On August 1, the engineering department hand-carried a purchase requisition to Jack Toole, supply manager, Oceanics, Inc. The requisition covered the purchase of one pressure vessel to Oceanics’ specifications as outlined in the requisition. Immediately, Jack went to work. He prepared a request for quotations asking twenty major pressure vessel manufacturers to have their proposals in his hands no later than Wednesday, August 31. The response to Jack’s request for quotations was amazing. During the month of August, eighteen of the twenty companies hurriedly prepared their proposals and submitted them to Jack within the allotted bidding time. As each proposal was received on Jack’s desk, copies were forwarded to the engineer and manufacturing engineer for preliminary evaluation. By September 5, Jack called a meeting in his office with the engineer, Mr. Holpine, and the manufacturing engineer, Mr. Grinn. During the course of the meeting, proposals were carefully screened and bidders were eliminated one by one until two companies remained. It was a difficult decision for the group to decide which of the two companies submitted the better proposal. The advantages and disadvantages of each supplier appeared to be about equal. Jack pointed out that Atomic Products Company submitted a lower estimated price, guaranteed the equipment, was more suitably located, and would meet the required delivery date. Jack also pointed out to Grinn and Holpine that Nuclear Vessels, Inc., offered Oceanics lower hourly and overhead rates, a minimum amount of subcontracting, and excellent past experience in making similar vessels. Jack stated that a field trip would be necessary to talk with both suppliers to determine which one was best qualified. At this point, the meeting was adjourned and plans were made to visit both companies the following week. (See Exhibits 1 and 2.) In following through with supply management policy, Jack called the vice president of Oceanics’ New York sales office and advised him of the potential trip. Jack learned that Atomic Products was a potential customer for Oceanics’ products, but Oceanics’ sales representatives were unable to get into the plant to meet key people responsible for procurement of major equipment. The vice president of sales stated that a sales rep would be at the airport to meet Oceanics’ representatives and take them to the Atomic Products Company first thing Monday morning. Jack phoned the president, Mr. Wilcox, and advised him that representatives from Oceanics would like to be at his plant Monday morning to review his plant facilities and meet the responsible people. The president did not appear to be enthusiastic, but said that he would be pleased to see them when they arrived.
Atomic Products Company, New York, N.Y.
We are pleased to submit a proposal in accordance with your request for the manufacture of one pressure vessel in accordance with your sketch #835 and all referenced specifications pointed out in your letter of August 2. Price. Because of the potential changes pointed out in your invitation to bid, and in line with your request, the work will be performed on a cost-plus-a-fixed-fee contract detailed as follows: a. Total price: Estimated cost Fixed fee Total $1,120,000 112,000 $1,232,000
b. Costing rate:
Estimated shop rate $24/hour Shop overhead 180% Material Cost + 10% handling charge
Shop facilities. There are adequate facilities at our New York Plant to manufacture the vessel and meet the specification to the fullest extent possible. We invite you and your associates to visit our facilities. Past experience. Our company has not made vessels of this size but does have the equipment and know-how necessary to perform the work. Our experience has been in working with vessels up to 60” in length, I.D. 30” and 3” wall. Subcontracting. We will be able to fabricate the entire vessel without exception in our shop....