PMB 440 case study #3 Cornucopia Catalog Company

The Cornucopia Catalog Company (CCC) has experienced a significant growth in catalog sales over the last three years. The Vice President (VP) of Operations (Program Management) has authorized a project to replace the existing automated, inventory tracking program with a better system that can handle the increased volume of catalog items.Customer complaints, due to delays in receiving ordered items, have steadily increased. The VP has decided that a management consultant should be hired to design the new system. The VP selects Beth Nichols as the management consultant as the Project Manager. Beth meets with the Managers of the Procurement and Inventory Control Departments to discuss the requirements for the Request for Proposal (RFP) for obtaining a contractor to design the new system.

Answer the following questions:

1. What are the difficulties in adequately defining a scope of work for the management consultant (Beth) that will support a fixed price contracting approach?
2. What are the advantages of having the bidders for this work supply a detailed description of the systems that they would provide with their bid proposals?
3. Discuss the advantages and disadvantages of using a target price contracting approach for this work (the new design, installation and testing).
4. If you used a cost reimbursable contracting approach for this work, what type of cost limits will you include in the contract to minimize cost exposure to CCC?
5. What type of quality incentive fees will you include in the contract to motivate the consultant to provide you with the best type of inventory control tracking system?
6. What type of schedule incentive fee will you include in the contract to motivate the contractor to complete the work as quickly as possible?
7. If you use a contract pricing approach that allows the consultant (Beth) to include its fee in its hourly rate, what incentives are there for the consultant to control either the cost or the schedule of its own work?