Peach Computer Company needs a facility in order to expand its business. It held a meeting with the project team and key stakeholders. At the meeting, the decision was made to utilize detailed design and engineering specifications so as to obtain competitive bids on the project. The executive committee required completion of the building within 12 months because the new facility would allow for production necessary to meet a new government contract.
The facility was of vital importance to Peach because it would yield additional net income of $4,000,000 annually. Within 2 months after the meeting, Don, the project manager, issued a request for proposal using the recommended specification method with a specific construction time of 9 months.
Four proposals were received. Don reviewed them quickly because he had 3 weeks to award the project and execute a contract. Below is a summary of each response. Winstrom Construction was a local Ohio firm that had completed much of the construction at Wright-Patterson Air Force Base.
It submitted a bid of $5,960,000 with a required deposit of $1,000,000. Winstrom had worked previously on a similar project for Peach and had finished it on time. Don was concerned with the deposit given that Peach would have to supply these funds from capital reserves, which were invested at 8% annually, but he rated their quality an A because he heard Peach had a partnership attitude in dealing with the inevitable problems on the AFB projects. Frazier Construction was a firm from Florida that had completed several projects around the country for competitors of Peach.
Known for speed and flexibility, it had a reputation of finishing projects in 95% of the required time. Don had invited the company to bid because he noticed the Peach competitors tended to give Frazier repeat business. Its bid was $6,100,000. Foreman Builders was following Peach from Minnesota, where it had completed three projects for Don.
A small, minority-owned firm, Foreman was not well capitalized but Don liked the fact that he dealt directly with the owner, Chuck, and his son, Jay. Foreman had not worked in Ohio, but knew the building type quite well and felt that 9 months was sufficient time to complete the project. Don felt its quality was second to none, and was not surprised with Foreman?s bid of $6,025,000 with a required deposit of $850,000. D.A. Evans Company was a national builder of strong reputation. Highly sought after, it was known for on-time, on-budget delivery of high quality.
Don had not worked with the company before and knew this only from articles in the national construction magazine, ENR. A large corporation, Evans was also in the market to replace PCs throughout its offices within the next 18 months?a fact that Don became aware of through his marketing group. This potentially represented sales of $20 million for Peach and a boost to the bottom line of $800,000 if Evans decided to purchase Peach computers instead of IBM. Its bid was 1 hour late and was $6,500,000.
What are the main issues in the case, and how would you begin to resolve them using some of the concepts we have discussed in class? What alternatives are available to resolve the issues?
What type of contract incentive(s) could you adopt to make this case more successful and why?
Provide an analysis of the four bidders.
What are the benefits and disadvantages of each supplier?