Procurement 5830 Pricing
"Case of the Pricing Predicament"
Professor Thomas Cornwell

Case Analysis: Case of the Pricing Predicament I. Major Facts A. Scott is a salesman for Standard Machine B. Scott received a call from Joann, the purchasing agent at Occidental Aerospace C. Occidental is Standard’s largest and most loyal account D. Scott followed Standard’s fixed price policy and submitted a bid of $429K E. Joann informed him that two competitors submitted bids of “under 390K” and another bid of “a little over 400K” F. Scott needs to cut his bid by an additional 22K to win the contract G. Joann informs Scott that Occidental will be building two new plants over the next four years, representing “a lot of potential business.” H. Scott goes to Tony, the sales manager, to ask for an exception to the fixed price policy II. Major Problem A. The dilemma for Standard Machine is whether it needs to uphold its fixed price policy or adjust it to maintain the mutually rewarding relationship with Occidental. III. Possible Solutions/Alternatives A. Standard Machine could leave the fixed price policy in place. For many years Standard and Occidental have been doing business with each other and it has been a mutually rewarding relationship. B. Since the milling machine is for Occidental’s new training center, Standard Machine could just give the machine to Occidental for a joint learning pilot where Standard Machine’s machine operators could be trained on its use. After a few years, Occidental could return the machine or purchase it for half of the original price. C. Standard Machine could withdraw their bid. Tony could argue the fact Standard would have to cut corners on the product thus causing Occidental to not get the quality that they are used to. IV. Advantages and Disadvantages A. The advantages