GSCM 460 THE PEACH COMPUTER COMPANY
THE PEACH COMPUTER COMPANY
Donald Bright, supply manager at the Peach Computer Company, was preparing his notes for a
meeting to be held that afternoon. The meeting concerned the construction of a new $6 million,
120,000-square-foot building to be located near Dayton, Ohio. The principle issue to be
discussed, and hopefully resolved, was what method of specification the firm should use in the
purchase of its new building.
When the requirement for the building first arose, the plant engineer at Peach advocated
the use of a design firm as the desired method of developing the specifications. Such firms were
employed successfully by Peach on seven previous construction projects it had completed during
the past five years. Under this approach, a design firm, traditionally referred to as an architectengineer or simply A-E, is retained to develop the detailed plans and specifications for the new
building. These specifications are identical in concept to the materials and method-ofmanufacture specifications used in the manufacturing
industry to purchase manufactured goods. After they are developed and approved, the
construction plans and specifications in sequence become (1) the basis for solicitation of bid
prices from qualified construction firms, (2) the cardinal part of the resulting construction
contract, and (3) the standard against which inspections are performed.
Don had conducted some preliminary discussions with members of the Dayton Institute
for Supply Management regarding the cost for A-E services. He learned that the fees for local
projects similar to his were averaging 8 percent of estimated construction cost. This percentage
was in line with Peach’s experience on its own projects.
One of the members of the Dayton chapter with whom Don talked suggested that he read
an article in an issue of the California Management Review (CMR). The article, entitled
“Inflation, Recession, and Your Building Dollar,” dealt with the purchase of building
construction. Don learned that several alternative approaches to supplying building construction
were available. One approach particularly appealed to him. It provided for the use of performance
specifications. Such specifications, instead of describing the building item by item in terms of its
physical properties, describe in words the building’s intended function, i.e., how large it must be;
how well lighted, heated, and cooled it must be; its longevity; its operating costs; and so on. After
the performance description is developed, it is used to solicit from qualified bidders a package
proposal that includes (1) a design approach, (2) a firm agreed price, and (3) a guaranteed
The CMR article documented that when properly used, performance specifications for
buildings can result in a significant savings in both dollars and time. Additionally, the article data
revealed that when this method is correctly used, a considerable savings in both the cost and the
time required to complete the project is a reasonable expectation. Furthermore, the article
indicated that the buyers of buildings purchased under this method have experienced
approximately equal satisfaction with their buildings as those who used A-E’s.
In preparation for the afternoon meeting, Don decided to develop lists of advantages and
disadvantages for each of the two approaches he was considering. After an evaluation of both
lists, Donexpected to be able to make a formal recommendation as to which method he thought
Peach should employ.
1. Should Don get any additional information? Explain.
2.Discuss the inherent advantages and disadvantages of using performance
3. Discuss the inherent advantages and disadvantages of the plans and specifications
method of describing quality.
4. Assuming that Don’s investigation and analysis indicates that both methods are
practical for use by Peach, discuss which approach Don should recommend.
5. Explain why one method will require more active involvement on Don’s part than the