THE PEACH COMPUTER COMPANY Donald Bright, supply manager at thePeach Computer Company, was preparing his notes for a meeting to beheld that afternoon. The meeting concerned the construction of anew $6 million, 120,000-square-foot building to be located nearDayton, Ohio. The principle issue to be discussed, and hopefullyresolved, was what method of specification the firm should use inthe purchase of its new building. When the requirement for thebuilding first arose, the plant engineer at Peach advocated the useof a design firm as the desired method of developing thespecifications. Such firms were employed successfully by Peach onseven previous construction projects it had completed during thepast five years. Under this approach, a design firm, traditionallyreferred to as an architect-engineer or simply A-E, is retained todevelop the detailed plans and specifications for the new building.These specifications are identical in concept to the materials andmethod-of-manufacture specifications used in the manufacturingindustry to purchase manufactured goods. After they are developedand approved, the construction plans and specifications in sequencebecome (1) the basis for solicitation of bid prices from qualifiedconstruction firms, (2) the cardinal part of the resultingconstruction contract, and (3) the standard against whichinspections are performed. Don had conducted some preliminarydiscussions with members of the Dayton Institute for SupplyManagement regarding the cost for A-E services. He learned that thefees for local projects similar to his were averaging 8 percent ofestimated construction cost. This percentage was in line withPeach’s experience on its own projects. One of the members of theDayton chapter with whom Don talked suggested that he read anarticle in an issue of the California Management Review (CMR). Thearticle, entitled “Inflation, Recession, and Your Building Dollar,”dealt with the purchase of building construction. Don learned thatseveral alternative approaches to supplying building constructionwere available. One approach particularly appealed to him. Itprovided for the use of performance specifications. Suchspecifications, instead of describing the building item by item interms of its physical properties, describe in words the building’sintended function, i.e., how large it must be; how well lighted,heated, and cooled it must be; its longevity; its operating costs;and so on. After the performance description is developed, it isused to solicit from qualified bidders a package proposal thatincludes (1) a design approach, (2) a firm agreed price, and (3) aguaranteed completion date. The CMR article documented that whenproperly used, performance specifications for buildings can resultin a significant savings in both dollars and time. Additionally,the article data revealed that when this method is correctly used,a considerable savings in both the cost and the time required tocomplete the project is a reasonable expectation. Furthermore, thearticle indicated that the buyers of buildings purchased under thismethod have experienced approximately equal satisfaction with theirbuildings as those who used A-E’s. In preparation for the afternoonmeeting, Don decided to develop lists of advantages anddisadvantages for each of the two approaches he was considering.After an evaluation of both lists, Don expected to be able to makea formal recommendation as to which method he thought Peach shouldemploy.
1. Should Don get any additional information? Explain.
2. Discuss the inherent advantages and disadvantages of usingperformance specifications.
3. Discuss the inherent advantages and disadvantages of theplans and specifications method of describing quality.
4. Assuming that Don’s investigation and analysis indicates thatboth methods are practical for use by Peach, discuss which approachDon should recommend.
5. Explain why one method will require more active involvementon Don’s part than the other approach.
