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Case Study: The Paradyne Case

Competitive Bidding

Competitive Bidding possible ethical issues:

Vendor deception, under-biddingetc!

Buyer unfairness, leak of infoetc!

Mar. 1981, Paradyne won a contract for $115 M to

replace the computer systems used by offices of the
Social Security Administration (SSA).

Should access central database

Should be off-the-shelf
Should work 98% of the time.
Pre-award demo of the system not a prototype
Pass on site visit by an inspector from SSA to determine

The Paradyne Case - II

Problems occurred immediately: Computers

failed acceptance testing

After delivery: Field offices reported repeated


After 21 months of operation, headaches, wasted

time and money, system worked to 98%!

The Paradyne Case - III

Investigation results:





Paradyne never had the proposed system in stock or

developed yet.
The operating system was still under development.
The computer demonstrated was not Paradyne but based
on a similar processor and re-labeled.
Paradyne was the only bidder assessed for capabilities
with no site visit.
Paradyne main business was building modems not
Paradyne hired a former SSA employee who (while
working for SSA) helped making the proposal and setup
the team evaluating the bids. SSA were informed of the
hiring but approved it.

The Paradyne Case Discussion




Was this a clear-cut unethical case by Paradyne?

Point out the unethical actions by Paradyne.
The initial requirements to qualify the machines were
relaxed to let Paradyne machines pass. Was this
ethical at the SSA part?
Was it ethical for a former SSA employee to take a
job with Paradyne negotiating contracts with the
SSA? Even if the SSA said it is OK? Is it ethical for
Paradyne to hire this employee? (Ethical theories??)

Application to a case

Paradyne Computers case.

Factual issues:

Request for proposals (RFP) stated clearly that only

existing systems would be considered.
Paradyne never had any such product and did not even
test the Operating System on it.
Employment of a former SSA employee was a clear
attempt by Paradyne to help lobby SSA for the

So, there is no controversy on the factual issues.

Paradyne case II

Conceptual issues:

RFP stated clearly that only existing systems would be

Is bidding to provide the required product, when the
actual product is still in the planning stage
lying, or an acceptable business practice?
Is placing Paradyne label over a real manufacturer
label deceptive?
Does lobbying your former employer on behalf of
your new employer constitute a conflict of interest?

So, Conceptual issues are more controversial.

Paradyne case III

Paradyne said they have done nothing wrong and

were conducting common business practices.

The conflict of interest issue is so hard to decide!

Actually, laws are now enacted preventing former

government employees from lobbying their
former employee for a specific period of time.

Paradyne case IV

The moral / application issues:

Answer is obvious:

Is lying an acceptable business practice?

Is it right to be deceptive so your company can get a

Lying and deceit are no more acceptable in your

business life than in your personal life!

The Key is:

If we can conceptually decide that Paradyne practices

were deceptive;
Then our analysis indicates that their actions were

Assignment # 3

Read the case The disaster at Bhopal and submit the

answers to the following questions:
Use the ethical theories previously covered to analyze the
Bhopal case. Topics to be considered should be: The placing
of a hazardous plant in a populated area, decisions to defer
maintenance on essential safety systems, etc.
Use your previously selected organization code of ethics to
analyze what a process engineer working in this plant should
have done. What are the responsibilities of the engineers who
designed the plant and the engineers responsible for making
maintenance decisions?
Submitted by next class. This is an academic exercise, not a
business activity. Therefore the written report does not have to
be in memo or letter format. It must be professional, and
should refer to concepts covered in class. You must provide a
cover memo with this summary document.