Consolidated Energy (CE) is a public utility company that generates and distributes electricity throughout a large portion of the US. The company is involved in all kinds of projects, including construction of new electrical generating and transmission equipment and facilities, upgrade and repair of existing equipment and facilities, information technology for customer service, and energy research projects. Much of this project work is contracted out, although CE units handle about half of it with internal expertise in construction, equipment upgrade and maintenance, information technology, and research. The company has construction units and equipment specialists in five cities, information technology specialists in three cities, and research units in two cities. The research units work on projects initiated by the corporate office, but the construction, equipment upgrade and maintenance, and IT units work on projects initiated by the five regional offices. Each of the units is assigned to one or two regions, so whenever a regional office identifies a project, that project is automatically handled by the construction, IT, or equipment unit pre-assigned to its region. Decisions about projects are made at both regional and corporate levels: projects costing more than $20M are handled at the corporate level; otherwise they are handled regionally. Whenever a regional office funds a project, it first decides if the IT, equipment, or construction unit for its region can handle the job; if so it assigns the job to them, otherwise it contracts the work out using the RFP/proposal process. A corporate PRB makes decisions for projects that exceed $20M. When the PRB approves a project, it awards the job either to the internal unit assigned to the region that requested the project, or to a contractor via the RFP/proposal process. Recently, a member of the corporate PRB had a brainstorm: why not use the RFP/proposal process for all projects, including ones that might be done internally? When a regional office identifies a potential project, instead of giving the project automatically to the pre-assigned internal unit, it would send an RFP to all of the company’s IT, construction, or equipment units. The unit with the best proposal would get the job, regardless of its location. Some members of the board balked at the suggestion, saying it would put units with the same expertise in competition with each other. Others argued that it did not make sense for, say, a construction unit to take on a project beyond its region, because transporting equipment and moving work crews to distant project sites would increase project costs. The member with the suggestion countered that such arguments were pointless, because competition among the units would encourage higher quality work and reduce overall corporate costs. What do you think of this idea? What are the pros and cons?
Consolidated Energy (CE) is a public utility company that generates and distributes electricity throughout a large portion of the US. The company is involved in all kinds of projects, including construction of new electrical generating and transmission equipment and facilities, upgrade and repair of existing equipment and facilities, information technology for customer service, and energy research projects. Much of this project work is contracted out, although CE units handle about half of it with internal expertise in construction, equipment upgrade and maintenance, information technology, and research. The company has construction units and equipment specialists in five cities, information technology specialists in three cities, and research units in two cities.
The research units work on projects initiated by the corporate office, but the construction, equipment upgrade and maintenance, and IT units work on projects initiated by the five regional offices. Each of the units is assigned to one or two regions, so whenever a regional office identifies a project, that project is automatically handled by the construction, IT, or equipment unit pre-assigned to its region.
Decisions about projects are made at both regional and corporate levels: projects costing more than $20M are handled at the corporate level; otherwise they are handled regionally. Whenever a regional office funds a project, it first decides if the IT, equipment, or construction unit for its region can handle the job; if so it assigns the job to them, otherwise it contracts the work out using the RFP/proposal process. A corporate PRB makes decisions for projects that exceed $20M. When the PRB approves a project, it awards the job either to the internal unit assigned to the region that requested the project, or to a contractor via the RFP/proposal process.
Recently, a member of the corporate PRB had a brainstorm: why not use the RFP/proposal process for all projects, including ones that might be done internally? When a regional office identifies a potential project, instead of giving the project automatically to the pre-assigned internal unit, it would send an RFP to all of the company’s IT, construction, or equipment units. The unit with the best proposal would get the job, regardless of its location. Some members of the board balked at the suggestion, saying it would put units with the same expertise in competition with each other. Others argued that it did not make sense for, say, a construction unit to take on a project beyond its region, because transporting equipment and moving work crews to distant project sites would increase project costs. The member with the suggestion countered that such arguments were pointless, because competition among the units would encourage higher quality work and reduce overall corporate costs.
What do you think of this idea? What are the pros and cons?
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