Lecture #13April 18, 2023

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RFP

CASE STUDY:CROWNAUTOMOBILECOMPANY

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Crown Automobile Company is trying to complete the testing on a new model mid-sized car that it needs to stay competitive with other automobile companies. The Project Manager, Sue Montgomery, is nervous because of the fact that the project was originally scheduled for completion of testing and start of production last month. The primary problem with the testing is the malfunctioning of a computerized monitoring system that is supposed to indicate problems that should be corrected by the driver of the car. The computerized monitoring system was procured from the Automotive Control Systems Company.

The technical specifications for the monitoring system was prepared by the Crown engineering group. Since the engineering group lacked expertise in this area, the engineer responsible for preparing this specification worked closely with a sales representative from Automotive Control Systems in preparing the performance requirements for the specification. The specification was issued to the Crown procurement group without review from other project groups.

The Crown procurement group could only find two companies that were willing to bid on the RFP for the contract. The contract was awarded to Automotive Control Systems since its bid was twenty percent less than the other bid. After the first computerized monitoring system was delivered, the manufacturing group responsible for assembling the prototype car had difficulty in installing the system resulting in several costly modifications. The testing group experienced numerous difficulties in getting the monitoring system to detect routine problems.

Sue Montgomery called a meeting with the engineering, procurement, manufacturing, and testing groups working on the project to determine a way to resolve the problems. The procurement representative stated that he believes the contract technical specification is not complete and requires revision to obtain a monitoring system that works properly. The manufacturing group representative states that the contract specification should be revised to obtain a monitoring system that is less expensive and time consuming to install. The testing group is of the opinion that shop testing requirements should have been included in the original specification to demonstrate that the system functions properly prior to delivery. Answer the following questions as if you are Sue Montgomery.

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Why scenarios?

Decision Making

Common Sense

Acquired Knowledge

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Process of solving

What is the problem?◦What is the symptom?◦What is the cause?

What is creating the problem?What are the possible solutions?What is the BEST solution?

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Crown Automobile CompanyWhat is the problem?

◦“The primary problem with the testing is the malfunctioning of a computerized monitoring system that is supposed to indicate problems that should be corrected by the driver of the car.”

What is creating the problem?What are the possible solutions?What is the BEST solution?

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1 – How can the engineering group at this point develop more comprehensive technical requirements for the computerized monitoring system? Should the engineering group have taken a different approach in obtaining the necessary technical input for the specifications prior to their release?

At this point, Engineering group can consolidate the feedback of all manufacturing, testing and procurement groups. This would result as a more comprehensive technical requirements. Engineering should have taken the same kind of approach in the beginning. Rather than consulting with only one supplier, they should have explored the features of all the available solutions in the market and procurement group could help them in doing so. On top of that they should have revised technical requirements multiple times through the reviews of all the in-house important stakeholders like manufacturing, testing, project management and obviously procurement

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2 – Should the fact that only two bidders were willing to bid on the RFP have indicated that there are problems with the technical specifications?

Yes, it indicates that most probably technical requirements were compiled on the basis of a vendor's existing solution. It can also be deducted on the basis of the fact that Automotive Control System's sales representative worked very closely for formulating the specifications. 8

3 – What input should have been received from the procurement group when the specification for this contract was in draft form?

Procurement could provide the list of suppliers for computerized monitoring system. They could also help in arranging meetings with different suppliers, so that engineering group would have a fair idea of all the systems available in the market. This could help in documenting technical specifications that would be based on Crown Automobile needs, rather than technology of one vendor

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4 – What input should have been received from the manufacturing group when the specification was in draft form?

Manufacturing group could mainly provide input regarding installation, storage and maintenance of the system. As this feedback wasn't incorporated therefore installation was very challenging and it also resulted in blown up cost.

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5 – What input should have been received from the testing group when the specification was in draft form?

One key feedback from the testing group is to include shop testing requirements. If it would have been included in the original technical requirements, it could have solved a lot of problems. Other than that, they could have demanded for supplier test representatives to support testing after the installation in system 11

6 – What course of actions will you take?

First thing is to compile all of the technical specifications based on different groups feedback. This process of review should be repeated multiple times but on war footings. Once a comprehensive and all-inclusive requirements are finalized then as a Project Manager I would like to perform following steps, while keeping the sponsor(s) in loop:

1. Engage Automotive Control System again to negotiate a price on the basis of this new set of requirements. It should be cheaper than generating a lot of change requests.

2. Perform a complete bidding process based on these newly formulated requirements

3. Prepare and present the cost benefit analysis of both options (price restructure with existing supplier and going with the new supplier) to sponsor(s) and senior management. On the basis of their feedback, I would rework the entire project plan with updated costs and schedule.

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RFP

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RFP: Technical & Management RequirementsTechnical StandardsSpecificationsQuality RequirementsSchedule RequirementsCost RequirementsOther Management

Requirements

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Schedule Requirements against Contract PricingFixed, unit and target price contracts

require specific completion datesCost reimbursable contracts with

schedule incentive fees can also require a complete definition of schedule requirements

Cost reimbursable contracts with a fixed fee or a percentage fee don’t require a detailed definition of schedule requirements

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Schedule RequirementsSchedule Completion

Requirements

Schedule Monitoring Requirements

Schedule Incentive Fee Requirements

Responsibilities for Schedule Requirements

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SCHEDULE COMPLETION REQUIREMENTS

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Engineered Materials ContractsRequire a substantial amount of detailed workIf buyer develops the detailed design then buyer

should include when the detailed drawings and specifications will be released to supplier

Supplier’s timelines are critical, if it is responsible for a portion of detailed design

Procurement of raw material is another important factor; should be part of RFP (delivery sequence & dates)

RFP specifies how much time is required for buyer inspections

RFP should define dates for providing quality documentation such as material test reports

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Example: Engineered Material

Buyer •Award Structural Steel Contract

Buyer •Provide Detailed Drawings

Supplier •Procure Structural Steel•Fabricate Columns

Buyer •Inspect Columns

Supplier •Ship Columns

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Engineered Equipment ContractsRFP defines the date when the suppler will be

released to begin its detailed design workRFP defines the required completion dates for

supplier produced technical documents for activities like licensing and foundation design

RFP specifies the time required for buyer approval

RFP requires that suppliers provide lead times to procure materials

RFP requests a schedule for equipment testing

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Engineered Equipment Contracts (Contd…)RFP specifies the required

delivery date based on project schedule. This date shouldn’t be earlier than required for installation

RFP specifies the dates when the testing is scheduled to take place at buyer’s premises for supplier’s representative availability

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Example: Engineered Equipment

Buyer •Award Contract

Buyer •Release Supplier to Begin Design

Supplier •Prepare Detailed Design

Buyer •Approve Detailed Design

Supplier •Procure Materials•Fabricate Solution

Buyer •Inspect Solution

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Engineering ServicesSchedule dates for completing

technical documents should be included in RFP

Scheduled completion dates for design packages are included in RFP

RFP should include dates of documents/activities that are required for licensing submittals

Dates for completing the design work are also included

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Example: Engineering Services

Buyer •Award Contract

Supplier •Conceptual Design•Prepare Detailed Specifications

Buyer •Approve Design

Supplier •Submit Licensing Package

Supplier •Submit Design Packages•Submit Drawing Packages

Buyer •Acceptance Test

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Construction ServicesCompletion dates for activities

that restrain the start of construction contractor activities are included in RFP

The integration of the construction and testing process schedules determines the dates for completion of the construction activities

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Example: Construction Services

Buyer •Award Contract

Supplier •Receive Drawings•Install structure

Buyer •Inspect structure

Supplier •Install Equipment

Buyer •Test Equipment

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