Bounded Rationality - a Personal Case Study Reflection

1. Introduction This report discusses a situation I faced as the Project Manager for a local manufacturing company who was contracted to build a quantity of ten C44aci class locomotives for an international coal distributor. Our company is a market leader in the rail industry, offering complete asset management services to its customers through the design, build and maintenance of locomotives. At the time of contract negotiations it was insisted upon by the customer that this new fire detection system be included within the terms of the contract or risk losing the contract to a competitor; under duress it was agreed by the bid team and included within the scope of contractual deliverables. At the time of contract award the system had not been designed or integrated into any other locomotive project. Theories discussed within this report outline common errors made within the decision making process including bounded rationality, satisficing, thinking traps, biases, communication problems and conflict within teams; it concludes by making recommendations of how I might have dealt with these issues more effectively had I been exposed to the academic theories, models and frameworks prior to the decision.

2. The decision Although not directly involved in the initial decision to include a new integrated system into the contract, as the Project Manager assigned to the project post contract award I was ultimately responsible for the design, supply and integration of the product into the final delivery of locomotives to the customer. Failure to do so would result in financial penalties and reputational damage to the organisation and potentially be career limiting for me; as a young enthusiastic Project Manager I was keen to prove my capabilities in managing the project.

Shortly after contract award, the decision was made to engage with the company outlined by the bid manager as the market leader for this type of product. The bid team in estimating a sell price for the

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