Submit a 300-400 word writeup on Moren Corp Case (A) as follows -

If you were in the position of Mr. Carter, who would you assign the design contract to? Analyze based on what is needed to award the contract and how much influence top management has on supply management in the decision?

Case 61 Moren Corporation (A) Moren Corporation was building three additional generation stations to serve its rapidly expanding energy market. To link these stations with a total area grid, a new method of carrying the power lines using ornamental tubular poles instead of towers had been adopted. Moren had had no previous operating experience with poles and decided to subcontract the design engineering, fabrication, and erection of the new line. For the first phase of engineering design, Mr. John Carter, the vice president of supply, faced the responsibility of deciding with which supplier the business was to be placed after his staff had developed the information needed. He was aware that Moren had only three years in which to complete the entire project, and yet he had to ensure high-quality work. COMPANY BACKGROUND Moren Corporation, established in 1895, was one of the largest power utilities in the eastern United States. It serviced a highly industrialized area of 10 fossil-fueled plants. With assets of over $19 billion and demand doubling every decade, it had already earmarked funds to increase its kilowatt capacity from 8.4 million to 13 million over a four-year period. The company was well known for its advanced technology and its good public relations. Both purchasing and engineering departments were centralized and located in the head office in the areas largest city. The new construction program was a heavy strain on both the professional and financial resources of the company, placing increased emphasis on the use of qualified people and suppliers outside the corporation. TRANSMISSION LINE BACKGROUND Although Moren was stepping up its older lines to 230 kV, by management decision and in accordance with the technological trend, 345 kV was adopted for the new line. It was to link the new generating stations in Addison, Smithfield, and Mesa Valley with the area grid, some 140 miles in total. Until now, Moren had used structural steel towers exclusively for carrying its power line. These were strong but visually prominent and attracted adverse comments from a public daily growing more aesthetically sophisticated. A relatively new development in the transmission field was the introduction of the ornamental tubular power pole. Approximately 2,000 miles of line using these poles had been installed with good success in various parts of the country. Most installations were relatively short sections in densely populated areas. A line using poles costs twice as much as the conventional towers but is still substantially cheaper than underground installation. Conscious of the great strides made in power pole design and use, Moren management decided to specify poles for the new lines. Because of the volume of conversion and projected expansion work, Mr. Carter and the project engineers knew that the tower manufacturers and erection companies with whom they had dealt in the past would not have the capacity to handle all the elements of the new pole concept. Furthermore, with no experience in 345 kV or pole suspension, Moren had to rely on the know-how of others for the new line and needed the services and guidance of competent subcontractors. The total job involved three major phases. 1. Engineering design called for layout as well as a functional pole specification and project guidance. 2. Pole manufacture involved a manufacturing proposal consisting of a specific design to meet the functional specifications as well as manufacturing volume and schedule deadline capabilities. 3. Pole installation involved excavation, foundation setting, pole erection, and line stringing. Preliminary cost estimates for the total project were as follows: a. Phase 1Engineering: $1.5 million to $1.8 million b. Phase 2Pole manufacture: $90 million c. Phase 3Installation: $78 million Mr. Carter and the chief engineer were not satisfied that any individual supplier could handle the total contract well. They decided, therefore, to subcontract each phase to a reliable source of high expertise within that phase, so that optimum overall benefits would accrue to Moren. The first sourcing decision dealt with the engineering phase. DESIGN ENGINEERING SELECTION All through the spring and half of the summer, Oliver Dunn, the buyer, worked with the transmission engineering section of the system engineering department of the company to establish parameters and locate a suitable design source. By late July, he was able to make his recommendation to the director of purchases (see Exhibit 1). Quotation Summary Description Design 140 miles 345 kV transmission line for Addison-Smithfield-Mesa Valley Recommended vendor: Pettigrew Associates, New York, N.Y. Location: Their premises Using department: General engineering Buyer: O. Dunn Total value: Established $1,740,000 salaries + burden P.O. No.: Date Approval: page 161 It was normal practice at Moren to provide a very brief summary for the director of purchases on all major contracts. A large file containing detailed information was built up by the buyers and purchasing managers involved. Normally, some preliminary discussions were held as the project progressed, so that Mr. Carter was reasonably informed by the time the official recommendation was prepared. Should he wish to see more information, he could request the file at any time. All three of the engineering firms considered were large and engaged in a wide variety of engineering consulting services. Travers & Bolton (T&B) and Crown Engineering (CE) had both done considerable work for Moren in the past and had performed satisfactorily. Pettigrew Associates had its head office in New York and maintained branches in 10 American cities. Pettigrew employed over 3,800 people, had a good credit rating, and had annual sales in excess of $480 million per year. Moren had never used Pettigrew in any of its projects. All three engineering firms had some tubular pole experience with short-line sections in other parts of the country. Aside from the design requirements, the consulting engineering firm was also expected to evaluate the bids from pole manufacturing and erection subcontractors. Additional Information 1. The transmission section of our general engineering department is unable to perform the design work of all the planned transmission work for the next three years, and it is necessary to contract some portion of this work. Travers & Bolton is already assigned the conversion of the 120kV to 230, and it is recommended that this 140-mile Addison-Smithfield-Mesa Valley 345 kV be contracted to some competent engineering firm. 2. We had sessions with each of the three below mentioned engineering firms to acquaint them with our needs and learn of their capabilities. The work they will perform is as follows: Make routine sections; make subsurface investigations; make electrical hardware and general project designs; and furnish miscellaneous specifications, drawings, and technical data required to procure the right of way, hardware, structural steel, and the awarding of contracts for construction. It is estimated this work will total 12,300 labor-hours. There will also be approximately $144,000 worth of computer services and general out-of-pocket expenses in addition to the labor-hours. 3. Bid

comparison is: It is recommended that this contract be awarded to Pettigrew even though their cost per hour is higher than the others. Total cost will be influenced by the capabilities and productivity of the company chosen, and, therefore, Pettigrew may not cost us any more; it is the desire of Moren management to have Pettigrew perform such a job with Moren as our first experience with them. Both T&B and CE have done considerable work for Moren