A software Company has just won a contract worth GH¢80m, if it delivers a successful product on time, but only GH¢40m, if this is late. It

faces a problem of whether to produce the work in-house or to

subcontract.

To subcontract the work would cost GH¢20m but based on past

experience would have only a 90% chance of being successful. In the

event of the software not being successful, there would be insufficient

time to re-write the whole package internally but there would still be the

options of either a late-rejection of the contract (at a further cost of

GH¢10m) or a late subcontracting of the work on the same terms as

before. With this late start, the local subcontractor is estimated to have

only a 50 / 50 chance of producing it late. In this case, the subcontractor

still has to be paid GH¢50m, regardless of whether he meets the