Help me answer this please LO17-1, LOI7-2, LO17-4 CASE 17.3 The Bidding Wars Ken
ID: 371139 • Letter: H
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Help me answer this please
LO17-1, LOI7-2, LO17-4 CASE 17.3 The Bidding Wars Kendahl Plastics Corporation contracts with NASA to manufacture component parts used in com- munications satellites. NASA reimburses Kendahl on the basis of the actual manufacturing costs it incurs, plus a fixed percentage. Prior to being awarded a contract, Kendahl must submit a bid that details the estimated costs associated with each project. An examination of Kendahl's job cost sheets reveals that actual costs consistently exceed cost estimates quoted during the bidding pro- cess. As a consequence, NASA ends up paying considerably more than the bids Kendahl submits A Kendahl representative was recently quoted as saying, "We really aren't overcharging NASA for the work that we do. The actual costs shown on our job cost sheets seem high only because we are forced to understate our bid estimates in order to be awarded contracts. It's a common practice and everybody does it. The truth of the matter is companies that quote realistic bid prices are not awarded contracts." Instructions Let us assume that it is common practice to purposely underestimate bids in order to win NASA contracts. Is it wrong for Kendahl to take part in this activity as long as it does not overstate the actual costs it incurs?Explanation / Answer
Answer:
Yes it is wrong for Kendahl to underestimate the costs during biding to get the contracts.Instead Kendahl should estimate the actual costs during biding the NASA contract and make them satisfy with their costs and explain them clearly about their costs and how worth it is to pay for that contract.The practice of understating during bids to get the contract should be removed.Everyone taking part in the bid must quote their actual costs and then win the NASA contract with that.There may be minor deviation of costs from biding, but the actual cost should not vary too high compared to estimated cost.So Kendahl should provide the actual cost details of each project and to get the contract they can offer other benefits and show their uniqueness inorder to attract the NASA and get the contract.
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