DigiLen is a leading digital graphic solution provider. The CEO of DigiLen, Sanjeev Kapoor, has recently

signed a $1,204,000 contract to develop and install a sophisticated detection system called SkyAngel to

SembCorp Marine, the largest ship-building corporation in Singapore. DigiLen has developed versions of

SkyAngel in many other countries before. Sanjeev is very confident that DigiLen can design and develop

a high-quality product to meet SembCorp's expectation. However, during the internal project launch

meeting, he raised his concern about the possible risk of failure at the final installation stage. According

to past experience, more than 90% of project failures happened at this stage because SkyAngel's

performance depends very much on engineering characteristics at the installation site.

Using normal production techniques, DigiLen can produce and install SkyAngel for $700,000. However,

there is an 8% chance that it will not perform up to specifications. It would then have to be shipped back

to DigiLen's plant in India, rebuilt for an additional cost of $150,000, and then sent back and re-installed

at SembCorp's site. The shipping and reinstallation costs would be an additional $210,000. If SkyAngel is

rebuilt, it will be done so as to guarantee that it will work free of defects.

Alternatively, if DigiLen took every possible precaution (such as transport via dedicated shipping line, on-

site pre-testing, inviting client to test the product at India plant, etc.) prior to installation at client site,

they could install an SkyAngel system that would be just perfect, at an additional cost of $120,000.

You are appointed as the project manager of this project. Your task is to make sure that the system can

be delivered successfully with minimum cost. To play safe, you approached Sanjay Kumar, division head

for test and evaluation, to look into using simulation to predict the possibility of failure before you

decide to take additional precautions. According to Sanjay, building such simulation model costs about

$20,000. The output of the test is a rating of "Positive" or "Negative". If the SkyAngel is all right (i.e., it

will meet customer's expectation), then the chance that it would test Positive is 70%. If it is not all right,

then the chance that it would test negative is 85%.

You thought about the project further and felt very uneasy about the possibility of failing to meet

customer's expectation as this is DigiLen's first project in Singapore. If this happened, you guessed that it

would cost the company around $100,000 in lost goodwill, reputation and/or effects on future earnings.

What decision will you make? Please kindly show via a decision tree.