National University Pmb440 Case Study 7 Central States Oil Company Csoc

PMB 440 case study #7 Central States Oil Company (CSOC)

The Central States Oil Company (SCOC) has a number of refineries in the mid-west that produce a variety of petroleum products. Executive management of SCOC decides to build a new refinery in a location that will reduce distribution costs. The design of the new refinery is to be based upon an existing refinery as a reference plant. Since management personnel are in short supply for the new project, CSOC decides to use a fixed price, design and construct contracting approach for the new facility that minimizes the need for SCOC management of the project contract. A fixed price, design and construction contract is awarded to Refinery Constructions, Incorporated (RCI).

The design documents for the new plant are given to RCI for their use in the design of the new plant. RCI proceeds with the new design, procurement of the equipment and needed materials, and construction begins on the new refinery with little oversight from CSOC management. When CSOC operations personnel tour the new refinery as it nears completion of construction, they discover that the layout of the new plant is significantly smaller than that of the reference design. The equipment that has been procured for the new facility is inferior in quality to the equipment in the referenced plant. Testing of the installed systems in the new refinery by CSOC personnel revels that the systems are not producing the required output for the refinery.

The Vice President for CSOC is extremely angry when receives report from operations personnel concerning the problems with the project technical specification per the contractual documentation. A meeting is called to meet with the Vice President of RCI to discuss all the problems and concerns. Answer the following questing as if you are the Vice President of Central States Oil Company.

Questions: Explain all your answers.

1. What is the minimum level of involvement that CSOC’s engineering group should have had with the design of the project and why?

2. What is the minimum level of involvement that CSOC’s procurement group should have had in the contractual efforts for the procurement of equipment and material for the new plant and why?

3. What is the minimum level of involvement that CSOC’s operations group should have had with the design and construction if the new facilities and why?

4. If there are no penalties for meeting the overall performance requirements for this contract in the design and construction, what can CSOC do about the fact that the plant does not produce the expected output?

5. As the contracted consultant, employed by CSOC, what position will you take in the meeting with RCI?

6. What are your recommendations to CSOC management?

Management of Project Procurement, C. L. Huston, The McGraw-Hill Companies, Inc. CS 21-2

CASE NAME)

I. Major Facts

(State here the major facts in bullet format, as you understand them. Make your statements clear and concise for your own understanding as well as for the understanding of the other students and the instructor.)

II. Major Problems

(State here the major problems, as you understand it. Emphasize the present major problem. You may wish to phrase your statement in the form of a question. In a few cases, there may be more than one problem. A good problem statement will be concise, usually only one sentence.)

III. Possible Solutions

(List the possible solutions to the major problem. Let your imagination come up with alternative ways to solve the problem. Do not limit yourself to only one or two possible solutions. Briefly note the advantages and disadvantages of each possible solution. Try to think outside the box.)

IV. Choice and Rationale

(State your choice from among your possible solutions and the detailed reasons for your choice. You may also wish to state why you did not choose the alternatives.)