Disaster in April: The Obligations of Kelly Construction

Posted: 3 Jul 2009

See all articles by John D. Macomber

John D. Macomber

Harvard University - Business School (HBS)

Christopher M. Gordon

Harvard Business School - Finance Unit

Ben Creo

Harvard University - Business School (HBS)

Date Written: April 21, 2009

Abstract

A construction company experiences a crane accident with multiple fatalities. The CEO, a client, and an employee must make choices to meet the company's obligations. Set in 2006, the case looks at the choices faced by board members of a museum which is an important client and which is faced with a completion deadline, and of a key employee who has other offers of employment and is negotiating a stay put bonus. The rights and interests of the surety company that provided the construction bond are also interwoven. The protagonist is the CEO of a multi-generational family business who must now negotiate with these parties and then decide whether to attempt to raise new capital, declare bankruptcy, or try to lead a controlled wind-down. The case explores crisis management, decisions by principals operating in the zone of insolvency, construction contract types, the limits of recourse available from construction bonds, roles of board members, calculation of an employee stay-put bonus pool, subcontractor and vendor communication, and reputational issues around bankruptcy or closure of a closely held family business. Analytical tools include contract status report, contractor balance sheet, stay-put bonus pool.

Suggested Citation

Macomber, John D. and Gordon, Christopher M. and Creo, Ben, Disaster in April: The Obligations of Kelly Construction (April 21, 2009). HBS Case No. 209-099, Harvard Business School Finance Unit, Available at SSRN: https://ssrn.com/abstract=1427254

John D. Macomber (Contact Author)

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Christopher M. Gordon

Harvard Business School - Finance Unit ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Ben Creo

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

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