Choosing a Computer Lab Vendor
A higher secondary school must buy 20 desktop computers and has two quotations. Vendor A quotes ₹4,80,000 before 8% GST, adds ₹6,000 delivery, and offers a three-year on-site warranty with a 24-hour response time. Vendor B quotes ₹4,50,000 before 12% GST, adds ₹12,000 delivery, and offers a two-year warranty; from the third year it charges ₹9,000 per year as annual maintenance, excluding 18% GST. Vendor B’s response time is 48 hours. The school will use the lab for at least three years and cannot budget for unexpected downtime during public examinations. It has a confirmed grant that can cover the initial invoice, but recurring maintenance must come from its own funds. The purchase committee must compare the three-year total cost of ownership, test how sensitive the choice is to the maintenance charge, and recommend a vendor with conditions that protect examination work.
1. Calculate the three-year total cost of ownership for each vendor. Which is lower?
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Vendor A: base ₹4,80,000 + 8% GST ₹38,400 = ₹5,18,400; add delivery ₹6,000 = ₹5,24,400. Three-year warranty means no AMC in years 1–3, so TCO = ₹5,24,400.
Vendor B: base ₹4,50,000 + 12% GST ₹54,000 = ₹5,04,000; add delivery ₹12,000 = ₹5,16,000. Third-year AMC = ₹9,000 + 18% GST ₹1,620 = ₹10,620. TCO = ₹5,16,000 + ₹10,620 = ₹5,26,620. Vendor A is lower by ₹2,220 over three years.
2. Calculate the break-even annual maintenance charge and interpret it.
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B's initial cost is lower by ₹5,24,400 − ₹5,16,000 = ₹8,400. The break-even AMC including GST is therefore ₹8,400. Excluding GST, divide by 1.18: ₹8,400 ÷ 1.18 = ₹7,118.64. Interpretation: if B's AMC is below about ₹7,119 per year excluding GST, B is cheaper over three years; above it, A is cheaper. At the quoted ₹9,000, B is not cheaper. The calculation assumes one AMC payment in year 3 and no other costs; if the school keeps the lab longer, the comparison shifts further toward A unless B cuts the AMC.
3. Recommend a vendor and state conditions that protect public examinations.
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On pure three-year cost, choose A, but make the recommendation conditional and record the non-price factors. A's 24-hour response and three-year warranty are better for exam-season risk; B's 48-hour response could leave a lab unusable during practicals. Conditions for A: confirm 24-hour on-site response in writing, a penalty for missed response, spare keyboards and mice, and a named service engineer. If B offers a lower AMC-at or below ₹7,000 excluding GST-and accepts a 24-hour exam-season SLA with penalty, B could be reconsidered. Do not award on headline quote alone: the ₹4,50,000 looks lower, but GST, delivery and AMC change the ranking. Get the final order with warranty and SLA appended.