CASE 2

BEST ENGINEERING CONSULTANCY, INC.

An engineering firm, Best Engineering Consultancy, Inc. made a partnership with a consulting firm,
through an outsourcing arrangement. Best would outsource some of its engineering functions.

Within a span of two years, the numbers of engineers directly employed with Best diminished from 30
to 5. Moreover, the customers felt that engineering work was of low quality, at a high value and
beyond schedule. The chief engineer was so disappointed that he resigned.

At the time of the partnership, said firm had 30 personnel whereas the said outsourcing firm had 30
also. As mentioned, because of the resignations and terminations only 5 employees remained at Best.

More so, Best’s billing reflected the consultant’s overhead costs and profits. The consultant also
charged the owner overhead costs to accommodate the employees that were moved to the new
partnership office.

Supposedly, the budget for a project should be determined by negotiations between the sponsor and
the project engineer. It should stay within the boundaries allowed for a particular project.

Partnering engagements like Best did with another consultancy firm made it for the two firms to
trade their secrets. Of course, there is a belief that outsourcing will substantially lessen fixed costs,
despite exchanging some trade secrets. However, the fixed costs are not properly charged to the
project’s budgets. Therefore, there are miscomputations and misappropriation of costs.

The Chief Executive Officer of Best Engineering is very much bothered with what is happening. The
contract between the firm and the outsourcing company ends next year. To preterminate the
contract will mean a penalty of P100,000.00. It would also take a while to think of another strategy
after the partnership.