Question 1b
Introduction
Cofold Construction Co (CC) is a listed construction company. Its head office is in the capital city, Lambdahasa, of the country of Omegland. Omegland has two neighbouring countries, Alphia and Betal. The countryside in both Alphia and Omegland is generally flat. In Betal, there is a large range of mountains (the Isnardi mountains) which separates its Eastern region from the rest of the country. All three countries use the same currency, the dollar ($).
The board of CC comprises 50% executive directors and 50% independent non-executive directors. The senior board members are:
Chairman Imena Bhudia
Chief executive Burton Vadher
Senior non-executive director Alex Larsen
CC’s core business is to provide support services, such as upgrade of electricity networks and road renewal and maintenance, in all three countries. However, it has also undertaken road construction projects of increasing size and complexity. Initially, CC carried out most of its major construction projects in Omegland, its biggest project there being a ring road around the city of Lambdahasa. CC has also started to develop a portfolio in Alphia, the biggest development there being a road between Phi City and Tautown, which was completed in 20X0.
To date, CC has not carried out any road construction projects in Betal. However, an opportunity has arisen for CC to tender for construction of a major road in Betal, which would be the biggest project which CC has undertaken to date.
The following exhibits provide information relevant to CC:
Exhibit 1: Extracts from the most recent annual report of CC.
Exhibit 2: Press release of the announcement of the new road in Betal.
Exhibit 3: Forecast revenues and costs for the construction of the new road in Betal.
Exhibit 4: Outline contents of the project initiation document (PID) and a summary of the operational issues section of the PID.
Exhibit 5: Transcript of an emergency meeting at CC’s head office.
Exhibit 6: Report of an interview with Burton Vadher in Omegland Daily News newspaper.
Question 1b:
You are Alex Larsen, the senior non-executive director of CC.
CC has been invited to tender for the contract for the construction of the new road in Betal, as the preferred partner of Betal’s government. CC’s finance team has drawn up financial forecasts for the project. However, you have doubts about the contract and you want it to be discussed thoroughly at CC’s next board meeting. You are particularly concerned with whether CC will be able to fulfil the criteria stated by Betal’s transport minister.
Required:
Prepare a briefing paper for the board meeting, which:
(b) Discusses the difficulties CC may face in fulfilling the criteria stated by Desmond Otieno, the transport minister of Betal. (8 marks)
Professional skills marks are available for demonstrating commercial acumen in identifying difficulties for CC arising from the criteria which Desmond Otieno has stated. (2 marks)