RFP

Lecture #13
4/29/15
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CASE STUDY:
CROWN
AUTOMOBILE
COMPANY

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 3

Why scenarios?
Decision

Making

Common

Sense

Acquired

Knowledge

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?

Crown Automobile
Company
What

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?
6

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
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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.

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.
10

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
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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 allinclusive requirements are finalized then as a Project Manager I
would like to perform following steps, while keeping the sponsor(s) in
loop:
1.

2.
3.

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

13

RFP: Technical & Management

Requirements
Technical

Standards
Specifications
Quality Requirements
Schedule Requirements
Cost Requirements
Other Management
Requirements

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Schedule Requirements against

Contract Pricing
Fixed,

unit and target price contracts

require specific completion dates
Cost 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 dont
require a detailed definition of
schedule requirements
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Schedule Requirements
Schedule

Completion
Requirements

Schedule

Monitoring
Requirements

Schedule

Incentive Fee
Requirements

Responsibilities

for Schedule

16

SCHEDULE
COMPLETION
REQUIREMENTS

17

Engineered Materials
Contracts
Require

a substantial amount of detailed work

If buyer develops the detailed design then buyer
should include when the detailed drawings and
specifications will be released to supplier
Suppliers 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

19

Engineered Equipment Contracts

RFP

defines the date when the suppler will be

released to begin its detailed design work
RFP 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 shouldnt be
earlier than required for
installation
RFP specifies the dates when the
testing is scheduled to take place
at buyers premises for suppliers
representative availability
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Example: Engineered
Equipment
Buyer

22

Engineering Services
Schedule

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

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Example: Engineering
Services
Buyer

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Construction Services
Completion

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

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thanK yoU

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