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Robert Benson founded Benson Manufacturing Company in 1990. Until 2011, the firm made electric motors for the U.S. Navy. In 1995, Mr. Benson was the recipient of several contracts from the U.S. Navy and the company expanded rapidly. After the Iraq War, Benson's manufacturing facility had much excess capacity. Robert decided to manufacture home appliances where he can utilize some of his own electric motors with slight modifications. Today, Benson is one of the nations largest appliance manufacturers.

Although appliances account for all of the firms sales, capacity to manufacture small electric motor has been retained, partly to protect against unforeseen contingencies. The rest of the motors were outsourced. Whenever feasible, Benson follows a dual sourcing policy. In some cases, three sources may be under contract.

Last month, Bensons procurement management issued a Request for Quotation (RFQ) for a motor to be used for one of its specially designed fans. They sent out the RFQ to five potential suppliers, none of whom Benson had done business with before. Of the five suppliers, two were distributors while the others were manufacturers. Benson estimated the price for the motors to be $29. The quantity estimated was 48,000 motors over the six-month period. If sales of the fan proved successful, the fans may be mass-produced thereby having the potential of subsequent repeat orders for the motors. Orders were to be placed daily through the firms automated material requirements planning (MRP) system, with deliveries to be within one week of release of an order.

Three days ago, the bids were opened. They were as follows:

Alpha Electric $30.00 Branson Distributors 28.00 Gunther Manufacturing 32.00 Delphi Electric 29.25 Energy Products 30.00

Today, before the award of a purchase order, Energy Products contacted the supply manager and submitted an alternative proposal. Under the proposal, Energy Products would reduce its bid to $23.75 if Benson would agree to purchase all its requirements for this size motor from Energy for a period of one year. Benson would be free to release delivery quantities at its own convenience, and Energy would guarantee to meet them within three days. Energy would carry one month of normal inventory (8,000 motors) and would increase its capacity if demand warranted.

What other factors aside from pricing should you consider prior to awarding the contract?