PMB 440 case study #8 Smallwood Insurance Company (SIC)
The Smallwood Insurance Company (SIC) is a broker that provides different types of insurance policies for individuals and small business. The executive management of SIC has decided to hire a consultant to design and install an automated system for providing invoices to its customers insurance premiums due on their policies. SIC has designated and assigned the responsibility for obtaining a consultant to Donald Phelps. He is to obtain a consultant and he is also tasked with managing the work performed by the consultant.
Donald prepares the technical and managerial requirements for the new system and provides this information to the Procurement Manager for inclusion in the Request for Proposal (RFP) for the contract. The RFP defines a Firm Fixed Price (FFP) contract agreement for the design and installation of the new system. The RFP states that the work must be completed three calendar months from contract award. The contract is awarded to the Cromwell Consulting Company based upon its quoted price and prior experience as described in its bid proposal response from Cromwell.
Donald receives a letter from Cromwell six weeks after contract award stating that the fixed price for the contract needs to be increased by fifty percent due to systems upgrade requested by SIC personnel. SIC personnel were interviewed by Cromwell consulting personnel. Cromwell also states that it will not proceed with the work on the contract until the contract change request is resolved. Cromwell offers to continue with the design of the system if all future work is performed on a cost reimbursable basis.
Donald meets with SIC Contracts Manager to determine what course of action should be taken with Cromwell. Answer the following questions as if you are the CIS Contract Manager at this meeting.
Questions: Explain all your answers.
1. Since neither of you attended the interviews conducted by Cromwell consultants of Smallwood personnel, how will you determine the validity of Cromwell’s claim of significant upgrade requested by Smallwood personnel?
2. How could is problem be prevented in contractual language? Hint. Review your class sign in sheet.
3. Assuming that you can determine a list of desired upgrades requested by SIC personnel, how can you estimate cost for implementing these upgrades?
4. What other alternatives are there to incorporate these upgrades now?
5. If you agree to Cromwell’s proposal to convert the contract to a cost reimbursable basis, how will you account for the monies that have already been paid to Cromwell under the fixed price portion of its contract?
6. How will Smallwood control the costs that are invoiced by Cromwell if the contract is converted to the reimbursable basis?
7. What type of Cost Reimbursable contractual would you propose and why?
8. What incentives will Cromwell have to control these costs?
9. What course of action will you take as a Contracts Manager and why?
Management of Project Procurement, C. L. Huston, The McGraw-Hill Companies, Inc. CS 24-2
need in this format
I. Major Facts
(State here the major facts in bullet format, as you understand them. Make your statements clear and concise for your own understanding as well as for the understanding of the other students and the instructor.)
II. Major Problems
(State here the major problems, as you understand it. Emphasize the present major problem. You may wish to phrase your statement in the form of a question. In a few cases, there may be more than one problem. A good problem statement will be concise, usually only one sentence.)
III. Possible Solutions
(List the possible solutions to the major problem. Let your imagination come up with alternative ways to solve the problem. Do not limit yourself to only one or two possible solutions. Briefly note the advantages and disadvantages of each possible solution. Try to think outside the box.)
IV. Choice and Rationale
(State your choice from among your possible solutions and the detailed reasons for your choice. You may also wish to state why you did not choose the alternatives