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Unformatted text preview: Klondike Engineering
In June 2002, Klondike Engineering had grown to a company with $25 million in sales. The
business base consisted of two contracts with the U.S. Department of Energy (DOE), one
for $15 million and one for $8 million. The remaining $2 million consisted of a variety of
smaller jobs for $15,000 to $50,000 each.
The larger contract with DOE was a five-year contract for $15 million per year. The contract
was awarded in 1997 and was up for renewal in 2002. DOE had made it clear that, although
they were very pleased with the technical performance of Klondike, the follow-on contract
must go through competitive bidding by law. Marketing intelligence indicated that DOE
intended to spend $10 million per year for five years on the follow-on contract with a
tentative award date of October 2002.
On June 21, 2002, the solicitation for proposal was received at Klondike. The technical
requirements of the proposal request were not considered to be a problem for Klondike.
There was no question in anyone's mind in the company that Klondike would win the
contract on technical merit alone. The more serious problem was that DOE required a
separate section in the proposal on how Klondike would manage the $10 million/year
project as well as a complete description of how the project management system at
When Klondike won the original bid in 1997, there was no project management requirement.
All projects at Klondike were accomplished through the traditional organizational structure.
Line managers acted as project expeditors (Klondike used the term “coordinators”) who
managed work effort to predetermined milestones.
In July 2002, Klondike hired a consultant to train the entire organization in project
management. The consultant also worked closely with the proposal team in responding to
the DOE project management requirements. The proposal was submitted to DOE during the
second week of August. In September 2002, DOE provided Klondike with a list of questions
concerning its proposal. More than 95 percent of the questions involved project
management. Klondike responded to all questions.
In October 2002, Klondike received notification that it would not be granted the contract.
During a post-award conference, DOE stated that they had no "faith" in the Klondike project
management system. Klondike Engineering is no longer in business.
1. What was the reason for the loss of the contract?
2. Could it have been averted?
3. Does it seem realistic that proposal evaluation committees could consider project
management expertise to be as important as technical ability? 1 ...
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This note was uploaded on 03/01/2010 for the course IE 5555 taught by Professor Aabb during the Spring '10 term at Minnesota.
- Spring '10