Mr. Jesse Krause, supply manager of the Vigard Manufacturing Company, was faced with the problem of
selecting a source to prepare a technical manual for a winder that the company was planning to sell nationally.
The Vigard Manufacturing Company was formed four years ago by Edward Vigard, an engineer who had
previously been employed by a large electronics manufacturer in the New Jersey area. Mr. Vigard’s company
concentrated on the production of a special type of wound magnet that had wide application in military and
commercial electronics equipment. The company had grown from two employees to a present work force of
seventy-five. In addition to Mr. Vigard and Mr. Krause, the management of the company included a sales
manager and a production manager. The president, Mr. Vigard, handled design and engineering matters.
The magnets that the company produced were wound on a machine that Mr. Vigard had designed. The
machine consisted of a specially designed casting, a high-speed motor, and a small core around which the
finely spun copper wire was wound in order to produce the magnet. Mr. Vigard had fabricated a number of
these winders for use by his company. Successful production of the magnets required proper operation of the
winders and this, in turn, depended on continual servicing to maintain required speeds and accuracy.
Last year Mr. Vigard and his management group decided to manufacture the winders for sale to electronics,

aircraft, missile, and instrumentation firms, many of which produced their own magnets on equipment that Mr.
Vigard believed was inferior to his own winder. Cost analyses and projections indicated to Mr. Vigard that sales
of the winders might constitute a substantial new source of volume and profit. When a decision to produce the
winder had been reached, Mr. Vigard invested a substantial portion of the company’s funds in the castings and
other components needed to manufacture the winders. As production proceeded, the sales manager prepared
for marketing the new product. First, he undertook exploratory discussions with potential customers in the
immediate area of the Vigard plant. Second, he negotiated an agreement with a sales representative to handle
sales in the western part of the United States. Third, he initiated an advertising campaign, by means of direct
mail and announcements in trade papers, stating that the winders would be ready for delivery on June 1 that
year.
The Vigard Manufacturing Company proceeded satisfactorily with the manufacture of the winders. Although the
sales manager found that there was a substantial amount of interest in the new product, he learned that the
winders could not be sold unless they were accompanied by an illustrated operation and maintenance manual.
For example, the western sales representative informed him that the manual was not only essential to the user
but also needed for demonstrating the winder. Moreover, an eastern customer had placed an order for several
of the winders contingent on their being delivered with a suitable manual. These contingent orders were of
great importance to the Vigard Company because the cost of the manufacturing program had required an
additional bank loan and had seriously depleted the company’s working capital.
Accordingly, Mr. Vigard and his associates prepared the technical descriptions that the manual would contain.
Mr. Krause, the supply manager, was directed to locate a source that could prepare approximately 180
illustrations and technical drawings and have the manual ready for the printer on the first of May so that it
would be available for the June 1 deadline.
Although he had never before had occasion to place artwork contracts, Mr. Krause found that he was able to
locate a number of potential sources through the use of the “yellow pages and the telephone. The companies
that he located were of two general types: (1) commercial art companies that prepared mail order catalogs and
(2) art companies that specialized in the preparation of technical manuals. He found that most of the
commercial art companies showed little interest in the work because they were busy preparing catalogs and
promotional pamphlets for their regular clients. Two large concerns that specialized in the preparation of
technical manuals seemed anxious to obtain the work.
In addition to these two broad classes of companies, Bullock Art, a small organization that was attempting to
expand, gave promise of being able to handle the work. This company consisted of Mr. Bullock and a group of
freelance artists he employed whenever he obtained a contract requiring their help. Mr. Bullock had been
employed as a freelance artist by several companies, which, upon telephone inquiries by Mr. Krause, reported
favorably on the quality of Mr. Bullock’s work. In addition, he taught commercial art at a well-known trade
school and had developed his own production methods, which appeared to be superior to those used by most
other art concerns.
Mr. Krause’s preliminary survey indicated that four companies were interested in undertaking the work: Bullock
Art; Webster, Inc., and Hershey Associates (the two concerns specializing in the production of technical
manuals): and The Catalogue Corporation, a large commercial art concern. Mr. Krause decided to visit each of
these companies.
Webster, Inc., the first company visited, was the largest art concern in the city, employing approximately 150
artists and book designers. The company had excellent facilities, including the latest art and layout equipment
and its own photographic laboratories. The operations of the company appeared to be efficiently organized and
well managed. Although the company was then operating at capacity, Mr. Krause learned that approximately
80 percent of its business had been with one large manufacturer that had recently informed the Webster
management that it was shifting its technical manual and work to another firm. The general manager of the
company estimated that he could complete Mr. Krause’s work on schedule. He stated further that the company
would undertake the work on an hourly basis with a guarantee that the total time would not exceed a specified
number of hours. He informed Mr. Krause that he could submit a definite quotation within forty-eight hours. 
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Hershey Associates was visited next. Although considerably smaller than Webster, Inc., the company had been
doing the same general type of work. After examining samples of the company’s previous work, Mr. Krause
concluded that Hershey Associates was qualified to prepare the artwork for the manual, and invited the
company to submit a quotation.
Mr. Krause then called on The Catalogue Corporation. Although this company was well known as a publisher
of mail order catalogs, it had never produced a technical manual. The company representative saw no problem
in meeting Mr. Krause’s requirements, however, He said that if any specialized talent was required, he would
have no difficulty in obtaining needed personnel inasmuch as several qualified people had called on him that
week in search of employment. In view of these assertions and the general reputation of the company, Mr.
Krause asked The Catalogue Corporation to submit a quotation.
The pressure of other work prevented Mr. Krause from visiting Bullock Art. However, Mr. Bullock telephoned to
ask if he might visit the Vigard Manufacturing Company to analyze the job and submit a quotation. He stated
that if he were given an opportunity to study the work, he was confident he could demonstrate his ability to
handle the contract within the time limit and at a lower cost than his competitors. Although Mr. Krause did not
believe that an additional quotation was necessary, he agreed to let Mr. Bullock analyze the work and submit a
quotation.
The following day the general manager of Webster, Inc., called on Mr. Krause to present his quotation. The
quotation stipulated a rate of $17.60 per hour with a maximum guarantee of $72,000. The quotation was
contingent, however, on weekly progress payments based on the number of hours spent on the contract. In
submitting the quotation, the general manager stated that the hourly rate should be considered as the
significant figure, since the maximum guarantee provided a margin of safety for contingencies. Mr. Krause took
exception to this statement, pointing out that a company employing more highly skilled personnel might
complete the job in fewer hours and at a lower total cost, even though it had a higher hourly rate. He
concluded, therefore, that the maximum guarantee was the more important figure. In addition, Mr. Krause
stated that although the artwork would not necessarily be awarded to the lowest bidder, it was going to be
placed on a competitive basis, and he advised the Webster general manager to eliminate any ‘water’ that might
be in his bid. After making a few computations on a scratch pad, the general manager stated that he could
reduce the maximum guarantee to $48,000. Thereupon Mr. Krause told him to prepare a new quotation and to
submit it as soon as possible. The following morning, the general manager returned with a new quotation
containing the same hourly rate but with a new maximum guarantee of only $22,500. When Mr. Krause
remarked, “There must have been enough ‘water’ in the previous quotation to float the manual,” the general
manager replied that he expected to lose money if he received the contract. He said that in view of this, he was
unwilling to assume the burden of financing the work. Mr. Krause explained that this was an important issue to
him and that his award of the contract might well hinge on this provision. The general manager pointed out that
his company typically received weekly progress payments and that without them he was not willing to accept
the contract. Mr. Krause then stated that he would make his decision and place the contract within forty-eight
hours.
In the meantime, Mr. Bullock had visited the Vigard Company and had spent several hours analyzing the work
and preparing his quotation. In the course of analysis, Mr. Bullock made a number of suggestions that not only
improved the style of the manual but simplified the production of the artwork. For example, Mr. Bullock
suggested that certain expensive airbrush operations could be replaced by relatively inexpensive screening
techniques. He also demonstrated that through more careful “eye control” many of the sketches could be
improved: This would result from a rearrangement of details so that they were placed at a point in the
illustration where the eye naturally fell first. He stated that if he were given the contract, he would improve the
layout and general appearance of the manual and eliminate difficult production problems. Mr. Bullock examined
the rough sketches for the manual and discussed them briefly with Mr. Vigard and the sales manager. When
Mr. Krause discussed Mr. Bullock’s qualifications with these two officers of the company, they both expressed
the opinion that he possessed an unusual ability and seemed to be well qualified to undertake the work.
Bullock Art’s quotation specified an hourly rate of $18 and a maximum guarantee of $21,060. Mr. Bullock 
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explained in detail how he had prepared the quotation and how the production shortcuts he had developed
would enable him to make a fair profit on the contract. Although Mr. Krause was convinced that Mr. Bullock had
a better understanding of the job to be done than any other bidder, he questioned his ability to acquire an
organization and get it in operation in time to meet the required production schedule. Mr. Bullock countered by
saying that this was the normal manner in which he worked and that he was confident that he could get the
personnel and equipment needed on a moment’s notice. He stated further that if he needed additional funds to
finance the work, he could borrow the money from his brother-in-law. In the event that he fell behind schedule,
he could work nights and weekends.
During the day, the quotations of the other two companies were received. The Catalogue Corporation offered
to take the contract at an hourly rate of $21.00 and a maximum guarantee of $32,130. The quotation of
Hershey Associates stipulated an hourly rate of $18.90 and a maximum guarantee of $33,750.
Although Bullock Art submitted the low quotation, Mr. Krause was somewhat reluctant to place the contract
with the company. He did not question Mr. Bullock’s personal ability, but he doubted that Mr. Bullock could
expand his organization fast enough to meet the desired production schedule. On March 22, because of this
doubt, Mr. Krause decided to visit Bullock Art. His visit disclosed that Bullock Art did not possess adequate
space in which to do the work. However, Mr. Bullock showed him an unoccupied basement in a building down
the street that could be rented, cleaned up, and put to use if needed.
After his visit to Bullock Art, Mr. Krause wondered if the potential savings of an award to Bullock justified the
risks that were involved. He needed to place the contract immediately in order to allow sufficient time for the
completion of the artwork and delivery of the manual to the printer by May 1. Unless the manual reached the
printer by this date, it would not be available on the first of June, the day on which the winders had been
promised for delivery.
. Major Facts / Major Problems: (List them)
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2. Possible Solutions: (What is your approach to solving the problems listed above? Explain)
– Solution A:
– Solution B:
3. Possible Solutions: (Discuss the advantage/disadvantage of solutions listed above)
– Advantage A:
– Disadvantage A:
– Advantage B:
– Disadvantage B:
4. Choice and Rationale: (Explain your choice and why selected)
– Solution A or B