COLLIER COMPANY I The Collier Company is a large electrical manufacturer. Recent
ID: 435505 • Letter: C
Question
COLLIER COMPANY I
The Collier Company is a large electrical manufacturer. Recently, a new division of the company
was started, and entirely new facilities were required. In equipping the new plant, it was decided
that for certain subassembly operations it would be desirable to have production employees
seated at high stools instead of standing at their work benches. Eight hundred and fifty employees
were to be so seated in the new plant.
After investigating many possible stool designs, the plant engineering department and the
personnel department agreed on a certain style of stool that was easily described to the trade as
“Carter’s 816 or equal.” Supply management requested bids from most major fabricators of this
type of item, and bids from nine suppliers were received more than ten days before the announced
closing date.
Several days before the final bid date these suppliers started to call the supply manager to
see how they ranked. The supply manager answered their questions honestly with phrases like:
“You are not low bidder, but you are fairly competitive.”
“You are not low bidder. You are way out of line.”
“You are presently low bidder, but others seem to be revising their bids.”
By April 23, the day originally chosen to close bidding, every supplier except supplier C
had submitted at least one revised quotation. (See Exhibit 1.) In most cases, the prices quoted
were substantially below the initial bids.
EXHIBIT 1
UNIT PRICES QUOTED BY SUPPLIERS
Original bid April 23 bid May 7 bid
Supplier A $55.92 $41.10 $34.08
Supplier B 44.70 37.50 31.62
Supplier C 39.48 39.48 39.48
Supplier D 45.36 35.88 30.06
Supplier E 43.86 38.58 31.98
Supplier F 38.70* 37.92 29.88*
Supplier G 39.00 35.40* 30.60
Supplier H 42.78 39.60 31.50
Supplier I 48.60 41.34 33.18
*Indicates low bid.
Late in the afternoon on April 23, two suppliers asked for special permission to make a
final bid on April 24. Since these two firms had been satisfactory suppliers of the Collier
Company for years, the supply manager was anxious to give them any opportunity to keep their
facilities operating in the depressed conditions that then characterized their industry. He gave
them a special extension of one day. By the next afternoon, the supply manager had heard from
three more firms who wanted the same privileges as the two concerns who had rebid. Firms kept
asking for special extensions or equal bid privileges until the supply manager finally said to all
who called that May 7 was the last day he would entertain bids. On May 7 several suppliers asked
for special permission to bid late and were refused. Supplier C still had not called in to change its
original bid.
By May 7, the supply manager felt that all the firms were bidding at less than their total
costs in order to keep their facilities operating at the highest possible volume in this slack period.
He also felt that further price adjustments would be negligible. However, not wanting any
supplier to go “out of pocket” on the order, the supply manager asked the plant engineers to make
a cost estimate on the chairs. The engineers estimated costs as follows:
Labor $12.00
Materials 13.62
Overhead: 150% of direct labor 18.00
Total cost (excluding profit) $43.62
Having satisfied himself that all suppliers were making some contribution to overhead at
the quoted prices, the supply manager awarded the order to supplier D, who had done business
with the Collier Company in the past and was considered one of the best fabricators in its field.
On May 9, two days after making the award, the supply manager heard from both
supplier C and supplier F.
Supplier C was extremely angry that he had not been told of the acceptance of new bids.
He said that he would write a letter to the vice president of material requesting a review of this
“entire deplorable situation.” The supply manager informed supplier C that reasonable follow-up
on the latter’s part would have given him any information available to other potential suppliers.
Supplier C was not at all satisfied with this answer and again expressed his intention to contact
the vice president of material.
Supplier F asked why the supply manager had requested bids at all if his “mind had been
made up all along.” Supplier F said that the order should have gone to the lowest bidder who
could provide the object desired. He said he could meet the specifications and could deliver to
any schedule supplier D could meet. He demanded the order, and when the supply manager
informed supplier F that “final selection of the supplier is entirely my province,” the supplier
raged that he would “spread the word to the trade” and would write the Collier Company
president, who “should know of such favoritism and incompetence.” He further stated that he
even suspected that money had passed hands for this order.
The supply manager was upset by these calls and did not enjoy his supper on May 9.
What are the weaknesses inherent in the competitive bidding process that are illustrated by this case?
Who do you think should have received the award? Discuss
You are the purchasing manager. What do you do now? Why? Assume that the statement "making the award" means that a purchase order has been sent to vendor D. Assume that you plan to remain as purchasing manager; quitting, retiring, or changing careers are not options here
Explanation / Answer
Q.1. To promote and maintain the competiteveness in bidding there should be certain norms that are required to be met which were seem lacking in the given case which has caused the weakness in the competitiveness in the bidding. These weaknesses/norms could be as follows -
1) At first when a final date is decided and has been communicated to all then the asker should stick to that date and should not entertain individual requests.
2) If the firm belevies that extending the date could be beneficial for the firm to have owest price bid then it could extend it as the supply manager did. But the loophole is that he did not communicated to all about this extension. He only told about the extenstion of the final date of submission who called but it was on his part to be equal to all and should communicate the same to all even if one calls or not. Hence the rage of Supplier C is somewhat reasonable.
3) To make the competiveness and privacy secured during the bidding providing information about the others is not ethical. Suppliers used phradses like you are not low bidder obviously tells about other bidders' price which is breach of secrecy.
Q.2. Given all the weaknesses and the concenr of the Supply manager i feel the bid should be awarded to D only. The selection of a supplier does not only depend upon the lowest price but other factors like services and quality provided by the supplier. No doubt price is an important factor too. As presented in the case D had done business with the Collier Company in the past and was considered one of the best fabricators in its field and D has also presented the second price quotation. These facts make him the strongest candidate to get awarded by the bid. And hence claim of F is not reasonable.
Q.3. The purchasing manager should stand with supplier manager in his decision as the ultimate decision was right to award the bid to D. However there were certain weaknesses on the part of the supply manager that should be restorted with other means.
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