Reference no: EM133251368
THE PROBLEM: You are the CFO of The Strong Foundation, a nonprofit that works to build houses in countries that are developing or recovering from recent disasters. After a massive hurricane hit the Caribbean nation of Macaya, The Strong Foundation raised $50 million through a combination of small crowd-funded donations and a few larger contributions from wealthy donors, which can be used to buy land and build concrete houses for some of the 22,000 families that are currently in temporary shelters. You've put out a call to concrete companies to provide materials and construction for the project, and the bids are now coming in.
The lowest responsible bidder is Bastion, a vendor with whom you have done considerable business in the past and with whom you have a good working relationship. The next lowest bidder, Rican & Sons comes in at 10% higher, which for this contract is a difference of $4.5M. Also, while the next bidder has a good reputation, you have not worked with them before as they are just moving into your state.
As you are about to make your final decision, you hear from an environmental watchdog group, EnviroHelp, who informs you that the production processes in the overseas plant that supplies Bastion's cement are releasing airborne pollutants within the plant and in the nearby residential neighborhood. These adverse environmental impacts have the potential to cause health problems to anyone exposed to the contaminated air. The factory is compliant with all laws and regulations in their home country, though it wouldn't pass muster under the stricter standards required in the US.
Your research also indicates that Rican & Sons purchases their concrete from an overseas plant that has a much better environmental record. From your analysis, Bastion would have to invest approximately $3.5M in their plant, with whom they have an exclusive contract, to meet the same level of cleanliness as Rican & Sons. The other concern is that the final upgrades to the plant will take at least 6 months (4 months to get the equipment; 2 month shut-down to complete retooling), putting your projects behind and possibly jeopardizing the funding if you can't get the work done within the three year window.
One company can build more houses, but their methods pollute the air. The next bid is significantly higher, meaning you'd shelter fewer families, but has a much better environmental record. With which company will you partner?