CASE STUDY

Case Study

Case Study

The Department presented an analysis at the August stakeholder meeting that provided a snapshot of the current state of the market for qualified products. Additional data provided by stakeholders for the Department to use in subsequent analyses is also included. Table below illustrates the average MEF has raised substantially since the new test procedure took effect in 2012. The slight dip in the average MEF in 2004 was due to the introduction of several new models at the minimum JML level, but the average MEF increased dramatically in the last six months of 2004. More importantly, Table One reveals a significant increase in the number of models available to consumers at relatively high MEF levels, thus supporting the conclusion that a significant increase in MEF levels can be achieved, while protecting consumer choice (Brent, 2002, 144).

Question 1

State Employee Costs

Year 1

Year 2

Year 3

Additional

Total

1.

Wage and Salary Costs

£46,671

£47,254

$47,845

£0

£141,771

2.

Fringe Benefits Costs

£22,869

£23,155

£23,444

£0

£$69,468

3.

Administrative Overhead Costs

£0

£0

£0

£0

£0

4.

Other Operating Costs

£0

£0

£0

£0

£0

5.

Total State Employee Costs

£69,540

£70,409

£71,289

£0

£211,238

(Sum of Lines 1 through 4)

Contracting Out Costs

6.

Contract Price

£37,000

£37,463

£37,931

£0

£112,393

7.

Contract Monitoring

£3,700

£3,746

£3,793

£0

£11,239

8.

One-Time Conversion Costs

£0

£0

£0

£0

£0

9.

Total Contract Costs

£40,700

£41,209

£41,724

£0

£123,633

(Sum of Lines 8 through 11)

Cost Analysis and Decision

10.

Annual Savings/Cost

£29,202

(Line 5 minus Line 9, divided by number of performance periods)

11.

Annual State Employee Costs

£70,413

(Line 5 divided by contract length)

12.

Average Annual Savings/Cost Percentage

41.47%

State employee costs assume one Laundry Worker and one lead worker as full-time employees. Year 2 & 3 costs assume 1.25% pay increase each year.

State employee costs do not include equipment costs to do the laundry or transportation costs to pickup and deliver. At a minimum, equipment costs would be at least one large commercial washer & dryer.

Contractor will be providing a truck or trucks to pickup and deliver laundry to various UW campus locations. Contractor costs also assume a 1.25% pay increase each year.

Three companies bid on this service at the time of the last solicitation.

During summer conference season, UW Housing produces a significant amount of laundry each week that requires quality work with turnaround within a week.

Other State agencies (Central Wisconsin Center & Badger State Industries) either don't have the physical capacity or personnel to perform the services. BSI will receive a bid solicitation, but did not respond to the last bid request (Christopher, 1997, 63).

Question 2

First, it's unwise to try to achieve too much, too fast. For example, don't try to apply a quality cost system to every project until you've applied it successfully to one project. And don't try to measure all of the costs, because you probably can't. Second, beware of insisting on controversial costs. JML `s points out several types of costs that other managers might challenge as not being quality-related. If you include these costs in your totals (such as total cost of quality), some readers will believe that you are padding these totals, to achieve a more dramatic effect (Collin, 2006, 418).

This is usually wise advice, but it can lead you to underestimate JML`s customer's probable dissatisfaction with your product. As we see in the next section, down that road lies ...