Bomardier Case

Rank wise: Price, technical proficiency, local content/presence were the most important award criteria to win bids for passenger railcar manufacturing contracts in the US. But it looks like political factors (requiring local content and presence) were playing a greater role than stated. For most bids around 1992, Morrison-Knudsen (M-K)'s offers were outweighing the technical edge Bombardier's Transportation Equipment Group (TEG) by performing most of the contract locally (e.g. open more local plants or hire more local people than competitors). In addition, the company considerably underbid contracts by 7% on average. Remarkably, all those key deciding factors were based on promises without a record of proof. Therefore, M-K's promises seemed to be out of touch when considering that the company lacked substantial experience in manufacturing rail equipment, and had not delivered a single working vehicle to any client so far at that time. M-K had experience in the refurbishment market for mass transit cars, but this is considered an entirely different business from car manufacturing, e.g. it did not involve design, and many integration ((critical in controlling cost and delivery time) issues were already solved (blueprints). Consequently, without the control of the overall design and the integration of various systems (critical in controlling cost and delivery time), while having components coming from all over the place (e.g. M-K was supplied and supported by low-cost overseas firms from Brazil, Japan or Portugal, even for design and engineering), M-K took a huge risk of not being able to fulfill its contracts through production shortages or other process issues, especially as the company came from the refurbishment market and did not have much experience in critical areas of design and integration. Although TEG outsourced about the same amount of total work (60%), the Canadian company kept control of the design and integration part, as these are critical to control costs and delivery. While TEG could still adapt to design changes and supply chain shortages, M-K had a much higher managerial effort to coordinate everything and solve shortages. By not having one successful project in the past but so many new orders to be fulfilled in a short timeframe, the company could easily get stuck, putting project deadlines and product performance at risk. Also, the total amount of orders worth $2 billion

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could easily bring the company into financial shortages, which would be further exacerbated by production delays, exceeding costs and delayed delivery times. To bid successfully, M-K further needed to adhere to the Buy America Act, which demanded 60% of content for items manufactured for domestic use to be sourced and assembled in the US. As a consequence, M-K set up many of its plants strategically, e.g. in the jurisdictions of authorities where it was seeking contracts. Thereby, the company could