Should Manufacturers Pay Integrators To Spec Them Into Bids?

Integrators disdain competitors 'stealing' jobs that they have worked to put together. So what if manufacturers paid integrators for getting a manufacturer's product spec'd into a bid, even if the integrator loses the bid?

Project registration is close but different. Additional discount points are given to an integrator who works on and registers a specific opportunity with a manufacturer. The integrator has a modest advantage, but they can still lose the deal for any number of factors - politics, a desperate competitor, a bigger competitor with even larger discounts, etc.

One company, Atlas Audio is releasing a program that goes a step further, "Finally, a rebate credit will be issued to any integrator who creates the specification but loses the bid on projects that still utilize the Atlas Sound products from the specification."

  • It's a win for the manufacturer to get integrators to fight harder for them.
  • It's a win for the integrator to get something out of it, even if they lose.
  • It could be a lose or issue to the end user if this motivates the integrator to push that one products.

Absolutely not! That's unethical. An integrator 's fiduciary duty is to the client he is working with. Any solution must be the correct one for the application. Anything less is unprofessional, period.

Unethical for the manufacturer to even offer them?

Unethical for the integrator to accept them even if not influenced by them?

Isn't every company's ultimate fiduciary duty to oneself/shareholders?

Richard, aren't manufacturers essentially doing the same thing by giving greater discounts to integrators who sell more of their products?

I wouldn't put this in the same category as volume discounts, since those are awarded based on total sales made for the manufacturer's products.

Bid registration discounts are a bonus, as long as you make the sale.

And the Atlas example is just plain twisted. Why would a manufacturer reward a losing bid?

An integrator should offer the client the solution for that particular application. Also find, and chose the product line that fits the clients surveillance needs, not the manufacturers sales needs. That's what I mean. Different applications may require different solutions that the integrator should identify and offer to the client. I see big company's think different than smaller ones, regardless if it hurts the customer.

Who makes up these questions?

Do Architects get a "payola" to spec a specific product in a new building design - Not.

My guess is if you do bid/spec work you are working to get the product spec'd into the bid in hopes of getting the sale.

that's called the cost of doing business. "Sometimes you lose - Sometimes you Win."

He's a challenge on the same topic. with many government projects, If you get paid as a consultant for your design / recommendations, in many cases you can't be a bidder - even though now you are in a position to offer the best product prices given that you don't have to absorb the losses from the no win bids. DUH!

"Do Architects get a "payola" to spec a specific product in a new building design - Not."

Actually, Yes. Frequently.

Whether they loose the bid or not is almost immaterial. If you have enough stroke to influence bid specification, you're certainly not a trunkslammer, nor are you planning on losing the bid.

One thing that is not clear to me - do integrators still get the rebate if the spec specifies "Atlas, or equal"?

Getting a hard spec for a sizeable project is really difficult, unless you have a long-relationship with the customer, are personally related to them somehow, or you resort to bribery.

My understanding is that the integrator get the payout even if they lose so long as they still buy that manufacturer's products (so it does not need to be hard spec'd, it just needs to wind up going with their products).

Here's a scenario:

The integrator bids on a project (A) he knows he probably won't be selected for because one of the other competitors has an inside track due to experience or some other factor, but he knows he's got another contract (B) coming up he's pretty sure to win but hasn't put in a bid yet.

He also knows he can get a discount on a future purchase from Manufacturer A , which he plans to use for Job B, if he puts in a bid for Job A specifiying that manufacturer's products and lets Manufacturer A know about it.

This is a perfectly credible scenario and the manufacturer only gets gamed by rewarding use of its product on the losing bid.

I have a hard time seeing what they might expect to gain by doing this.

Responding to a bid and getting a product spec'd are two different things.

In this case, if the integrator manages to have the bid written with Atlas written in, they get the rebate. If they simply respond to a bid using Atlas gear, they get a Christmas card.

Manufacturers are reasonably good at qualifying such requests. They typically have people based in the region who know the competitors, end users, consultants, etc. and can judge if an integrator is really the one getting their product in or is just trying to take advantage of a known deal.

All I'm saying is the manufacturer would be opening himself up to this type of abuse.

And if it requires extra oversight by employees, etc...to try and prevent this type of practise, that also means additional expenses along with the additional risk.

It does not open them up to abuse.

If they are written in to the spec, they are guaranteed to win the job no matter whose offer is accepted.

Again: being spec'd and being bidded are two different things. One is a sure thing. The other is a big 'maybe'.

So basically, what you're saying is the losing bid only gets the discount on the next purchase if the project goes ahead with that manufacturer's product even if someone else wins the job.

In essence, the assumption is that the end-user is willing to favour the manufacturer over the integrator, which isn't really a great position for the integrator even though he went through the trouble and effort of dealing with the bid process and making sure that manufacturer's product are used.

I'm still not convinced how beneficial that might look to the integrator. Seems like a lot of promise and potentially not much to show for it.

Yes, you are correct. From the link:

"Integrators spend a lot of time and expend a lot of effort to write design build specifications only to lose that sale to another company that is able to undercut the price. "

"This program is designed to ensure that all the integrators who specify Atlas Sound products in a system design receive compensation, whether they win the job bid or not."

Alain, manufacturers already do this process for project registration. I repeat, project registration is standard practice in the industry.

The only thing different here is that if you register and lose, you still get 'paid' as long as the manufacturer's products are sold into the job.

No additional analysis needed.

OK. It's clearer now. This is being presented as an added benefit of project registration, not something separate from that process.

Here's my question: why did everyone immediately assume that the integrator was specifying things simply in order to get this payout? Do we all really think so little of integrators?

Let's say they evaluated the project, narrowed down equipment to one manufacturer they thought was best, and then wrote that into a spec. Would it be unethical for them to get a bonus from the manufacturer for doing it then?

And to add, if it is so unethical for them to take this bonus if they lose the deal, shouldn't it be equally unethical for them to get the bonus discounts if they win the deal. Both are incentives to favor one product over the other. Help me understand please.

Any Card Carrying AIA member knowingly double dipping a paying client, is violating AIA Code of Conduct rule 3.0.02 This rule applies when the Member, though paid by the owner and owing the owner loyalty, is nonetheless required to act with impartiality in fulfilling the architect’s professional responsibilities.

If you're doing probono design work to win the larger design contract, Architects aren't making specific design choices at that stage, unike this industry.

I am a customer who wants a new building - a big one. I select an Architect for design, because I like their style, they were the low bidder, they are my sibling, whatever. I thereby enter an agreement to pay them money for a design for a building - a complete design that meets code, and can be broken up in constructible parts and let out for bid.

As an architect, that's a big job! Holy cow, I have to be an expert on everything: electrical, plumbing, even the toilets, light fixtures, and door hardware. The problem: there's no way I know all that stuff. So I'll just hire experts to design/specify those small details for me.

Even better: there are legions of experts willing to do this for free! I mean sure, they might 'play favorites' and specify equipment from a certain brand because 'they are just keeping the wheels greasy'. Or they might even work for a manufacturer outright. As an architect, I don't really mind that, because they're good people with lots of letters by their name, and it would cost me thousands of dollars and countless hours to do this on my own: these people are willing to give me free designs if they can write specific names into specs!

Pfft. I'm an architect. As long as everything looks great, is safe, and is affordable, I'm happy. Any product design issues are the manufacturer's or installing sub's to handle, not mine.

This happens thousands of times every day. Architects trade specification writing for free skilled labor. Do you think they rebate their billable hours to the customer because they don't write these designs?

We covered this endemic issue in our "Should Manufacturers Write A&E Specs?" post. If you don't think that's slimy enough, let me introduce you to "The Axis Corruption Cruise".

The IT geeks in the studio audience see this as a channel maturity question. To use computer terms, you all sound like you're talking about a bunch of vendors trying to sell Digital PDP-11's. There are, in some points of view, an assumption the channels are suffiicently mature that there is not such a tight relationship betwen the integrator (who's taking money from the end user and therefore should be representing their agenda) and the manufacturers. So yeah this looks like double dipping or paybacks or a bunch of other negative words.

But then again there seems to be a significant divide growing between integrators-work-on-construction-projects and integrators-sell-to-enterprise-supply-chains. Maybe I'm sitting in the wrong audience.

The real answer lies in the policies of the manufacturer. If the mfg limits who can sell and install the product, then there is loyalty in the channel. It also means that the integrator has more experience in installing the product. Better cost control. The end user should become more involved in product selection thus more shoot out before spec, thus best product for the job.

So the ture answer relys with the mfg and thier reps. IMO