Case 17.3 – The Bidding Wars

Scenario: Kendahl Plastics Corporation contracts with NASA tomanufacture component parts used in communications satellites. NASAreimburses Kendahl on the basis of the actual manufacturing costsit incurs, plus a fixed percentage. Prior to being awarded acontract, Kendahl must submit a bid that details the estimatedcosts associated with each project. An examination of Kendahl’s jobcost sheets reveals that actual costs consistently exceed costestimates quoted during the bidding process. As a consequence, NASAends up paying considerably more than the bids Kendahl submits.

A Kendahl representative was recently quoted as saying, “Wereally aren’t overcharging NASA for the work that we do. The actualcosts shown on our job cost sheets seem high only because we areforced to understate our bid estimates in order to be awardedcontracts. It’s a common practice, and everybody does it. The truthof the matter is companies that quote realistic bid prices are notawarded contracts.”

Let us assume that it is common practice to purposelyunderestimate bids in order to win NASA contracts:

Initial Post – As an employee, write an internal memo toyour manager addressing the following:

1. Is it wrong for Kendahl to take part in this activity as longas it does not overstate the actual costs it incurs?

2. If you were part of Kendahl, would you have personally haveissues using this bidding practice?

3. Research and cite common ethical bidding practices. Whatother bidding practices have your read about that you would be okwith using, even though they may be unethical or push theboundaries of being ethical.

Please no handwritten/photo answers as I will not beable to read thank you