The Peters Company Project

In 1980, Corwin accepted a specialty-product assignment from Peters Company because of the potential for follow-on work. In 1981 and 1982, and again in 1983, profitable follow-on contracts were received, and a good working relationship developed, despite Peter's reputation for being a difficult customer to work with.

On December 7, 1982, Gene Frimel, the vice president of marketing at Corwin, received a rather unusual phone call from Dr. Frank Delia, the marketing vice president at Peters Company.

Delia: "Gene, I have a rather strange problem on my hands. Our R&D group has $250,000 committed for research toward development of a new rubber product material, and we simply do not have the available personnel or talent to undertake the project. We have to go outside. We'd like your company to do the work. Our testing and R&D facilities are already overburdened."

Frimel: "Well, as you know, Frank, we are not a research group even though we've done this once before for you. And furthermore, I would never be able to sell our management on such an undertaking. Let some other company do the R&D work and then we'll take over on the production end."

Delia: "Let me explain our position on this. We've been burned several times in the past. Projects like this generate several patents, and the R&D company almost always requires that our contracts give them royalties or first refusal for manufacturing rights."

Frimel: "I understand your problem, but it's not within our capabilities. This project, if undertaken, could disrupt parts of our organization. We're already operating lean in engineering."

Delia: "Look, Gene! The bottom line is this: We have complete confidence in your manufacturing ability to such a point that we're willing to commit to a five-year production contract if the product can be developed. That makes it extremely profitable for you."

Frimel: "You've just gotten me interested. What additional details can you give me?"

Delia: "All I can give you is a rough set of performance specifications that we'd like to meet. Obviously, some trade-offs are possible."

Frimel: "When can you get the specification sheet to me?"

Delia: "You'll have it tomorrow morning. I'll ship it overnight express."

Frimel: "Good! I'll have my people look at it, but we won't be able to get you an answer until after the first of the year. As you know, our plant is closed down for the last two weeks in December, and most of our people have already left for extended vacations."

Delia: "That's not acceptable! My management wants a signed, sealed, and delivered contract by the end of this month. If this is not done, corporate will reduce our budget for 1983 by $250,000, thinking that we've bitten off more than we can chew. Actually, I need your answer within forty-eight hours so that I'll have some time to find another source."

Frimel: "You know, Frank, today is December 7, Pearl Harbor Day. Why do I feel as though the sky is about to fall in?"

Delia: "Don't worry, Gene! I'm not going to drop any bombs on you. Just remember, all that we have available is $250,000, and the contract must be a firm-fixed-price effort. We anticipate a six-month project with $125,000 paid on contract signing and the balance at project termination."

Frimel: "I still have that ominous feeling, but I'll talk to my people. You'll hear from us with a go or no-go decision within forty-eight hours. I'm scheduled to go on a cruise in the Caribbean, and my wife and I are leaving this evening. One of my people will get back to you on this matter."

Gene Frimel had a problem. All bid and no-bid decisions were made by a four-man committee composed of the president and the three vice presidents. The presi-

dent and the vice president for manufacturing were on vacation. Frimel met with Dr. Royce, the vice president of engineering, and explained the situation.

Royce: "You know, Gene, I totally support projects like this because it would help our technical people grow intellectually. Unfortunately, my vote never appears to carry any weight."

Frimel: "The profitability potential as well as the development of good customer relations makes this attractive, but I'm not sure we want to accept such a risk. A failure could easily destroy our good working relationship with Peters Company."

Royce: "I'd have to look at the specification sheets before assessing the risks, but I would like to give it a shot."

Frimel: "I'll try to reach our president by phone."

By late afternoon, Frimel was fortunate enough to be able to contact the president and received a reluctant authorization to proceed. The problem now was how to prepare a proposal within the next two or three days and be prepared to make an oral presentation to Peters Company.

Frimel: "The Boss gave his blessing, Royce, and the ball is in your hands. I'm leaving for vacation, and you'll have total responsibility for the proposal and presentation. Delia wants the presentation this weekend. You should have his specification sheets tomorrow morning."

Royce: "Our R&D director, Dr. Reddy, left for vacation this morning. I wish he were here to help me price out the work and select the project manager. I assume that, in this case, the project manager will come out of engineering rather than marketing."

Frimel: "Yes, I agree. Marketing should not have any role in this effort. It's your baby all the way. And as for the pricing effort, you know our bid will be for $250,000. Just work backwards to justify the numbers. I'll assign one of our contracting people to assist you in the pricing. I hope I can find someone who has experience in this type of effort. I'll call Delia and tell him we'll bid it with an unsolicited proposal."

Royce selected Dan West, one of the R&D scientists, to act as the project leader. Royce had severe reservations about doing this without the R&D director, Dr. Reddy, being actively involved. With Reddy on vacation, Royce had to make an immediate decision.

On the following morning, the specification sheets arrived and Royce, West, and Dick Potts, a contracts man, began preparing the proposal. West prepared the direct labor man-hours, and Royce provided the costing data and pricing rates. Potts, being completely unfamiliar with this type of effort, simply acted as an observer and provided legal advice when necessary. Potts allowed Royce to make all decisions even though the contracts man was considered the official representative of the president.

Finally completed two days later, the proposal was actually a ten-page letter that simply contained the cost summaries (see Exhibit 10-2) and the engineering intent. West estimated that thirty tests would be required. The test matrix described only the test conditions for the first five tests. The remaining twenty-five test conditions would be determined at a later date, jointly by Peters and Corwin personnel.

Exhibit 10-2. Proposal Cost Summaries

Direct labor and support Testing (30 tests at $2,000 each) Overhead at 100% Materials

G&A (general and administrative, 10%)

Total

Profit

19^ S25G,GGG

Total

On Sunday morning, a meeting was held at Peters Company, and the proposal was accepted. Delia gave Royce a letter of intent authorizing Corwin Corporation to begin working on the project immediately. The final contract would not be available for signing until late January, and the letter of intent simply stated that Peters Company would assume all costs until such time that the contract was signed or the effort terminated.

West was truly excited about being selected as the project manager and being able to interface with the customer, a luxury that was usually given only to the marketing personnel. Although Corwin Corporation was closed for two weeks over Christmas, West still went into the office to prepare the project schedules and to identify the support he would need in the other areas, thinking that if he presented this information to management on the first day back to work, they would be convinced that he had everything under control.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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