Smith Engineering(SE) had grown to a company with $25 million in sales. The business base consisted of two contracts with the Ministry of Energy(MOE), one for $15 million and one for $8 million. The remaining $2 million consisted of various smaller jobs for $15,000 to $50,000 each. The more significant contract with MOE was a five-year contract for $15 million per year. The contract was awarded in 2010 and was up for renewal in 2015.

MOE had made it clear that, although they were very pleased with the technical performance of SE, the follow-on contract must go through competitive bidding by law. Marketing intelligence indicated that MOE intended to spend $10 million per year for five years on the follow-on contract with a tentative award date of October 2015. On June 21, 2015, SE received the solicitation for the proposal and did not consider the technical requirements of the proposal request to be a problem. There was no question in anyone's mind that, on technical merit alone, SE would win the contract. The more serious issue was that MOE required a separate section in the proposal on how SE would manage the $10 million/year project and a complete description of how the project management system at SE functioned. When SE won the original bid in 2010, there was no project management requirement. SE had accomplished all projects through the traditional organizational structure. Line managers acted as project leaders.

In July 2015, SE hired a consultant to train the entire organization in project management. The consultant also worked closely with the proposal team in responding to the MOE project management requirements. SE submitted the proposal to MOE during the second week of August. In September 2015, MOE provided SE with questions concerning its proposal. More than 95 percent of the questions involved project management. SE responded to all questions. In October 2015, SE received notification that MOE would not grant the contract. MOE stated that they had no "faith" in the SE project management system during a post-award conference. SE is no longer in business.

Questions:

1. Provide four reasons for the loss of the contract?
2. Explain two suggestions by which SE could avoid the loss of the contract.
3. Does it seem realistic that proposal evaluation committees consider project management expertise as important as technical ability? Why? Provide two justifications.