Case Studies 25:

Question

A computer services company was negotiating a very large order with a major corporation. They
had a very good track record with this client. Five different departments in the corporation had
pooled their requirements and budgets and a committee that had representation from all the
departments was formed. The corporation wanted the necessary equipment on a long lease and did
not want to make an outright purchase. Further, they wanted all the hardware and software from
one supplier. This meant that their supplier would need bought-out items from other suppliers,
since no one supplier could meet all the requirements from its range of products.
The corporation provided an exhaustive list of complex terms and conditions and pressured the
vendors to accept their terms. The computer company that was finally awarded the contract had
agreed to the overall terms as far as their own products were concerned, but had also accepted the
same terms for the bought out items. In this case, the bought out items were to be imported through
a letter of credit. The percentage of bought out items vis-à-vis the company’s own products was
also very high. One of the terms accepted was that the ‘system’ would be accepted over a period
of 10 days after all the hardware had been linked up and the software loaded.
The computer company started encountering supply troubles immediately. There were over a
hundred computers connected with one another through software. For the acceptance tests, it had
been agreed that the computer company would demonstrate, as a prerequisite, the features they
have promised during technical discussions.
Now, when a Hero Honda motorcycle claims 80km to a liter of petrol, it is under ideal test
conditions, and if a motorcycle from the showroom were to be tested for this mileage before being
accepted, it would never pass the test. In the corporation’s case, due to internal politics, the
representatives from one department-who insisted on going exactly by the contract-did not sign
their acceptance since the system could not meet the ideal test conditions.
Further, in a classic case of “for want of a horseshoe, payment for the horse was help up”, when
the computer company tried to get the system accepted and payment released, they could not. The
system was so large that at some point over a period of 10 days, something or the other always had
problems. But the corporation took the stand that as far as they were concerned, the contract clearly
mentioned that the system had to be tested as a whole and not module by module.

Questions: (15 Marks)

1. Comment on the terms and conditions put forth by the corporation. 5M
2. What factors influenced the computer company’s decision to accept the contract? 5M
3. Was it a win-win agreement? Discuss. 2M
4. As a committee leader, how will ensure proper execution of the contract? 3M

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