THE WELCH COMPANY
440 Davis Court #1602
San Francisco, Ca 94111
415 781 5700
September 25, 1988 03 00053 8092501
Mr. Jeff Ghilardi
Tudor Engineering Company
Broadwater Dam Project
P O Box 67
Toston, MT 59643-0067
Broadwater Power Project
Diary Report August 15 - October 1, 1988
Having been on the scene for a month or so, here are some observations to
assist Tudor in evaluating my progress relative to the assignment. There are
also some ideas to help redress specific project difficulties.
I believe Engineering management at the job has been well within industry
standards. Until recently, however, Tudor has been "outgunned" by the
Contractor who has 3 or 4 people writing "position" papers on a regular basis.
If those 3 or 4 people or at least 1 or 2 of them, were planning the work, they
could make more money. But, they do not believe this yet.
The Contractor is thereby presenting significant management problems. My
presence was intended to balance this situation and is beginning to succeed.
Differing perspectives, however, have evolved concerning my assignment.
.. My job is to ensure the Contractor meets budget and time objectives, and to
position the State so it can recover damages, if necessary. (see
Diary on Aug 15, 1988).
I relied on Tudor's interest in using me, as acceptance of my
methods. In performing the assignment, differences have arisen which need
clarification to ensure the Client gets its monies worth.
.. My method is to encourage the Contractor to perform by giving timely
notice of its duties, rights, failures and damages that flow from performance.
In our discussion on Sep 8, 1988, you suggested offering additonal payment as
further incentive for the contractor to perform.
Second, I create a record showing my Client performed its duty and the other
side did not. This is conveyed so that the other side can see that its best
course is to perform according to project requirements. As long as the
Contractor believes (as Sletten has believed up to now), that it can gain
through litigation what it cannot earn through productive work, it will
concentrate on filing claims and being disruptive at meetings, rather than
building the job.
.. This requires knowing what Notices to give and in what form. It was my
understanding that Tudor accepted my expertise in this area based upon its
and expected me to apply it. I believe greater advantage can be
taken of this opportunity to control the contractor and shape a constructive
record. In some respects the Contractor is getting mixed signals. Matters
that should be presented to foreclose debate are left open, giving the
Contractor hope that obdurate posturing may be rewarded. This delays
performance of the work and will foster doubt during formal dispute resolution,
about what the Contractor was required to perform, under the theory that
conduct shows actual intent.
.. Tudor's concern about using SDS for Command and Control of the record
needs to be resolved in order for me to perform the Welch assignment. If use
of the Diary is proscribed, effectiveness of project management is diminished;
the risk of delay, extra cost and failure increase for the Engineer, the State
and the Contractor.
One of the tools to control the Contractor is to show a pattern of persistent
failure to perform its duties and commitments. Even on seemingly small
matters, the pattern of conduct lends credibility to the larger charge. The
Contractor recognizes this and has attempted to build a record to show the
Engineer has not met its duty to support the Contractor. Research indicates a
basis for this position that results from Tudor volunteering to furnish
opinions about matters that have not been properly presented (e.g. time
extensions, backfill concrete payment, work by other contractors).
.. Progress is being made to gain control of the record. It requires daily and
consistent application of contract requirements through the Diary. We cannot
physically force the Contractor to perform. But we can demonstrate that
failure to do so will be more harmful than doing what is called for in the
contract. The Diary bit by bit does this, when properly used. Instead of the
Engineer being behind, suddenly it is clear that it was the Contractor who all
along was way behind in furnishing essential information. The Contractor must
see this in order for his conduct to change.
.. The impact of SDS is seen from the change in Bill Merriman, Sletten's lead
executive overseeing this project.
He is no longer an obstreprous impediment to daily management; rather now he is
asking you what the Engineer wants.
When Clyde told me in our initial discussion that Bill was a difficult person,
I explained this would be helpful to show Sletten that its strongest views
about recovering contract claims would be turned against them (see
Diary Aug 15, 1988
At the meeting on Thursday, Bill was visibly shaken by mild challenge. This
change in conduct from being a difficult (bullying) presence shows the effect
of awareness that everything he does and says is connected in SDS to what has
been said and written before and to what is called for in the contract.
Awareness that poor conduct and posturing through claim letters harm, rather
than advance, Sletten's financial goals brings crushing pressure to perform
within the Contract. Pressure does not arise by answering bellicose
accusations and threats in kind. It comes from offering to pay immediately all
costs substantiated within the meaning of the contract.
.. The skill is in formulating applications of the contract which justify payment
decisions that can withstand independent review based on the conduct of the
parties. SDS is critical to control the record with respect to such conduct.
The SDS Diary is the core process for applying the contract and industry
practice, which in combination guide performance of the work.
The Diary should be used to respond to correspondence by confirming
understandings in meetings and telephone discussions, where feasible. Tudor's
practice to generate a separate document on every issue (see Diary Sep 8, line
101334), permits the Contractor to control the agenda merely by advancing an
inordinate number of frivolous queries. It, also, reduces the time available
for the Engineer to plan, inspect, and direct the work.
.. Tudor should therefore support use of SDS for the Broadwater project within the
guidelines proffered by Wayne Wetzel in his letter concerning Sletten's
objections to the August 24 meeting Notes. I have put in place a system of
feedback for establishing the accuracy and credibility of these materials, so
that Sletten will be isolated in the event it challenges same. DNRC counsel
should comment from time to time on Diary matters they would like clarified in
.. In this regard DNRC counsel should listen to the tape recordings Sletten
has made of meetings and offer guidance on matters that require clairfication.
These can be worked into the record through the normal course of business.
Understanding what is said on the tapes will be difficult because of the
discursive nature of dialog in business meetings. In any case I suspect
Sletten will not be taping future meetings because it is too great a constraint
on Bill Merriman. Indeed, it may turn out that Tudor will be taping meetings.
.. In addition to giving notices, and building the record, the State may be able
to improve behavior of the Contractor by crafting remedies commensurate with
contract breaches that do not warrant termination. This should be done under
advice of counsel; however, in general where the contractor refuses to perform
a requirement, has demonstrated inability to perform, or has performed
defective work, the State may take corrective action and reduce payment to the
Contractor through the claims provision. This is different from reducing the
scope of the contract for Owner convenience. In that case, the Contractor is
entitled to retain its anticipated profit on the omitted work, as compensation
for entering the contract. Defective work and the like, discussed above, can
be charged its full reasonable and necessary cost, since the contractor gives
up its right to the full benefit of its bargain by its breach. Such monies can
be deducted from current pay estimates and this action will likely gain the
attention of the Contractor.
.. Tudor should obtain a written legal opinion prior to taking such action, and
thereafter should use it as a tool to manage the Contractor, and mitigate
damage to both parties. A good example is the Curb Ring (see discussion for
Sep 22, meeting on line 2447).
When distribution occurs of
information that seems to present a risk,
occurred on September 22, 1988, it is almost impossible to effectively retrieve
it because copy and fax technologies quickly expand distribution beyond the
reach of retrieval. Requests for returning or destroying documents merely flag
information as worthy of increased scrutiny. The requested party makes a
copy and returns the original; then sets aside time to study why this
information is important. A better approach is to submit more information
that adjusts unwanted impressions contained in the initial material,
without drawing attention to the prior submission.
Apart from the Diary record, the project needs a CPM schedule. Neither Voith
nor Sletten have complied with the contract requirement, and so the Engineer
does not have a credible knowledge base from which to decide critical issues.
This harms Contractors because claims for time extensions are unsupported. But
it is even more harmful in hampering control of the work. Everyone is blind to
the correlations and implications of daily events and decisions. The proposal
I made to issue a change order for
Sletten to submit a CPM schedule
applies equally to
Voith. .. Progress meetings have improved due to the detailed Diary Notes being produced.
The parties now understand these are going to be relied upon and so their
conduct is changing. However, commitments and analyses presented during
meetings and otherwise, are still just "seat of the pants" guesses causing
ephemeral schedule projections that harm the State and Tudor. CPM is essential
for macro planning to compliment SDS daily management.
Summarizing: good progress has been made toward my assignment objectives, but
there is some question about what those objectives are. A good working
relationship exists among personnel, but a few important policy differences
concerning use of the Diary, need attention. As well, Tudor should consider
the procedural matters discussed herein, in order to reduce the backlog of
correspondence and free up the Engineer for directing the work, particularly
scheduling. DNRC legal should review meeting Notes and Tapes and report
matters they feel require clarification. Additional and adequate computer
equipment at the site would aid in the level of service that can be applied
toward project objectives.