Gene Di Fonso at Bae

Executive Summary:

As the BAE Project Manager for the installation of a BAE baggage handling system in the Denver International Airport (DIA) it is my decision to modify the deadline of the current contract and continue with the project. Although the DIA Project Management Team (PMT) is seeking $55+ million in penalties for not having the system installed and fully operations by the desired open date I'm confident that BAE's claims totaling $40 million due to increased costs and the breach of the original contract conditions agreed to be the DIA board will result in a decision that is favorable for BAE. The main reason for continuing with the project is to reap the reputational rewards of having a BAE baggage handling system installed in The World's Most Efficient Airport. If the project is managed correctly and has enough time scheduled to complete the installation properly which includes sufficient time testing then BAE will secure their reputation for decades to follow.

Issue Identification:

The main issue in this case is that Gene Di Fonso at BAE needs to make a decision whether or not to cancel, modify, or continue with the contract to install the baggage-handling system at Denver International Airport. This is a very complex decision as DIA is demanding penalties be paid upwards of $55 million for the backup systems they installed due to BAE not having their baggage handling system installed and operational by the original planned opening date. As well, BAE feels that DIA should have to pay $40 million in penalties due to DIA not living up to their end of the original contact which have resulted in BAE's costs to increase.

Secondary issues that tie into the main issue are that the project was poorly planned and behind schedule from the start which changed the project into a "build-design project" meaning they started building while they were still designing. The DIA PMT had little to no control of communication channels, tracking issues and delays, rescheduling due to delays, labour volumes on site, and delivery volumes.

Environmental and Root Cause Analysis:

Only after BAE had already begun working on United's baggage system did the DIA PMT see the value in an airport wide integrated baggage system. It was at this point that airport planners and consultants began to draw up specifications so the city could send out requests for bids. The DIA PMT gave no forethought to the space required for the system, power requirements, weight of baggage system on the building, and the heat that the system would generate. Out of 16 companies contacted only three responded and the Consulting firm recommended against all three due to them not meeting the airports needs. BAE was among the companies that had decided not to bid for the contract as the type of technology to be used for such a system is the kind of decision that must be made very early in the project. Although BAE already had the technology developed implementing it in a complex project like this would require more time than the city had available. BAE told DIA from the beginning that they would need at least one more year to get the system up and running, but no one wanted to hear that.

In April 1992 BAE was awarded the $175.6 million contract to build the entire airport system with many conditions outlined in the contract. These conditions included the design not be changed beyond a given date and there would be a number of freeze dates for mechanical design, software design, and permanent power requirements. As well BAE needed all-around access, timely completion of certain areas, permanent power, and computer rooms to which all these elements were outlined as milestones. Denver officials accepted these requirements and in addition committed to unrestricted access for BAE equipment due to knowing the tight deadlines.

In October 1992, 6 months after BAE was awarded the contract, Chief Airport Engineer Slinger died. Slinger had strongly supported the baggage system therefore he knew how tight the deadline was and reacted quickly to resolve any issues that BAE encountered. His replacement Gail Edmond worked closely with Slinger prior to his death so she was familiar with the importance of the requirements of the contract. Gail however was not given the same authority as Slinger and had to have all decisions approved by the council. Instead of issues being resolved within 24 hours it sometimes took the council 2 to 3 months. These issues included another contractor not moving his work truck so BAE could access an area of the airport, blowing massive amounts of dust around the sensitive electronic equipment, there were constant changes being made to the plan, freeze dates were being exceeded, software changes needing to be made past the cut off, and the power supply