1. What are the major considerations in splitting a contract into different phases?
2. What is the role of the purchasing manager in reviewing the work of his subordinates?

If you were in the position of Mr. Carter:

3. Which contractor would you select for the foundation and erection work?

4. Would you separate these two phases and award them to different bidders?

Case 6-2 Moren Corporation (B) Moren Corporation was building three additional generat- ing stations to serve the rapidly expanding energy market. To link these stations with the total area grid, a new method of carrying the power lines using ornamental tubular poles instead of towers had been adopted. Moren lacked experi ence with poles and decided to subcontract the design engi- neering, fabrication, and erection of the new line. [For com- pany background and line projection information and the selection of engineering consultants see Moren (A) case.] Having selected its consultants for its first 345 kV transmission line and placed its order for the fabrication of the poles and hardware, Moren was ready to locate a suitable contractor to do the foundation work, erect the poles, and string the lines. Purchasing and engineering had been pursuing this con- currently with the search for a fabricator, because Moren wanted to get started on the line by the fall. Gordon Yarrow, supervisor of materials purchasing, was responsible to the vice president of supply, John Carter, for this contract CONSTRUCTION SELECTION One company, T.D. Rapier, had done almost all Moren's transmission work for over the last five years, but, with EXHIBIT 1 Comparison of Bids Moren Corporation- 345 kV Line Foundation Bidder Construction Installation Total Transmission Line Addison- Line contractors Smithfield- $53,079,648 44,617,110 37,778,478 37,993,872 27,672,804 No bid 30,612,400 (D) (E) (F) (G) T.D. Rapier (H) McTaggart Construction (1I) Consulting engineer's prior estimate Foundation contractors: $47,103,840 38,117,804 41,390,640 37,485,360 43,433,700 36,192,072 47,750,400 $100,183,488 82,734,914 79,169,118 75,479,232 71,106,504 Mesa Valley 78,362,800 (J) (K) (L) 73,775,574 38,966,364 35,201,376 the consultant's help, a good cross section of qualified line builders had been invited to bid. In addition, several Notes 1. Two line contractors and one foundation contractor companies were asked to quote on the subgrade work. This helped to test the market to determine whether foundation contractors could build foundations cheaper than line builders. Mr. Carter reserved the right to award separate contracts for above- and below-grade work Two meetings were held with the bidders, one for the line builders and another for the foundation contractors, foundation declined to bid 2. The two lowest line constructors, Rapier and McTaggart, were evaluated, plus the possibility of a split award to (L) for foundations and (I) for above- grade work. However, McTaggart is recommended for the following reason: a. Offers lowest bid. at which all aspects of the job were fully discussed. The unit prices were based on current wage rates and working conditions and were subject to adjustment by a percentage equal to 0.80 times the percentage change in the average wage rates By September the consulting engineers were able to provide purchasing with an evaluation of the bidding and computation, enabling the attached summary to be com- piled (see Exhibit 1) b. Highly experienced. Built thousands of miles of line in mountain, desert, and swamp. Experience included 230, 345, 500, and 750 kV construction. c. Presently working for several other power companies d. Recommended by our design engineers and consultants e. Has done considerable work in this state through a subsidiary, although not for Moren. Case 6-2 Moren Corporation (B) Moren Corporation was building three additional generat- ing stations to serve the rapidly expanding energy market. To link these stations with the total area grid, a new method of carrying the power lines using ornamental tubular poles instead of towers had been adopted. Moren lacked experi ence with poles and decided to subcontract the design engi- neering, fabrication, and erection of the new line. [For com- pany background and line projection information and the selection of engineering consultants see Moren (A) case.] Having selected its consultants for its first 345 kV transmission line and placed its order for the fabrication of the poles and hardware, Moren was ready to locate a suitable contractor to do the foundation work, erect the poles, and string the lines. Purchasing and engineering had been pursuing this con- currently with the search for a fabricator, because Moren wanted to get started on the line by the fall. Gordon Yarrow, supervisor of materials purchasing, was responsible to the vice president of supply, John Carter, for this contract CONSTRUCTION SELECTION One company, T.D. Rapier, had done almost all Moren's transmission work for over the last five years, but, with EXHIBIT 1 Comparison of Bids Moren Corporation- 345 kV Line Foundation Bidder Construction Installation Total Transmission Line Addison- Line contractors Smithfield- $53,079,648 44,617,110 37,778,478 37,993,872 27,672,804 No bid 30,612,400 (D) (E) (F) (G) T.D. Rapier (H) McTaggart Construction (1I) Consulting engineer's prior estimate Foundation contractors: $47,103,840 38,117,804 41,390,640 37,485,360 43,433,700 36,192,072 47,750,400 $100,183,488 82,734,914 79,169,118 75,479,232 71,106,504 Mesa Valley 78,362,800 (J) (K) (L) 73,775,574 38,966,364 35,201,376 the consultant's help, a good cross section of qualified line builders had been invited to bid. In addition, several Notes 1. Two line contractors and one foundation contractor companies were asked to quote on the subgrade work. This helped to test the market to determine whether foundation contractors could build foundations cheaper than line builders. Mr. Carter reserved the right to award separate contracts for above- and below-grade work Two meetings were held with the bidders, one for the line builders and another for the foundation contractors, foundation declined to bid 2. The two lowest line constructors, Rapier and McTaggart, were evaluated, plus the possibility of a split award to (L) for foundations and (I) for above- grade work. However, McTaggart is recommended for the following reason: a. Offers lowest bid. at which all aspects of the job were fully discussed. The unit prices were based on current wage rates and working conditions and were subject to adjustment by a percentage equal to 0.80 times the percentage change in the average wage rates By September the consulting engineers were able to provide purchasing with an evaluation of the bidding and computation, enabling the attached summary to be com- piled (see Exhibit 1) b. Highly experienced. Built thousands of miles of line in mountain, desert, and swamp. Experience included 230, 345, 500, and 750 kV construction. c. Presently working for several other power companies d. Recommended by our design engineers and consultants e. Has done considerable work in this state through a subsidiary, although not for Moren