Frank Perdue had built up a successful development company. When he became City Commissioner, everyone said it was good to have a businessman on the Commission. Businessmen know how to control costs and make sound economic decisions, they said, and Frank could help the city tighten its belt. One of his first projects was an analysis of the Human Resources Department. He claimed that if the whole function was outsourced, it would save the taxpayers money. A year later, after painful layoffs and a bumpy transition, the new contractor, NewSoft, was in place. Two years later, NewSoft’s billing rates had steadily increased, and there were complaints about service. After five years, the supposed savings had vanished, and Frank had moved on to state government, his campaigns fueled by “generous” campaign contributions from companies like NewSoft.
Requirements
1. Although this case differs from “fraud” in the usual sense, describe the conflict of interest in this case. Who benefitted and who did not?
2. When making business decisions of this sort, some factors are quantitative and some are not. Discuss some of the non-quantitative factors related to this case. (Challenge)