DEVELOPMENT OF CASE STUDY
Total Cost Ownership as criteria of alternatives selection
The bids will be selected under the criteria of total cost ownership. The total cost ownership, mostly known as TCO, refers to the analysis which places the single value on a complete lifecycle of the capital purchase (Lahti, 2018). The value in this context is inclusive of the ownership, operations, acquisition, and any other overhead costs of change management, which flows from documentation and training.
It is important to note that Total Cost ownership highlights differences between long- term cost and the purchase price. It is a technique used in the analysis of coming up with useful decisions when faced with alternatives. It also aids a lot in reviews of whether to make decisions between the critical lease vs buy comparison (Lahti, 2018). It does so through incorporating the acquisition process, which, in a way, have direct impacts on the outcomes of vendor selection. The selection of alternatives considers priorities such as acquisition of capital and also overall corporate budgeting. Don't use plagiarised sources.Get your custom essay just from $11/page
The concept of total cost ownership will be used as selecting the above-analyzed bids. The bids have different activities and different budgeting. The company needs a thorough review to know which bid to choose and have the justification of selecting such a bid. In most cases, bids are selected about the amount of money offered. From the business perspective, the contracted company will always look at the project, which will give a higher bid. The higher the request, the more profitable a project will be. However, the contracted company must know that the project with higher bids involves a lot of activities, and they should be planned well. From the analysis of the given bid, Amelectsrv will select the project with the highest bid, which is Microsoft – On-premises solution bid. It involves a lot of parameters, and the analysis shows that the bid adds up to 57188.40$US.
In selecting that bid, there are some components which need to be focussed. These costs are acquisition or the physical Hardware cost, the operating cost, and finally, personnel costs.
The acquisition cost includes the costs of equipment, and sometimes it includes peripheral equipment and other upgrades of equipment (McConalogue, Davis, & Connolly, 2017). For example, in the selected bid, the equipment is laptops and back up our servers. It is through the use of equipment that a project is carried out. Therefore, this equipment needs to be in the right state always. Since the equipment used in the selected bid are more mechanical, they are subject to failure also. Therefore, the contracting company needs to include the risk of failure in the bid. That inclusivity increases the bid, and in case the equipment does not fail, the company receives that as profit (Tran, 2017). Therefore, it is always advisable to select the highest bid to accrue those benefits.
The operating cost within a bid includes services and subscriptions and are an integral part of the project. The subscriptions also include the initial training costs, direct operator labor costs, and utility costs. While selecting a bid, it is necessary to consider the operating costs, which sometimes may go beyond the budget. An example of where operating budget costs may go beyond the budget is in training. If in a project, a technical activity appears which needs expertise, the company needs to offer training to its employees or have the alternative of hiring. In the process of doing so, the budget increases, and it may lead to a deficit in expected returns. Therefore, the contracting company selects the highest bid to make sure that they cover even the operating costs, which were not included in the budget (Lahti, 2018). It is an aspect which suggests that the highest bid should be selected since it has the room of including the costs, which were in the total budget.
The personnel costs are inclusive of administrative staffing and the support personnel to the facility. In simpler terms, the personnel costs majors a lot with maintenance purposes. The maintenance cost should also be included in the project. The equipment used in the project is subject to tear and wear conditions. In those conditions of tear and wear, that equipment might become slow, which can affect the rate of performing activities. If the rate of conducting activities in a project is less than the expected, the budget will automatically adjust upwards. There should a way of covering that increase of budget due to maintenance costs (Rantanen, 2019). For the purpose of covering that cost, there is a need to have the raised bid, which will ensure that even if there will be maintenance costs occurred, the returns or benefits will remain within limits.
Scope
In the world of big business, the concept of Total cost ownership is essential for both buyers, vendors, and also contractors. As the buyer, one has to consider the initial cost of acquiring the bid. Furthermore, there is also a need to focus on the costs of maintenance (Scheubelnor et al, 2018). It is the same scenario concept which is used by contractors when selecting a bid. The bid to be selected is in the field of Information Technology, and it is necessary to consider the initial cost of the software. Also, the contractor needs to consider the back up of software and include its cost while taking the bid. It is an effective method of making sure that no matter how the bid selected deviated from the budget, there are still some significant returns.
Summary
Effective management carries out the research of their equipment to use in case they are selected for the bids. It is an aspect that helps a lot to establish an understanding of the anticipated total cost of ownership and the span to be taken to finish the bid. It is also important to note that sellers or offerees of bids will characteristically compare the competitors’ bids from the perspective of the cost of ownership. It is a scenario that needs contractors to incorporate the offerees concern about the total cost ownership to help them in the process of evaluation (Sharma, 2016). The situation needs to yield win-win outcomes. It is an outcome that will reflect the nature of the bid and its corresponding budget. The more the activities included in the bid, the more bid will be higher, and the expectation is that returns will be high.
However, it is advisable to ensure that a lot of focus is put on the nature of the bid. There is that scenario whereby activities to be carried might be less yet the project is technical. In such a bid, the contractors should value it at a higher bid since it tends to consume more resources in terms of time. The perfect example is Network costs Bid _Networks-R-Us. It is a bid that requires fewer activities, yet it is technical. It is valued at 3374.0 $, which is far much below the budget. If the bid was selected, it could have led to wastage of resources in terms of time since it involves a lot of technicalities. From the perspective of total cost ownership, that bid should be highest of all given bids.