Bae Case Report

EXECUTIVE SUMMARY

Mayor Webb has communicated to BAE that he has approved the construction of the backup baggage system for Denver International Airport (DIA) as recommended by Logplan. He has asked that we cover the $50 million cost to implement the backup system and notified us of a $12,000 per day penalty for not finishing the baggage system by DIA’s expected completion date. After carefully analyzing all the developments since we were awarded the contract, we believe that the Project Management Team (PMT) and DIA are responsible for the delays because they have failed to provide what we agreed with them in the original contract. Original project requirements were changed after freeze dates and BAE was not prioritized over other contractors; these were two milestones that were agreed upon the signing of the contract. These two milestones were highly critical because at the time both parties were concerned about the ability to complete the project by the expected date. BAE’s current biggest issue is the rising cost of the project given that Mayor Web is expecting us to pay for the backup system and to pay per day penalties; to date this amount is over $53 million dollars. We have considered three options: 1) continue with the project as is, 2) modify the design and, 3) cancel the contract. Options 2 and 3 carry the biggest cost exposure to BAE and a high probability that our brand will be severely impacted. We have decided to proceed with option 1 and defined a plan that is aimed at mitigating BAE’s cost exposure, dealing with project challenges and repositioning our brand. The efforts have started and are expected to be completed by October 15th of this year.

ISSUE IDENTIFICATION

These are the main issues that we face today:

Rising cost of the project

Mayor Webb has decided to implement a backup baggage system as recommended by Logplan and has demanded that we cover the $50 million cost to implement it. He also requested that we pay a $12,000 per day penalty...