Bidding Dilemma at Transmission Solution Company
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Case Code: PROM014 Case Length: 14 pages Period: 2013 Pub Date: 2013 Teaching Note: Available |
Price: Rs.400 Organization: Valor India Industry: Energy Countries: India Themes: Project Management |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Company's Background
Valor AG was incorporated in Germany in 1950. As of December 31, 2012, Valor had 29,500 R&D experts, 17,000 software engineers, 190 R&D centres in 30 countries, 57,300 patents, and 20,000 'green' patents that formed a part of the company's environmental portfolio. As of March 2013, Valor had 12 legal entities, 56 sales offices, 9 Software centres/BPOs, 23 factories, 19,000 employees, 400 dealers, 200 system houses, 350 service centres and 1700 retailers. Valor Energy had developed different sources of generating and transmitting energy solutions to the country – Fossil fuels, Oil & Gas, and Renewable resources. It had also come up with special transmission solutions for these... .
Selecting Between Projects
The PGCIL project involved the construction of a High Voltage Direct Current (HVDC) project whereas the HVPNL proposed project was for constructing 220 kV gas insulated substations (GIS). Prior to making the presentation before the committee, Mr. Dinesh Mishra and Mr. Avnish Sharma bought the tender documents of both the firms...
HVPNL Issues
After going through the tender document of HVPNL, the summary of which is given in Exhibit II, Mr. Avnish Sharma made these following observations. He said that there were issues which were coming in the way of bidding for HVPNL. The most important of all was that the payment terms were 50%, 40%, and 10 % for supply of equipment including mandatory spares. Valor wanted the client to pay an advance of 10%, but HVPNL did not agree to this...
PGCIL Issues
The committee was more forthcoming about the PGCIL project. Mr. Dinesh Mishra put forward all the issues in the contract for the construction of 2,500 MW high-voltage direct-current terminal stations for a 780 km long HVDC transmission route between Uttar Pradesh and Rajasthan As per the tender contract of this project, PGCIL was willing to pay an advance of 10% of the total value of contract unlike HVPNL. The PGCIL project was to be completed in a period of 6 months but it was not as rigid as the HVPNL contract. The rest of the payment for the contract was to be done on the basis of POC (Percentage of completion method) and in INR terms. Also there was no specification that non compliance of work which could lead to liquidity damages....
Arriving at the Bidding Cost
Having decided to bid for the project, the commercial manager had to do a detailed analysis of the risks and foresee the cash flow before handing it to the bid manager whose responsibility it was to bid for the project based on the inputs from the commercial manager. For analyzing the risk of the project, the Limits of Authority LOA document was prepared to give the bid manager the authority to bid for the project having categorized risks associated with the project. This gave the bid manager a limit margin within which he/she had to arrive at the price keeping in mind the probability and intensity of risk
Exhibits
Exhibit I: Expected Capacity Additions
Exhibit II: Summary of Tender Document of HVPNL
Exhibit III: Arriving at the Bidding Price for PGCIL
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