Essay on DeHavilland Case Study

1347 Words Oct 25th, 2014 6 Pages
Executive Summary

De Havilland is a Canadian aviation company that is in the process of determining how to contract out the supply of its flap shrouds and equipment bay doors for its Dash 8 aircraft. Its current supplier, Dollard Plastics is believed to be charging a large premium over market price and for that reason, a completive tender was issued to test De Havilland’s hypothesis. After receiving bids from 9 companies, a strategic review of De Havilland’s options and alternatives was conducted. Based on this review, it is recommend De Havilland ceases its contractual relationship with Dollard and instead enters into a contract with Marton Enterprises. Although entering into a contract with Marton puts forth the issue of whether or
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Those negotiations failed and De Havilland was forced to go to competitive bid, in which bids from nine different companies, including Dollard, were received. De Havilland’s bid evaluation criteria required that each bidder satisfied two requirements; price, and the ability to establish a long term cooperative relationship.
With respect to the first criteria, price, bid analysis reveals that Marton Enterprises proposal came in at 16% cheaper than the next highest bidder, DAS Composites, and 73% cheaper than the highest bidder, Dollard. The question that De Havilland is faced with is determining whether or not the price proposed by Marton is indeed representative of the true cost, or whether the cost was understated in order to win the contract, with added costs coming down the line potentially in the form of repair costs, maintenance, or replacement. De Havilland’s tender package allowed for each bidder to determine the quality of material used in injection molding used for the tooling required to produce the shipsets as well as the method by which the bidders would charge for the injection molding, either as a lump-sum single non re-occurring cost, or added to the price of each unit produced as a “tooling cost” spread over the expected entire production. Some of the bidders such as DAS Composites chose to include the cost as a single lump-sum (non-reoccurring) cost, whereas others, such as Marton, decided to include it as a

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