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P R O G R A M O N N E G O T I A T I O N A T H A R V A R D L A W S C H O O L AN INTER- UNIVERSITY CONSORTIUM TO IMPROVE THE THEORY AND PRACTICE OF CONFLICT RESOLUTION * This version of Eazy’s Garage was written by the Dispute Resolution Research Center at the Kellogg School of Management. Th e original exercise was created for the Harvard Negotiation Project by Bruce M. Patton, based on an idea from the American Arbitration Associatio n © 1996- 2014 Dispute Resolution Research Center (DRRC), Kellogg School of Management, Northwestern University . All rights reserved. Revised 2010. DRRC/KTAG teaching materials are protected by copyright law. DRRC requires a per person royalty for use of its exercises. Each purchase of an exercise authorizes copying or electronic distribution of that exercise equal to the quantity purchased. Access DRRC/KTAG materials at www.negotiationexercises.com Contact DRRC at [email protected] E AZY 'S G ARAGE DRRC Version* Confidential Information for Jim Eazer, Gas Station Owner You have owned your own gas station for 33 years. Jack Calhoun, a young mechanic, began working for you three years ago. He has always been skillful and reliable.
Frances Litchfield, a dentist, has been a steady customer since she first owned a car. Indeed, the Litchfield family have been customers for as long as you ha ve owned the gas station, although there are fewer Litchfields in town now than there used to be. That has been especially true since the death, a few years ago, of Frances' uncle, Tom, with whom you went to school. One week ago, Frances Litchfield brough t her eight-year -old German car in because it had suddenly become hard to start and began to run rough. You hurt your back the day before and had been told by your doctor to keep your hands off cars for a couple of weeks , so you asked Jack to look at Frances' engine. Jack looked the car over for about 20 minutes and told Frances that it needed a new emissions control device and a valve job. He gave her a rough estimate on the back of an envelope: $ 285.00 parts $ 720.00 labor $100 5.00 total Dr. Litchfield brought the car back the next day to have it fixed. The work took longer than Jack thought because of several rusted bolts that broke. Jack left a message with Frances' secretary that he had had “some trouble” and the work would take a little longer, but the car would be ready by the end of the next day and working like new. Jack likes smooth -running engines. Jack gave Litchfield this bill: $ 310.00 parts $1200 .00 labor $151 0.00 total Litchfield was unhappy with this bill and stormed in to see you. Rather than waiting for an explanation, she started talking about “gouging,” “written estimates,” and lawsuits. That got you pretty hot, so you wrote a new bill based on the cost of the job as estimated by the “Standard Manu al,” which is used industry-wide to set the price of parts and to estimate the time a job will take. Most mechanics follow this manual in giving both estimates and bills, and you use EAZY'S GARAGE – Confidential Information for Jim Eazer 2 it to bill most of your customers. (It is only the Litchfields and two or three other families that you, as Jack knows, usually give a break to): $ 310.00 parts $1330 .00 labor $1640.00 total Frances refused to pay this bill and left. But later that night, after the garage had closed, she returned with a spare key and drove her car away. You called your lawyer first thing the next day. You wanted to file a criminal complaint for conversion of a mechanic's lien, but he persuaded you not to just yet. The lawyer did, however, call Dr.
Litchfield and tell her to consider this possibility. It appears from talking with Jack that his first estimate was based on the ten hours it generally takes to actually do a valve job and a Standard Manual estimate of two hours for replacement of the emissions control part (which is not in the same part of the engine as the valves). He had expected Dr. Litchfield to take the envelope estimate into the office and that you would prepare a written estimate and warn her about possible additional charges if the job did not go smoothly, but while Jack was putting a tool away Dr. Litchfield got into her car and drove away. The work itself took Jack 20 hours, 8 hours longer than he had estimated. Largely, this was due to 6 rusted bolts on the manifold head, all of which broke and had to be dr illed out, but no doubt some additional time resulted from Jack's unfamiliarity with the layout of this car’s engine . Jack's price fo r parts included an additional $ 25 over his estimate to cover the cost of the broken bolts and their fixtures. Both Jack's estimate and his bill charged for labor at the rate of $ 60 per hour. Your rate for most customers is $70 per hour.
The second bill, which you prepared, included the retail cost of the parts Jack used and a labor charge at $ 70 per hour based on the Standard Manual's time estimate for work on the car: 11 hours for a valve job, 2 hours to replace the emissions control device, and 1 hour each to replace six broken manifold bolts. Standard industry billing practices are as follows: Most garages charge customers a flat fee for a job based on a signed written estimate, and require a signed repair authorization form before beginning work. The estimate is based on retail parts prices and estimated labor times (which are usually, but not always, on the generous side) given in any of several “Standard Manuals” (such as Chilton's), modified by the mechanic's informed judgment. The older the car, the less reliable the Manual's time estimates because the likelihood of rusted and frozen bolts goes way up.
Customers are generally warned of this orally and in the fine print on the repair authorization form. When such complications occur, the customer is charged a flat fee above the estimate for the additional work based strictly on the Manual estimate for, as an example, drilling out a rusted bolt. If, after a job is begun, it appears that substantial work beyond the scope of that authorized by the repair authorization form is required, the mechanic will usually call the customer before proceeding, since the customer's legal liability will otherwise probably be limited to that authorized by the repair authorization form. Although dealerships for expensive cars may charge as much as $ 150 an hour for labor, most independent garages charge around $70 per hour. However, smaller garages may bill more hours for less fami liar foreign cars. Finally, independent dealers generally buy manufacturer's parts from dealer distributors for about 25% off the retail price of the parts for foreign cars, 35% off for American cars. You would like to keep Dr. Litchfield and her family as customers, but you cannot afford to establish a precedent of customers stealing their cars and not paying their bills. Even though you have not been as close to the Litchfield s since Frances' uncle d ied, you would still prefer to maintain the relationship —especially with Frances' father, a contemporary. Your reputation in this small town is also important, but that cuts both ways in this negotiation. On the advice of your lawyer, you have agreed to m eet with Dr. Litchfield to try to work things out. Frances, after the threat from your lawyer, has agreed to meet with you at a local coffee shop .
