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Supplemental Data Analysis Problem *(Fictional Scenario and Data by James Van Scotter, Ph.D.)

The Fiji Water company is considering options to develop goodwill with the local Fijian Islanders by funding the installation of a water well on a remote island where the people currently lack consistent access to clean, safe drinking water. The Fiji Government maintains a publicly accessible database* of all public works projects completed within the last 10 years. The database provides detailed information about the well installation contracts. In general, the Fiji Water company expects that the best wells (and costliest wells) will tend to be the water wells that have:

  1. higher volume capacity
  2. better taste
  3. more purity
  4. higher reliability for equipment
  5. certifications reflecting compliance with international drinking water standards
  6. use of corrosion resistant materials
  7. higher levels of automation
  8. and perhaps… equipment distributed through more reliable wholesalers

With the attached data in hand, the Fiji Water Company wishes to analyze the government data to see if the price offered by the contractor is a good deal, or perhaps overpriced. In order to do this, the analyst at Fiji Water Co. needs to first construct the best model possible for estimating prices. This may require the development of certain classification and decisions rules and conversion of qualitative data into quantitative data. This may require the creation of dummy variables (0,1) or other approaches that make the data analyzable using regression. Running regression in MS Excel, requires the installation of the Data Analysis add-in. If you don’t know how to add this add-in to Excel, you should be able to find simple instructions online.

As an analyst, your first job is to construct the best model you can. This will be a model that explains the greatest amount of variance in the contract prices. Once you have identified this model, you will then need to input the bid criteria the has been offered by the contractor in order to decide whether or not the proposed well installation contract is a good deal.

Here are the relevant details from the contractor’s bid:

Price$31,000
Volume.9
MTBF rating4
Taste ratingCCC
Purity ratingParticulate ≤ 80 PPM
Corrosion ResistanceUnknown
AutomationLevel 4
CertificationYes
Wholesaler Origin1

Bonus Questions

  1. What are the main cost drivers affecting well contracts? What factors are generally irrelevant?
  2. Is the well contract price fair?
  3. Given the broader context of issues in the case and the current analyst results, what should Fiji Water do?
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