Carl O. Hilgarth's Commentary on "Conflicts within a Manufacturing Firm"
Now that T&D's internal tool and die department can bid
on new tooling by offering a price to produce it internally,
they will have to abide by the procedures established by the
Purchasing Department so the integrity of the bidding and
contract award process is not compromised. They should be
placed on the approved bidder list, receive a copy of the
approved tooling part prints and specifications, and the sealed
bid envelope in which to respond with their quote. The
department head of the internal tool and die is totally out of
order when he asks the Purchasing Department for the prices
obtained from the outside vendors before he submits his quote.
With this inside information, he can become the low bidder.
Purchasing should refuse the internal tool and die
department request as unethical--give him a set of the prints
and specifications, the sealed bid envelope, the bid closing
date, and tell him to submit quote. After contact award, he can
review the source selection evaluations and bids in the same
manner as the other bidders.
Well, T&D's Purchasing Department shares the quotes with
T&D's tool and die department head. T&D's outside
vendors complain that T&D has acted in bad faith. They're
right! By being able to see the competing bids, the tool and
die department head had inside information. If I was an outside
supplier to T&D Manufacturing, I would decline to bid any
of the jobs under these ground rules.
The logic of the tool and die department head in trying to
persuade the Purchasing Department that it is making a mistake
in not providing him the quotes of the other vendors in advance
is ludicrous. If he thinks he can be competitive with the
outside vendors, let him submit a bid like everyone else.
An interesting point here is the bid rate that internal tool
and die uses in preparing their quotations. If their direct
labor rate and material costs are not properly burdened,
they'll use only the base rates and inherently underbid anyone.
Management should have the cost accounting department prepare
appropriate burdens for the internal tool and die to apply to
their base labor rates and material costs so their bids are
truly competitive with those of the outside vendors. If this is
not done, the outside vendors will have another complaint in
that T&D is only obtaining pro-forma outside bids and
awarding the contract to internal tool and die on the basis of
unrealistically low pricing.
Cite this page:
"Carl O. Hilgarth's Commentary on "Conflicts within a Manufacturing Firm""
Online Ethics Center for Engineering
National Academy of Engineering
Accessed: Thursday, December 12, 2013