Michael Davis' Commentary on "Conflicts within a Manufacturing Firm"
[Michael Davis has modified the case somewhat in order to
make it more a problem of engineering ethics than of business
or purchasing ethics.]
You have been put on the spot. You are an engineer in
Purchasing. The head of your in-house shop has called to ask
the prices obtained from outside suppliers bidding on a certain
job. He wants those prices to help him prepare his own bid on
the same job. What should you do?
Such requests are likely to occur when a company begins to
make its "inside supplier" more efficient by forcing it to
compete with outside suppliers by making them compete with an
insider. Unless a company has been careful to make clear to
everyone involved what the point of the new practice is and how
it is supposed to work, certain misunderstandings are
inevitable. Insiders, for example, are likely to assume that
they have an "inside track". Outsiders are likely to worry
about that too.
Generally, competition between inside and outside suppliers
will benefit the company only if the competition is fair. If
the insider has an inside track, outsiders will not take the
trouble to bid. Preparing a bid costs money. Would-be suppliers
are not likely to spend their money on preparing a bid unless
they have a good chance of getting the contract. Once it is
clear that inside suppliers have the inside track, an outside
supplier has only two options, to charge for preparing its bid
or to decline to bid. The company will then have to pay the
cost of the outside bid or see the outside competition
disappear. Doing a favor for the shop head has a large hidden
The head of the shop probably did not think of things this
way. He probably thought of the situation as "us against them",
where "us" is the company and "them" is the outsiders. It is
"us" against "them". But "us" is only his shop. The rest of the
company is the umpire. The old friendships, the hello in the
hall, the same centrex, none of that matters anymore. You and
the shop are no longer on the same team. The company has ceased
to exist as a competitive unit. While every part has the same
objective in one respect, maximizing return on investment for
the owners, each part has a different objective in another.
Each seeks to maximize return on what has been invested in it,
whatever the effect on other parts of the company. The owners
are supposed to benefit overall, even if some parts of the
company suffer as a result. This is a coherent strategy.
Whether it will work in a particular company is, of course,
What then should you do? Probably the best thing would be to
suggest a meeting of appropriate department heads to discuss
bidding procedures. That would get you off the hook for now. It
would allow the issue to be aired in a relatively friendly
environment. And it would probably help everyone to understand
better what the rules really are (or should be).
One should certainly not begin with the assumption that the
shop head is trying to obtain an unfair advantage. If, however,
he declines to discuss his request with other department heads,
you will have reason to believe that he knows he is doing
something shady. You can then tell him to put his request in
writing and you'll clear it with your boss. That should be the
last you hear of it. You should probably also mention the
incident to your superior, accompanying it with the suggestion
that there may be a need for further training in Purchasing and
elsewhere on the new relationship between department.
Cite this page:
"Michael Davis' Commentary on "Conflicts within a Manufacturing Firm""
Online Ethics Center for Engineering
National Academy of Engineering
Accessed: Wednesday, May 22, 2013