Dynamic Systems Ltd. is the Romanian subsidiary of an USA company specialized in turnkey integrated IT systems. The CEO of Dynamic Systems Ltd. is an American citizen. Romania is a new market for the company and it is the first time when it extended its business outside USA. The main activity of Dynamic Systems is to import the mother company’s products and solutions in Romania and sell them on the Romanian market. The company has been operating for over a year in Romania and has already employed around 20 people. During the first year, the company obtains the necessary permits, searches for the best people to employ and approaches a few private customers. At the end of the first year, expecting to see some growth, the mother company slowly starts pushing the local company to deliver more positive results. One day, the CEO is informed by the Head of Sales that one of his former university colleagues has been newly appointed in a high-ranking public office and he could easily set up a meeting to discuss the company’s portfolio and identify any business opportunities in the public sector.This is an area the company hasn’t yet managed to access.
The CEO gladly accepts and meets the public official together with the Head of Sales at a well-known coffee shop. The public official shows openness and confesses to the CEO and Head of Sales that he intends to change the whole obsolete IT infrastructure of his institution and modernize the whole IT system. Funds can be easily accessed, so there are plenty of opportunities for Dynamic Systems to partner on this.
The CEO is enthusiastic about this opportunity, thinking that such a large scale project could easily boost the figures and please the shareholders and the top-management of the mother company. The public official is assuring everyone of his good intentions, stating that he has no interest other than the greater good! However, afterwards, he complains
about the lack of resources and knowledge of his people in drafting such a complex project and, if the business environment wishes to give a hand, he would be more than grateful to accept it.
Then, he suggests that other IT companies are also willing to support and invites Dynamic Systems to join this partnership as soon as possible since time is running out.
The Head of Sales jumps to the proposal and says that his company can offer consultancy, of course within the limits of the local regulations. But he forgets to take with him, upon leaving, the detailed technical descriptions of the company’s equipment.
On their way back to the office, the Head of Sales asks the CEO for a confirmation to further pursue this opportunity and to take over any further discussions with the public official. The CEO agrees; however, he asks for periodic updates on the developments.
A month later, the Head of Sales returns to the CEO for approval to take over costs for a site reference visit to the US for the public official and a few technical experts motivating that the best way to under stand a turnkey solution is for the experts to actually see the system functioning on already installed premises. Furthermore, he justifies the trip by stressing out that the experts are having difficulties in understanding the way such a system could benefit and add value to their institution and that, unfortunately, such expenses could not be afforded by public authorities. The CEO weighs this in and considers it as a normal business approach and agrees.
The Head of Sales makes the bookings and also includes a weekend layover in the USA, even though the site reference visit is only one day. His reasons for prolonging the trip are the long distance and time difference, as well as the idea that it is wiser to offer the potential clients such an option. The public official states that the institution does not offer daily allowance for such kinds of trips and asks for meals and beverages to be included if possible.
The expert team is highly impressed by the site reference visit and extended weekend, travel and lodging conditions being more than pleasant. Moreover, they use the company’s negotiated hotel rates to charge to their room additional facilities offered by the hotel, such as spa services and lavish room service, without asking for permission from the Head of Sales.
Dynamic Systems pays as well for these additional expenses. On return, the experts enthusiastically start working on the tender documentation. From time to time, the Head of Sales provides the expert team with advice on technical specifications, either by phone or email, making sure to let them know that these are only friendly suggestions.
Upon releasing the tender, the CEO of Dynamic Systems sees that the technical specifications are extremely favorable to their solution, almost a perfect match. There is only one issue: the implementation time requested by the tender book would lead to a very tight schedule. For certain items, even though part of the Dynamic System’s portofolio, it was uncertain whether the products could be delivered on time to meet the deadlines. The CEO decides to go further with the turnkey solution, but the Head of Sales insists not to take such high risks, because missing a deadline in a public project would lead to a nonconformity certificate which would affect the company doing business in the public sector for quite some time. The statement is confirmed by the Legal department. As a trusted adviser to the CEO, the Head of Sales is asked for a solution. The CEO immediately gets the proposal to partner with a small Romanian company who is willing – even on short notice – to be their subcontractor. When asked by the CEO how come such a small local company has the requested resources, the Head of Sales states that this should not be a concern as this company is known to have the necessary experts and deliver small services to that particular institution without any problem in the past. Seeing the CEO as being still reluctant, the Head of Sales mentions that this solution is suggested by the technical experts of the public institution and that they should take their friendly advice because this is how things are done in Romania, i.e., via recommendations.
Being under the pressure of time and not having a too vast network of contacts in Romania, the CEO cannot find any alternative. Therefore, he agrees to subcontract the small company without a proper due diligence. However, he notices that the prices offered by the small company are quite high, thus meaning that Dynamic Systems Ltd. should lower its margin. He protests to the Head of Sales, who, once again, outlines that this is the best alternative for the time being and should they wish to finally enter the public sector, it is a compromise worth taking. The CEO finally agrees with the solution.
The tender is awarded via e-bidding to Dynamic Systems Ltd., as they are the only participants. The CEO considers as a good sign the fact that the published budget was in concordance with the experts’ initial estimation and the fact that no other company was interested or claimed the tender book. All these three facts eliminate any concerns he might have had with the setup of the project. With this new tender, the CEO can report great figures for the second year of operations to the mother company.
The project runs smoothly except the fact that, at some point in time, the small company requests that the invoices should be paid in a different account, in Cyprus, not mentioned in the contract. The CFO of Dynamic Systems requests a written confirmation of the fact that the small company is the account holder of the Cyprus bank account. The small company sends a short email confirming the account holder; therefore the CFO does not proceed further with the due diligence and goes ahead with the processing of the payments. One day, the public official decides to make a visit to the company’s CEO to congratulate him on the success of the project, but also to discuss some issues with delayed payments. The official explains to the CEO the fact that his upper management has different priorities in allocating the existing budget and unfortunately, payments will be on hold for a few months, a frequent issue in the public sector. Nevertheless, the public official shows his availability in trying to unblock this situation given the fact that there have not been any problems with the implementation of the project.
As the discussion continues, the public official thanks the CEO about the very welcoming and interesting trip to USA and the very good and expensive wines he received last Christmas as presents. He goes further stating that he has heard from the Head of Sales that another interesting solution – an extended version of the current one – is being implemented in several locations in Asia, a thing he would be interested to see as well. He mentions that the project is such a success that he could act as a promoter to other public institutions, or to extend the current solution, should Dynamic Systems Ltd. be interested.
As the discussion goes further, the public official mentions that his son is also studying IT, a bright and talented young man who would be very grateful to learn from the best, meaning Dynamic Systems’ experts. The CEO mentions the paid international internship projects his company offers and invites the public official’s son to apply. The public official suggests that a recommendation to HR coming directly from the CEO would be very helpful.