In any home, there are lots of manufactured products: appliances, pipes, drywall, paint, lights, faucets, toilets, windows, shingles, doors, and much more. All of those products come together to create your new home.
The builder (or you as the customer) must specify a manufacturer for each of those items. Many people assume that a builder uses the least expensive items he or she can get away with (hence the term "builder grade"). But that's not usually the case.
As the customer, you may request specific manufacturers, perhaps because you've always used that brand and love it or maybe you know someone who works there. You may care about the brand for appliances but not the toilets, shingles, or pipes. For the items where you don't have a manufacturer preference, your builder will make the selection for you.
So what criteria does the builder use when choosing the manufacturer for each item? There are several things that come into play.
Supplier or contractor chosen to install a particular item
Builders have contractors they trust, and they're going to follow the advice of that contractor regarding the manufacturer to use for their area of products.
Let's take heat and air as an example. The builder knows who is going to get the phone call on Sunday afternoon in the middle of July when the air conditioner breaks. He doesn't want that call. By making the equipment choice the responsibility of the contractor, the builder makes sure the contractor "owns" his choice of equipment and will stand behind it.
Reputation among other builders
Just like you do when you are researching products, a builder will call his builder buddies to get the scoop on particular products. He'll ask other builders about ease of installation and how often they run into warranty issues with a specific product, especially if it's one they've never used before.
Some products relate directly to the builder's market niche. For a builder advertising himself as a green builder, products that are proven to save energy costs or reduce environmental impact (anything from appliances to roof decking) are going to be his first pick.
Similar to reputation, a builder will use products he's familiar with and trusts. The last thing a builder needs is a bunch of warranty issues that arise from a product he chose in order to save a few hundred bucks. If he's always used a particular manufacturer for shingles and rarely encountered an issue, that weighs heavily in his recommendation for that product.
All other things being equal, the least expensive product is the best. That's what you do when buying something—if you see a refrigerator at Best Buy and the same one is on sale at Lowe's, you buy the one at Lowe's because it's cheaper. The same thing happens in the building industry, but there are lots of factors to consider before price.
If you're wondering why your builder chose a specific manufacturer for a specific product, feel free to ask them. Chances are they can tell you exactly why they selected that manufacturer, whether it's due to performance, past experience, or reputation among other builders.