Indianapolis Harvard Case Solution & Analysis

Indianapolis Case Solution

Introduction

In the center of Indiana, the city of Indianapolis is situated, which is considered as the 13th largest city of the country. In 1992, Stephen Goldsmith was elected as the mayor of the city. Indianapolis was famous in the whole country because of achieving high growth in increasing industrial base and hosting sports activities such as football, and basketball.

The annual growth of the city’s budget was 6%, however since 1987 the city was going in fiscal deficit of $8-$14 million. After being elected as the Mayor of the city, Stephen called its department’s manager to bring the summarized reports of their operations as new budget was to be allocated. After his announcement, the managers were surprised as there was no proper costing system which could be followed.

After listening to the views of the department’s manager, he conveyed a message for all employees that from their departments would compete against the private firms in terms of development projects. In case if their department were to be successful in bidding process then, they would award the funding and related project. If their departments fail, then the development work of city will be handed over to the private firms.

In order to compare the private bids for new development works, Stephen and Room (head of transport department) invited one accounting firm, KPMG Peat Marwick, to conduct due diligence of the previous work and come up with actual cost of previously did projects. This was a six week project and the firm conducted interviews from workers regarding the material used and time consumed for performing particular work. After carefully analyzing the past work and required activities, the team submitted report to Stephen. Moreover, after analyzing the established report, the managers came to know about their work and single line account cost.

The departments had to submit the bid for Pothole Filling, and the lowest bidder would be the winner of the bidding process. Afterwards, the departmental team was afraid of losing its job if the private bidder would win the project. Therefore, they eliminated the extra layers of human resources and material cost to come up with a well-established and low cost bidding plan.

Problem statement:

In Indianapolis, there was no activity based costing system to analyze the major component of cost for given projects. The government’s departments were not developing quality services as the private firms were. Therefore, Stephen, and Roob decided that those projects which private companies could do better than the public firms, then in such a case, the private firms should be given the chance.

As far as the new budget and development work of Pothole Filling were concerned, the Mayor of the city was inviting bids from private as well as his own department in order to improve the services for the citizens.

Case analysis

Situation of city:

 The city government (Mayor and its department) failed in providing quality services to their citizens. There was no proper costing system followed by the departments. The whole budget was just being wasted and had no record of particular account where the proportion of budget was spent.

Recently, work management system was installed in city. This system updated about the number of people that worked on a particular street maintenance/repair project and the number of hours they took to complete the work. However, there were few lacking(s) in the system in terms of the total they spent on each particular site/project. After the arrival of the new mayor, the major focus was to improve the efficiency of government departments. For this, Stephen announced to increase the competition among the government and private companies for public sector development projects. This move was expected to bring proper accountability in the government departments related to the development projects...................

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