitutions scare architects, and for good reason. They spend a lot of time designing around a particular product – that’s why that particular product is specified. Architects worry about how many details in the drawings will be affected – and will no longer be correct – because of a particular substitution. During the months-long design process, design decisions are followed all the way through everything that’s affected by them. There’s often no time to go back and do this again during construction. And when design changes have to be made due to a substitution, it is hard to be sure one has gone back and checked every possible thing that could be affected, as was done when the design was first developed. This is not only due to time constraints, it’s also because this is not how the design process naturally flows.

Architects also wonder if the owner is getting something of a lesser value on the project when a substitution has been accepted because the owner was attracted to cost savings. The architect knows that the owner is happy to be getting something cheaper, but the architect worries that the owner is giving up something of greater value or performance (the specified item), and the general contractor or subcontractor is the one actually saving more money on the substitution.

People Have Different Ideas About What a Substitution Is.

Panelists agreed that different team members on a design and construction project do not agree about exactly what a substitution is. The general contractor pointed out that team members treat substitutions differently depending on the project delivery method. Substitutions are treated differently on hard bid (design-bid-build), negotiated (construction-manager-at-risk or construction manager/general contractor), and design-build projects.

The general contractor doesn’t want to receive substitutions submitted by subs on hard bid (design-bid-build) projects, because they are usually submitted to the general contractor without enough time to get them approved by the architect prior to the bid. The general contractor then has to decide whether or not to use the price associated with that substitution. If the general contractor is not the low bidder, it doesn’t matter, so there’s an incentive to use the price associated with an unapproved substitution. But if he uses that number and then the substitution is not accepted when submitted to the architect after the bid, he’s losing money.

On negotiated projects, the general contractor wants to see substitutions, get pricing, explain to the owner and the architect that if this product is used instead of a specified product, the owner can save money, or the schedule can be shortened. There’s more of a collaborative effort on negotiated projects.
The specifier (of course) read us the definition of a substitution from MasterSpec. It’s vague. Most of the industry probably agrees that “the devil is in the details” on this issue. We agree that a substitution is a change, but what kind of a change, and how a substitution is supposed to be evaluated, are where the differences of opinion and misunderstandings occur. The owner and design team need to define how casual or formal the process for evaluating substitution requests is. The specifier believes that part of his job is to define that evaluation process succinctly.

For Better or Worse, “Or Equal” is Flexible.
​
The owner’s rep doesn’t mind the phrase “or equal” at all. Owners are looking for general contractors who are willing to “turn stones” and look for better options, and the phrase “or equal” in the specs allows for more possibilities.

The contractor says that “or equal” in a spec gives them more flexibility to look at the possibility of using an unspecified product in the bid.

Architects do not like the phrase “or equal” because it is open to multiple interpretations. There’s a lot of information that needs to be evaluated to see if something that is submitted is actually equal, so if someone submits on an “equal” that is not listed in the specs, this contract administrator asks for a substitution request.

The subcontractor likes the phrase even less than architects. He described it as two words in a specification that make subcontractors want to turn away and run as fast as they can in another direction. He thinks that if an architect goes through the exercise of heavily specifying one product that there isn’t an “equal” to that. He described “or equal” as a “cop-out” that allows way too much flexibility. (How is a sub supposed to know what is considered to be equal?)

The specifier does not use “or equal” in his specs, because the phrase is full of uncertainties. “Or equal… determined by whom?” he asked. He believes that the only equal to a product is the next product on the assembly line of the manufacturer who’s making it. “Equal” is too strict a term to be put out there to be determined by anybody. The specifier prefers a phrase like “Alternatives are welcome to be presented” along with a statement about who approves the alternatives. He believes it’s a more honest way to evaluate alternatives.

We got an interesting question at the end of the panel discussion from a chapter member about “or equal” and public work. Some government owners require that “or equal” be added to a list of products or manufacturers. We discussed different ways to define “or equal” in the construction documents, and procedures for evaluation. Some government entities do not actually define “equal,” or give any guidelines for procedures to evaluate “equals,” but still require that the phrase be included.

We’re Not Sure About “No Substitutions.”

The owner’s rep would never advise an owner to require “no substitutions” in the spec.

When asked how much pricing is affected when competition is limited by specifying “no substitutions,” the general contractor responded that the problem is that you don’t know. The suspicion is thathigher pricing does result when there’s no competition.  We’re in a competitive environment, and if someone is sole sourced, they may take advantage of that and bump up their price.

In the subcontractor’s experience, typically an owner doesn’t end up with higher prices when a sole source with no substitutions is specified. For curtainwall, pricing is only given to select vendors, and some can provide better pricing than others in bids, but their numbers probably won’t change based on how many manufacturers are named. Separate from the pricing issue is a service issue; the subcontractor mentioned that some vendors may have more leverage to get replacement products out on the jobsite faster than others.

The Earlier a Substitution Request is Made, the Better.

Everyone generally agreed that the earlier a substitution request is made, the better.

The specifier pointed out that procedural requirements for substitutions that happen prior to the bid are not part of the contract documents – they’re part of the instructions to bidders. In these cases, approved substitutions are no longer substitutions at the time the contract is signed – they become part of the contract. Procedural requirements for substitutions that happen after the bid are part of the contract documents.  Also, substitutions that happen after the bid are divided into substitutions for cause and substitutions for convenience – requests for substitutions for cause are submitted when things are not available, manufacturers don’t make something anymore, etc. MasterSpec specifications software suggests that all substitutions for convenience should be received within a certain number of days after the construction contract is signed.

The owner’s rep’s projects typically have negotiated contracts, so don’t have hard bid dates. He said that as long as substitutions are decided upon prior to signing the contract, substitutions are fine.

The general contractor believes it’s best to require substitution requests to be submitted prior to the bid, but from a practical standpoint, it makes sense to accept some substitutions after the bid.

The architect’s contract administrator sounded somewhat resigned as she said that substitutions are going to happen before, and after, the contract is signed. It’s better to receive the substitution requests at the right time, before the bid. But even more important than timing is that the general contractor should actually review the substitution request before sending it on to architect (and not just stamp it and pass it on without actually reviewing it).

The subcontractor thinks that it’s good to receive substitution requests during and after the bidding process, because the project benefits from time for the team to collaborate. The best results, best pricing, best performance, best product can come out of collaboration. Any other way is subjective – just one person’s opinion. The project can get to a higher level with collaboration, with everybody involved.

Can We Eliminate the Substitution Process?

A guest attending the meeting asked how we get rid of this substitution process. The subcontractor on the panel said that the only way to get rid of the substitution process is to write performance specifications instead of specifying products, manufacturers, or descriptions that point to specific manufacturers.

CSI’s Construction Specifications Practice Guide defines a performance specification as “a statement of required results with criteria for verifying compliance, but without unnecessary limitations on the methods for achieving the required results.” The book cautions that “an incomplete performance specification results in a major loss of quality control over the materials, equipment, and workmanship going into a project.” The criteria for verifying compliance need to be “capable of measurement, test, evaluation, or other acceptable assurances.”

In performance specifying, no products, manufacturers, or installation requirements are specified. Anything that can meet the required results, and whose compliance with the required results can be verified, meets the spec. In performance specifying, although a product is not named in the spec, it meets the spec if it meets the required results indicated in the spec. Even though it’s not named, a substitution request is not necessary.

Performance specifying transfers some design duties and control from the design team to the contractor team. It allows many more options to be presented to the general contractor. It takes some control away from the architect and the owner – if they don’t like the way something looks, they may not be able to point to the spec and say that something doesn’t meet the spec. If it performs the way the performance specification requires, it meets the specification, and cannot be rejected without a change order.

The panelists: Tom DeBerard of DAE Construction Services, Stan Ward of Ward Construction, George Feathers III, currently of Curtain Wall Design & Consulting, Inc., Morayma Salas of Cuningham Group, and David Bishton of Construction Rx, LLC.