Questions

1. What role should ethics play in the writing of a proposal such as this? Did the PEO do the ethical thing for David? How much money should the PEO have tried to make? what would you have done if you were part of management at the PEO?

CASE 2
Re-examining a Proposal
After working 10 years as the only minority manager in a large printing company, David
Jones decided he wanted to set out on his own. Because of his experience and prior
connections, David was confident he could survive in the printing business, but the wondered
whether he should buy an existing business or start a new one. As part of his planning, David
contacted a professional Employer organization (PEO), which had a sterling reputation, to obtain
an estimate for human resource services for a startup company. The estimate was to include
costs for payroll, benefits, and workers? compensation, and other traditional human resource
services. Because David had not yet started his business, the PEO generated a generic quote
applicable to a small company in the printing industry in addition, because the PEO had nothing
tangible to quote, it gave David a quote for human resource services that was unusually.
In the meantime, David found an existing small company that he liked, and he bought it.
Than he contacted the PEO to sign a contract for human resource services at the previously
quoted price. David was ready to take ownership and begin his new venture. He signed the
original contract as presented.
After David signed the contract, the PEO reviewed the earlier proposal in light of the
actual figures of the company he had purchased. This review raised many concerns for
management. Although the goals of the PEO were to provide high-quality services, be
competitive in the marketplace, and make a reasonable profit, the quote it had provided David
appeared to be much too high. It was not comparable in any way with the other service
contracts the PEO had with other companies of similar size and function.
During the review, it become apparent that several concerns had to be addressed. First,
the original estimate made the PEO appear as if it was gouging the client. Although the client
had signed the original contract, was it fair to charge such a high price for the proposed
services? Would charging such high fees mean that the PEO would lose this client or similar
clients in the future? Another concern was related to the PEO?s support of minority business.
For years, the PEO had prided itself on having strong values about affirmative action and
fairness in the work place, but this contract appeared to actually hurt and to be somewhat
unfair to a minority client. Finally, the PEO was concerned with the implications of the contract
for the salesperson who drew up the proposal for David. Changing the estimated costs in the
proposal would have a significant impact on the salesperson/s commission, which would
negatively affect the morale of others in others in the PEO?s sales area.
After a re-examination of the original proposal, a new contract was drawn up for David?s
company with lower estimated costs. Though lower than the original proposal, the new contract
remained much higher than the average contract in the printing industry. David willingly signed
the new contract.