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 twelve months since the new facility would allow for production necessary to meet a new government contract.
The contract was of vital importance to Peach since it would yield additional net income of $4,000,000 annually. Within 2 months after the meeting, Don 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 since he had 3 weeks to award the project and execute a contract.
Winstrom Construction was a local Ohio firm that had completed much of the construction at Wright-Patterson Air Force Base. They 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 since he heard they had a partnership attitude in dealing with the inevitable problems on the AFB projects.
Frazier Construction was a firm from Florida who had completed several projects around the country for competitors of Peach. Known for speed and flexibility, they had a reputation of finishing projects in 95% of the required time. Don had invited them to bid since he noticed the Peach competitors tended to give Frazier repeat business. Their bid was $6,100,000.
Foreman Builders was following Peach from Minnesota where they 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 nine months was sufficient time to complete the project. Don felt their quality was second to none, and was notsurprised with their 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, they were known for on-time, on-budget delivery of high quality. Don had not worked with them 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 their offices within the next 18 months – a fact that Don became aware of through his marketing group. This potentially represented sales of $20,000,000 for Peach and a boost to the bottom line of $800,000 if Evans decided to purchase Peach computers instead of IBM. Their bid was one 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? Which bidder would you select and why?
Frazier would’ve been an excellent choice, had they also did work for Peach. Although they probably were a great team, Foreman Builders has a great relationship with Peach personally. Also Foreman Builders were familiar with the building, so this is definitely a big bonus for Peach, sense the require specifications of the project is very detailed. Choosing a contractor that has a great background in the providing accuracy for this project should be ideal. Winstrom Construction was a great choice to invite to this sort of bid.
They are local, and have done similar projects for Peach. However, the decision has to be made and the project has to start in 3 weeks! With concerns of having to get money from the federal reserves, because the bid required a deposit of $1,000,000, this could delay the start of the project. D.A. Evans was probably the furthest out of reach. Although the sound like they could get the project done with the upmost quality, we still don’t who these people are. We have never had a relationship, therefore our trust in them in obsolete.
* What factors should be considered or addressed in the implementation? How would you implement your recommendation? * Do you feel that company politics would have an impact on the selection of the supplier?