Question

THE PEACH COMPUTER COMPANY Donald Bright, supply manager at the Peach Computer Company, was preparing his notes for a meeting to be held that afternoon. The meeting concerned the construction of a new $6 million, 120,000-square-foot building to be located near Dayton, Ohio. The principle issue to be discussed, and hopefully resolved, was what method of specification the firm should use in the purchase of its new building. When the requirement for the building first arose, the plant engineer at Peach advocated the use of a design firm as the desired method of developing the specifications. Such firms were employed successfully by Peach on seven previous construction projects it had completed during the past five years. Under this approach, a design firm, traditionally referred to as an architect-engineer or simply A-E, is retained to develop the detailed plans and specifications for the new building. These specifications are identical in concept to the materials and method-of-manufacture specifications used in the manufacturing industry to purchase manufactured goods. After they are developed and approved, the construction plans and specifications in sequence become (1) the basis for solicitation of bid prices from qualified construction firms, (2) the cardinal part of the resulting construction contract, and (3) the standard against which inspections are performed. Don had conducted some preliminary discussions with members of the Dayton Institute for Supply Management regarding the cost for A-E services. He learned that the fees for local projects similar to his were averaging 8 percent of estimated construction cost. This percentage was in line with Peach’s experience on its own projects. One of the members of the Dayton chapter with whom Don talked suggested that he read an article in an issue of the California Management Review (CMR). The article, entitled “Inflation, Recession, and Your Building Dollar,” dealt with the purchase of building construction. Don learned that several alternative approaches to supplying building construction were available. One approach particularly appealed to him. It provided for the use of performance specifications. Such specifications, instead of describing the building item by item in terms of its physical properties, describe in words the building’s intended function, i.e., how large it must be; how well lighted, heated, and cooled it must be; its longevity; its operating costs; and so on. After the performance description is developed, it is used to solicit from qualified bidders a package proposal that includes (1) a design approach, (2) a firm agreed price, and (3) a guaranteed completion date. The CMR article documented that when properly used, performance specifications for buildings can result in a significant savings in both dollars and time. Additionally, the article data revealed that when this method is correctly used, a considerable savings in both the cost and the time required to complete the project is a reasonable expectation. Furthermore, the article indicated that the buyers of buildings purchased under this method have experienced approximately equal satisfaction with their buildings as those who used A-E’s. In preparation for the afternoon meeting, Don decided to develop lists of advantages and disadvantages for each of the two approaches he was considering. After an evaluation of both lists, Don expected to be able to make a formal recommendation as to which method he thought Peach should employ.

1. Should Don get any additional information? Explain.

2. Discuss the inherent advantages and disadvantages of using performance specifications.

3. Discuss the inherent advantages and disadvantages of the plans and specifications method of describing quality.

4. Assuming that Don’s investigation and analysis indicates that both methods are practical for use by Peach, discuss which approach Don should recommend.

5. Explain why one method will require more active involvement on Don’s part than the other approach.

Answer 1

1. Don should definetly obtain more information regarding the method they would generally use to purchase new building. if the data provided isnot adequate information ,such as the gaurantee for construction over a specified duration , it would be very careless for the company to choose this method. Additional information enables the company to have strategic plan based on its future goals. Another example would be to seek information concerned with after sale services, such as maintenance , as well as other additional benefits that companies may offer competatively over others. Don can verify the experiences of the engineers in the companies and compare this to the previous work conducted with peach's other project contractor. this ensures that the company maintains its reliability.

2. Following are the advantages and disadvantages of using performance specification--------

Advantages--------1. it enable supplier to suggest new improved ways of meeting the requirements.

2. A standard is established for measuring and checking materials as supplied, preventing delay and waste that would occur with improper material.

3. An opportunity exists to procure identical requirements from a number of different sources of supply.

the disadvantages of using performance specification is when the prepare tries to tell the vendor "how to do the job" . this must be left upto contractor.

3. Some advantages of specification are ensuring the customer receives what they ordered. specification can eliminate indecision . specification also protect the programmer from requirements change. these type of changes can result in entire projects needing to be restarted from scratch. it helps to mitigate arguments that may arise from indecision.

some of the disadvantages of the plans and specification method are time consuming, lack of clarity, limiting competation and unreasonable tolerance. it is expensive method in term of cost of construction. duration of construction is also not certain and does not provide for the intended function.

4. I belive don should recommend the performance specification method because it has several advantages over the quality specification method used when purchasing a building. it provides detailed information of the purposeful functions of the building and provides a detailed written description filled with clarity of information for peach to evaluate. Further performance specification would enable peach to save on cost in purchasing new building for their future projects while reducing the time time construction hence availabling a new building quickly. this minimizes unecessary cost assosiated with long duration of construction and lowers the cost of construction in the long run by reducing unnecessary expenses.

5. Don can expect to be more involved in quality approach. the performance approach promotes a collaborative effort between all the department within the peach computer company. when collaboration occurs it gives the specs to the construction team as an exact requirements for what should be done, making the construction team reponsible for anything that is done incorrectly. when it is upto the construction firm to follow instructions, little is place in the hands don for the reminder of the project , he is needed primarily from the beginning of the planning process to the beginning of construction.