Lg424 Case Notes

PART IV
Instructor’s Teaching Notes

AAA, INC.
(A SERVICES CONTRACT MANAGEMENT CASE)

Purpose
The purpose of this case is to discuss the supply manager’s role in managing a services contract. Specifically, the case addresses the appropriate level of supply manager involvement in a supplier’s problems, and effective methods of avoiding problems. The case examines source selection and the disadvantages of cost plus percent of cost contracts.
Discussion
The case asks the following questions:
1. How could the supplier problems be avoided in this particular case?
This question points out the importance of sufficient bid time, being sensitive to the supplier’s limitations, and contract terms and conditions which give the appropriate level of control to the buying firm.
2. What are the potential implications of a cost plus percent contract?
This question addresses the issue of providing proper incentives to the supplier and the disadvantages of cost plus percent contracts. It examines cost plus incentive fee contracts when the buying firm has an objective other than price (in this case, schedule).
3. What type of sourcing procedure should have been used?
This question examines sourcing methods and the use of source evaluation criteria.
4. In this particular case, what should the supply manager do?
This question examines the advantages and disadvantages of canceling the services contract and selecting a new source.
Question 1:
How could AAA have avoided the problems it experienced with Comstock?
Comment:
At the outset, AAA placed itself in a disadvantageous position by not ensuring hat there was sufficient time for the source selection process. In addition, AAA placed an unnecessary restriction in its specifications by stipulating that the contractor would have to perform all work in-house. If Comstock had been permitted to subcontract for the talent it could not provide from within, it could have avoided many of the problems encountered. AAA could...