U.S. Army Corps of Engineers
San Francisco District
333 Market Street
San Francisco, CA 94105 1905
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CESPN-PM (Keesling, 415 977 8473)
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October 7, 1997
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MEMO FOR:
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CEMP-E (Jim Jones)
HQUSACE Washington, D.C.
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..
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Subject:
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Communication Metrics Cost Savings
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Preparing for the 21st Century
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- References:
- Memo to CEMP-E, Jim Jones Sep 29, 1997
- Jim Jones memo (email) to Keesling, received Sep 4, 1997
- Keesling memo (email) to Jim Jones, Sep 4, 1997
- San Francisco District report on Comm Metrics, Mar 28, 1997
- Estimate Cost Savings Comm Metrics, Oct 7, 1997 (Attach 1)
- Strategic Vision, USACE Commander, Lt. Gen. Joe N. Ballard
- Per your
request,
ref b, attached is an estimate of cost savings
for Communication Metrics, ref e, which should
compare favorably with savings from recent Corps-wide initiatives
to use Project Management, CFMS and RMS.
Communication
Metrics
offers a strategic, core competency to improve performance and
cost effectiveness, as reported earlier on March 28, 1997.
ref d. This new
capability supports the Commander's charge to prepare for the
challenge of new realities that require better methods in
the 21st century, ref f.
..
- Communication Metrics saved construction management expense
on Oakland, including S&A, approximately $317K and
substantially contributed to cost avoidance on pending
claims of about $3.4M. The cost of this savings was
approximately $50K for 3 months.
..
Communication Metrics also saved the prime contractor added
expense on part of the work, consistent with our partnering
policy.
..
- Communication Metrics would have saved approximately
$2M on construction management cost if used for the 2 year
construction period on Oakland. The cost to the government for
these services would be about $500K. Based on adjusted project
total outlays of $56M, it is estimated Communication Metrics
would save the government $5.8M or about 10% of construction
cost.
..
This return of $10 for each $1 of cost, i.e., ROI is
10:1, could be substantially higher on the Oakland Harbor
project due to significant value at risk, now nearly $65M.
..
-
Cost avoidance reflects estimates
of results on two claims by the contractor which total $22M.
Communication Metrics developed our position which is expected to
prevail. Assigning a current value is clearly
speculative due to
the vagaries of litigation. This estimate reflects the
contribution of Communication Metrics in avoiding payment of
unearned sums to the contractor. Cost avoidance would likely be
much higher, if Communication Metrics were used for the duration
of the project.
..
- Saving $2M from construction management expense
reflects increased time District Operations staff expended on
Oakland due to practices of the contractor and changes in the
business environment that cause information overload. Limited
span of attention, like span of control in the military, means
increased attention to Oakland has a cascading negative impact on
District Operations. However, added effort on Oakland is
required to avoid significant risk from $65M in claims. Greater
savings can therefore result by using Communication Metrics from
project recon through design in order to fix initial upstream
problems that are otherise overlooked, forgotten or ignored until
much later when construction cost is impacted.
..
- Communication Metrics applied to District Operations could
yield cost savings in the range of 6%, based on limited results
from Oakland. This will enable current staff to handle business
growth. Our District has expanding commitments that require
added capability. Adding "metrics" to communications for all
business processes will produce better service at less cost with
less claims and more benefit to customers and the community.
..
- Cost savings come from proactive management to reduce
the explosion of rework caused by new realities of formation
overload. Adding metrics to communication provides
intelligence
that expedites and aligns work with requirements to arrest cost
and schedule growth. This supplements RMS and strengthens Risk
Management, as seen from cost savings. Communication Metrics
adds value that can prepare USACE for change in the 21st century
by leading the way in cost reduction and effectiveness.
..
- More experience with Communication Metrics can determine the
best fit with organizational culture. It could be part of a
composite "Communications Office" that has both Public Affairs
and Communication Metrics. This would support Commanders and
operational Divisions, as needed. Alternatively, Communication
Metrics might be a stand-alone unit. Or, if this is too bold a
change, it could be incorporated into Project Management, and for
the time being used for District Operations on an ad hoc basis.
Thompson F. Keesling
Program Project Management Division
..
ATTACHMENTS
- Estimate Cost Savings Communication Metrics
..
Attachment 1 - Estimate of Cost Savings Communication Metrics
Prepared by: Thompson F. Keesling (CESPN-PM)
Dated: October 7, 1997
1. Purpose
Communication on Sep 29 and Sep 4, ref a - c, resulted in a
request by HQUSACE for an estimate of savings on the cost of
Operations by using Communication Metrics, in order to
evaluate potential for wider use (recommended in ref d), and
in particular to undertake a broader test to substantiate
these preliminary findings.
..
Communication Metrics is in the 6% - 8% range of Supervision
and Administration (S&A) cost for Construction Management.
Therefore, it does not add to existing cost parameters.
However, the expense is justified on the broader grounds of
cost savings for District Operations, including projects.
2. <0148- Methodology
Savings on operations can be estimated based on the common
value of communication for operations and projects. In other
words the benefit of Communication Metrics to weekly progress
meetings, for example, would be similar for District staff
meetings. Organizing the record and analysing alignment of
project decisions, would be valuable for operations, as
discussed on Sep 26, ref a. We can therefore estimate
operations cost savings by calculating savings on the Oakland
Harbor project, and applying an adjusted percentage to the
cost of operations.
..
District Operations costs are calculated as a multiplier of
project budgets. This analysis dampens cost savings on
Oakland, which has unique cost characteristics, in order to
give a clearer picture of value from using Communication
Metrics District-wide.
3. ..
b. Project Cost Savings from Communication Metrics
Cost Avoidance Project Claim Exposure
Navy Sewer Line .4M
Soft to Hard Polygon Change 1.0M
Todd/Schnitzer Wing
Contaminated Materials Claim 2.0M
-----
Total Cost Avoidance............3.4M ............... $3.4M
See detailed estimate below.
..
Cost Reduction (Savings) Construction Management
------------------------------------------------
Cost Avoidance has a component of Cost Savings because
Communication Metrics was applied to daily management of
issues which led to Cost Avoidance shown above.
Estimated Actual for 3 Months
-----------------------------
Navy Sewer Line 30K
Soft to Hard Polygon 23K
Todd/Schnitzer 38K
Other issues 30K
Preparation/Research 26K
Rework 170K
-----
317K 317K
..
Estimated 2 year Period
-----------------------
Progress Meetings $117K
Preparation/Research 312K
Rework 978K
Litigation 650K
---------
2,057 2,057K
--------
Total savings Constrct Mngmnt......... 2,374K 2.4
------
Total savings on project.............................. $5.8M
..
c. Communication Metrics Cost for 2 years
200K x 2 = 400K
Welch made extended effort on Oakland to demonstrate
viability of Communication Metrics. Allow additional
budget for normal staffing
150K
-------
Total cost of savings........... $550K ................. .6M
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d. ROI on Oakland Project (5.8/.6)......................... 10:1
Return on Investment (ROI) of Communication Metrics shows
value added from special technology and work practices
that improve cost effectiveness. Adding more managerial
staff cannot substitute for Communication Metrics. It
would increase congestion without adding "intelligence"
nor expertise implicit in ROI of Communication Metrics.
..
e. District Operations Savings
USACE HQ's request for cost savings on Operations is
taken to mean reduction of non-project direct costs.
Estimate $5.8M savings on $56M adjusted project cost is
approximately 10% savings. Assume Oakland Harbor was
unusual due to bankruptcy of contractor, and so savings
may be less for typical project.
..
Therefore, assume 6% savings on typical projects.
Since communications is a higher percentage of District
Operations, Communication Metrics should yield higher
percentage of savings on District Operations costs.
Conservative estimating considering factors in the letter
dated Sep 26, 1997, ref a, would therefore plan on a
comparable range of 6% savings for District Operations.
The total District budget is approximately $65M per year.
$15M is non-project outlay. Savings then would be:
.06 x 15M = $900K
Estimated cost would be 200K
..
The record of savings on Oakland construction operations
indicates a good chance that savings can increase by
using Communication Metrics from the beginning of a
project through the design phase.
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f. Partnering Yields Savings under Communication Metrics
Communication Metrics avoided potential cost of $377K on
the Navy Sewer Line matter, described below; and it saved
the government another $30K in direct management expense.
This total $400K savings also enhanced the contractor's
income potential on this scope of work under the Oakland
project, and so accomplishes the Corps of Engineers'
partnering policy.
4. <0311- Detailed Estimate of Cost Savings
This has two components:
(a) Cost Avoidance is speculative but substantial
The contractor has filed $65M in claims, and may be
entitled to some increased payment but has not yet
substantiated the amount. Litigation will establish
the amount owed, either by settlement or judgement.
The record of performance is a key factor in the
litigation process, but not the only factor.
Therefore, the record prepared under Communication
Metrics contributes to cost avoidance, but the impact
is speculative.
..
b) Cost Reduction reduces level of effort to accomplish
the same or increased work, i.e., better productivity
a. Cost Avoidance
Navy Sewer Line
---------------
Marc McGovern, Construction Manager on Oakland, reported
Communication Metrics identified a solution to the Navy
Sewer Line problem, ref d Appendix A. Over many months
the Contractor demanded a change order for alleged
defects in contract drawings. At the Progress Meeting on
October 15, 1996, the contractor submitted a proposal:
Extra Cost to stabilize slope per Dwgs. $373K
..
Analysis showed a possible basis for a changed condition,
but Communication Metrics discovered alignment in the
underlying record, which had been overlooked, that
eliminated this cost. The solution enabled the contractor
to realize improved earnings at no increase in cost to
the Corps of Engineers.
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Soft to Hard Change in Material
-------------------------------
From approximately October 1995 to March 1996 the
contractor filed notices of encountering hard material at
locations where the drawings showed soft material. A
series of 5 RFPs were issued by the Resident Engineer.
The contractor responded to all RFPs at once on 960730,
seeking a total of approximately $7M extra payment.
..
The Corps maintained that the contractor bid the same
unit price to dredge areas shown as "hard" as it bid to
dredge areas shown as "soft," and so requested
justification from the Contractor for an increased unit
price.
A major source of communication arose over the form of
the original RFPs which requested a lump sum price for
work that was bid as unit price. The form of the language
became so embroiled as to cause the cost-sharing sponsor
to argue on behalf of the contractor's cost request,
despite the fact that the cost-sharing sponsor regularly
voiced opposition to the contractor's claim.
..
Communication Metrics was begun in September 1996.
Within a month or so it was applied to the Soft to Hard
Polygon claim.
Analysis showed:
1. Mathematical and contractual errors in the
contractor's submission.
..
2. Lack of alignment between the record of samples
taken in the field that spawned the RFPs, and the
sweeping scope of the RFPs which converted an
entire area from soft to hard, rather than merely
acknowledge that an area may contain some harder
material for which justification was needed to
support increasing the unit price bid for
comparable work.
..
3. Support for the Corps of Engineer's position that
no increase in payment was warranted.
4. A strategic adjustment was needed to withdraw the
5 original RFPs and combine them into a single RFP
with an express requirement to submit a unit
price.
..
This strategy transcended endless argument with
the contractor about application of FAR
regulations to the contractor's lump sum cost
proposals for the original RFPs.
As a consequence RFP #19 was issued in accordance
with point 4 that focused analysis on justification
of unit price increases relative to original bid
pricing.
..
Total savings is approximately $7M. We will estimate
savings due to the contribution of Communication
Metrics as:
= $1M
..
Todd/Schnitzer Wing Contaminated Materials Claim
------------------------------------------------
The contractor encountered underwater debris in an area
of the work. Communication Metrics aligned the record of
conditions found in the field with the notice by the
contractor and with contract provisions. This supported
a determination that a changed condition existed. An RFP
was crafted to enable the work to proceed.
..
The contractor refused to perform the RFP claiming later
events established that contaminated materials existed in
the Todd/Schnitzer wings which required special handling.
Due to a mix-up from not applying Communication Metrics
RFP #20 was rescinded by the District, relieving the
contractor from a direction to perform the work.
Eventually, the contractor claimed $15M in extra payment
was needed to perform debris removal estimated by the
government to cost approximately $500K. Communication
Metrics tracked conflicting promises and unsubstantiated
contentions by the contractor that it had commissioned
tests proving contamination. Since this matter remains
open, for purposes of this estimate, the savings
attributable to Communication Metrics is approximately:
= $2M
..
b. Cost Savings (Reduction) on Construction Management
Navy Sewer Line
---------------
The Corps of Engineers avoided expending approximately
160 hours (4 weeks work) in administering this matter as
a result of using Communication Metrics for research,
organization and analysis that revealed a win/win outcome
for the Corps and the Contractor. It is estimated that
at least another 40 hours would have been expended by the
Corps but for the solution by Communication Metrics.
200 hours at $150/Hr = $30K
..
In fact, the contractor was claiming entitlement to
additional payment of $500K. Since the matter was
resolved without the government incurring this expense
a reasonable argument is that Communication Metrics
avoided this additional expense to the government. In
the interests of clarity, this assessment of savings
merely recognizes $30K savings in the reduction of
COE personnel costs.
..
Soft to Hard Change in Material
-------------------------------
Approximately 160 hours of Construction Management was
saved by Communication Metrics work product that yielded
the strategy of combining RFPs which completely changed
the level of effort required to administer this claim.
150 x $150 = $23K
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Todd/Schnitzer Wing Contaminated Materials Claim
------------------------------------------------
Approximately 250 hours was saved by expediting review
among affected District and Project staff and formulating
analysis to issue RFP #19, and further by providing
information from the record to support understanding of
complex environmental issues.
250 x $150 = $38K
..
Other Issues (Mud Bucket, Weekly Planning, Schedule)
----------------------------------------------------
During the short period Communication Metrics was used,
it revealed the contractor was not performing critical
contract requirements. Problems that were being worked
by Corps of Engineers staff were shown to be contractor
responsibilities. A prominent example was a meeting on
December 13, 1996. The contractor presented an updated
schedule with voluminous "backup." Welch did not attend
this meeting, but through interviews and documents
Communication Metrics discovered the contractor gave
incorrect and incomplete information at the meeting that
initially misled the District on a critical project
decision.
..
For this order of magnitude estimate, rather than explain
every matter, we estimate savings as follows:
10 issues x 20 hours per issue
200 x $150 = $30K
..
Progress Meetings
-----------------
As a result of contractor difficulties leading to major
claims by the Contractor, the Corps of Engineers began
staffing weekly Progress Meetings with 10 to 15 people
from Engineering, Contracting, Construction,
Environmental, etc.
..
This attendance posture was intended to improve
"communication" among affected staff whose work may have
been impacted by various issues. It may have been
intended to demonstrate heightened scrutiny and concern
by the Corps of Engineers in improving performance by the
Contractor.
..
Communication Metrics demonstrated this level of
attendance was unnecessary. Better understanding was
achieved through the meeting notes, and it was maintained
through the record, rather than become distorted by
constant recall from each attendee.
..
Follow up was more rigorous and effective using the
Action Item system endemic to SDS that supports
Communication Metrics. As a result Chief Con Ops was able
to order attendance restricted to RE, PE and the
Communication Manager. The PM attended on occasion,
however, as Herb Cheong's memo states, research prior to
meetings and post meeting briefings by the Communication
Manager ensured more thorough and productive meetings,
ref d Appendix A.
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A conservative estimate of cost savings assumes avoid 5
people for 1.5 hours per meeting for the 2 year duration
of the job.
5 x 1.5 x 52 x 2 = 780 hours x $150 = $117K
The more important contribution of Communication Metrics
is making meetings productive, as discussed below under
re-work.
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Planning, Analysis, Alignment, Preparation
------------------------------------------
Communication Metrics is a dedicated "intelligence" role
that uses technology to organize information and provide
timely analysis for decision support. When there is not
enough time to add intelligence to information, "rework"
results, as discussed below.
..
On Oakland, Communication Metrics reduced the time
required for Corps of Engineers staff to prepare for
meetings, as reported by Herb Cheong, our Project Manager
(see ref D Appendix A).
Welch spent from 15 minutes to an hour to prepare for
these meetings, then briefed Corps of Engineers' managers
who might be leading a meeting, or otherwise need to be
aware of key information to be developed at a meeting.
The level of preparation would not be possible to perform
by conventional means in even 2 hours, so we use 1 hour
of saved time per attendee, since all attendees do not
need the same amount of preparation at each meeting.
..
For simplicity, 1 hour of time saved is estimated for all
attendees, even though some were Contractor and Port of
Oakland staff. This reflects the general point that
preparation and research benefits everyone, advancing
partnering objectives; and further that this practice was
actually performed more broadly on a daily basis, rather
than just for weekly progress meetings.
..
SDS diagnostics for Weekly Progress Meetings under
"Rework" below, shows a total of 177 attendees for 15
meetings over 3 months. This yields for 3 months:
177 x 1 x $150 = $26K
..
Total savings on project for 2 year job.
3 x 4 x 2 x 26 = $312K
..
The benefit of investing time to be prepared is seen from
the avoided cost of rework.
Rework
Authorities recognize "rework" to fix mistakes is a major
cause of cost escalation that increases over time, because,
as information becomes more complex, understanding and
follow up to get things done degrade toward entropy, per
study by the U.S. Air Force Institute of Technology (AFIT)
(see "Uncertainty Analysis for Program Management" published
by PMI, 1981).
..
Cost savings from improving communication to avoid
rework are calculated below based on analysis of information
overload in "New World Order Needs Old Time Religion."
..
The more common description of "rework" is problem handling
through trial and error. Costs of rework are absorbed as
"Murphy's Law" or litigation results in cost avoidance, or
in further cost escalation.
..
This estimate for rework looks only at costs that are
absorbed. Litigation expense is considered separately.
..
"Rework" arises from inability to attain closure on
issues due to conflicts between decisions and reality
that leak out through trial and error over weeks and
months due to lack of "intelligence," discussed above.
..
Decisions are made that seem correct at the
moment; but, then suffer continual corrections over time
due to lack of alignment with controlling factors, e.g.,
facts of performance and conditions, prior commitments,
contract provisions, policies, procedures, guidelines,
regulations and laws. Meetings, calls and email increase,
but understanding and progress decline. Communication
worsens as new players come on the scene and original
objectives are forgotten leading to information entropy.
..
Limited span of attention inherent to human mental acuity
prevents alignment except through trial and error, called
rework. Span of attention is similar to span of control
where the military recognizes that increasing the number
of people to lead has diminishing returns. Similarly,
increasing the amount of information beyond human limits
causes "information overload" that results in critical
factors falling outside the span of attention until problems
force them into the span of attention.
..
"Feel Good" management causes rework when decisions
seem correct, or good enough at the moment, based on
factors within span of attention. Managers feel that the
time required to obtain, organize and analyse information
to generate "intelligence," is greater than the cost of
rework to fix mistakes due to lack of good intelligence.
..
Growing complaints of not having...
enough time to think
...reflect a painful reality that information overload
means managers do not have time to think about all of the
factors that impact the work. Deferred "pain" of future
adjustments is therefore traded for immediate relief from
having to think more deeply, hunt for information to
verify accuracy of impressions, discover that information
is missing, obtain missing information, incur emotional
stress and frustration seeking feedback from people who
have limited time, fear and object to providing feedback.
This amalgam of momentary relief from the effort required
for good management, is summarized by the term "feel
good" management.
..
Often, however, acrimony and confrontation set in
despite reliance on "feel good" management, because
misunderstanding, cost and schedules grow when effective
metrics are ignored in daily communication. Posturing and
belligerence permeate every communication. Nobody feels
good when too much rework leads to information entropy
that causes cost growth and project failure.
..
Communication Metrics reduces rework in two ways:
1- It expands span of attention by proactively
aligning understandings, and therefore decisions
and actions with a broader spectrum of controlling
factors, including authority, than is possible by
conventional means.
..
Proactive alignment avoids the steady drip, drip
of new and unforeseen correlations, as decisions
and conduct gradually encounter the ultimate
metric of reality that otherwise prevents closure
under conventional practice of trial and error,
guess and gossip, hunch and hope.
..
Communication Metrics uses SDS technology to
discover greater nuance and more correlations
(i.e., intelligence) than are evident under normal
limited span of attention. The result is
proactive management rather than trial and error
problem handling.
..
Communication Metrics provides three types of
alignment that support organization and analysis
to produce "intelligence" that saves time and money:
a- Subjects
These are categories or classifications of
information, matters and issues requiring
common treatment. Examples are meeting
agendas, file descriptions, groupings of
documents on a desk according to common
meaning, application etc.
..
b- Links
Specialized technology makes it fast and
easy link related events, analysis, and
controlling authorities called "original
sources," that produce a web of connected
"knowledge."
..
c- Feedback
The organization, links and analysis in
Communication Metrics, give managers early
notice of adjustments in communication and
decisions to avoid delays and extra cost.
Deliverying intelligence via Internet and
in a summary format linked to details,
enables feedback to be accomplished with
minimal time.
..
2- Action Items (cited by Herb Cheong, in his
memo on Apr 7, 1997) are scheduled to maintain
visibility by linking to original reasoning and
factual history, so that needed action is not
forgotten by the passage of time, high information
flows, nor by the arrival of new tasks and new
players. This correlation (integration) between
time and information (schedule and diary)
overcomes the growing risk of complexity in the
business environment due to the limited span of
attention.
..
On Oakland, there are approximately 11 key players:
Hrs/Week
Planned Actual
Project Engineer 40 45
Inspector Supervisors 80 90
Inspectors AE 240 250
Resident Engineer 5 20
Construction Manager 10 22
Chief Construction Operations 2 6
Asst. Chief Con Ops 4 15
Project Manager 5 12
Design Engineer 5 10
Chief Planning/Engineering 2 5
Contract Officer 3 10
Contract Specialist 2 5
Environmental Engineer 2 5
----- -----
Total hours per week................. 396 495
..
Actual time to manage the work is 25% above budgeted
time, but for District staff the investment is 200% - 300%
greater that budgeted time, which causes significant
reduced attention to other matters, snow-balling reduced
effectiveness on everything.
..
Increased time for rework to fix mistakes, caused by
information overload, reduces the time to prepare for
meetings, which makes communication ineffective due to
cursory understanding and over reliance on conversation,
called "guess and gossip" in the District's Communication
Metrics report published on March 28, 1997, ref d.
..
The amount of time lost due to rework can be calculated
from the difference between the typical agenda prepared
for meetings which reflects subjects that are recognized
as material to performance, and the actual number of
subjects tracked by Communication Metrics. A second
factor is the number of links (citations) that align
understandings in the record, since this represents the
potential for conflicts that require correction.
..
The agenda prepared by the Corps for the Oct 1, 1996
Progress Meeting had 10 items. This is a typical agenda
for weekly progress meetings. Most meetings average from
6 - 12 subjects.
..
Communication Metrics actually tracked the following
factors at weekly progress meetings:
SDS Diagnostics Progress Meetings
---------------------------------
Partici- Sub- Cita- Action
Date Time pants Words jects tions Items
961001 1000 19 1125 40 10 7
961009 1300 19 1861 47 29 9
961015 1000 15 2193 61 32 7
961022 1000 21 2974 57 24 7
961029 1000 15 2898 60 44 12
961105 1000 14 3671 65 36 11
961112 1000 14 4553 56 91 16
961119 1000 13 4377 48 93 4
961126 1000 12 2811 39 59 11
961203 1000 11 1416 27 30 2
961209 1330 4 3162 31 69 14
961219 1000 4 2521 28 48 9
961230 1330 4 1956 32 37 6
970106 1200 6 2626 6 32 15
970106 1400 6 1753 22 27 6
----- ----- ----- ----
177 619 661 136
..
Since, as noted, common practice identifies about 10
subjects per meeting, then for these 15 meetings, a total
of 150 subjects would have been worked.
..
Communication Metrics identified 619 or 469 more subjects
for these particular meetings, approximately 400% more.
..
This reflects added value of proactive management
identifying correlations and implications to avoid rework
on 469 subjects that would otherwise have been discovered
by trial and error problem handling over weeks and
months. Increasing from 150 to 619 subjects is a
significant increase in management span of attention
uniquely possible under Communication Metrics.
..
Citations should be added to this amount because they
reflect alignment which is impossible under conventional
management due to limited span of attention, and so
otherwise leads directly to rework.
Additional Subjects 469
Citations (alignment) 661
-----
1130
Note: this is a conservative valuation since it
ignores the difference between the number of
action items people are able to recognize and
those tracked by Communication Metrics. It is
likely in the range of 2:1 or 3:1. The analysis
also ignores additional subjects and linkages
tracked by Communication Metrics from other
meetings, discussions, calls and documents,
including email. In less formal communications,
people generally recognize 2 or 3 subjects and a
similar number of action items. Like formal
events, no one has time to link understandings
from less formal communications to original
sources. These factors increase the potential of
Communication Metrics to save the cost of rework
by overcoming limits on span of attention.
..
Assume each missed alignment results in one (1) hour of
rework by a Corps of Engineer manager. Therefore,
Communication Metrics produced savings of:
1130 x 1 x $150 = $170K
..
Total savings on project for 2 year job.
3 x 4 x 2 x 170 - 170 = $3,910K
Assume normal bell curve and that period when
Communication Metrics was applied was at or near peak
activity on the project, so that actual savings is only
25% of peak rate.
.25 x 3910 = $978K
..
Where was this money expended by the Corps?
Average savings per week over 3 months
$170/12 = $14K
..
The weekly savings from Communication Metrics correlates
with increased expense for Corps of Engineers' District
staff who were forced into performing "problem handling"
that escalated into a constant daily grind of putting out
fires that developed on Oakland.
..
Planned - Actual operations hours is 495 - 396 = 99
99 x $150 = $15K
A major advantage of Communication Metrics, in addition
to avoiding increased District staff time, so it can
perform normal duties, is that Communication Metrics
produces a record that is constant. It can be used
repeatedly without decay of understandings due to time,
and distortion of reality when "too many cooks" get
embroiled in the "kitchen." This avoids the problem of
congestion, and produces a record that supports dispute
resolution, including litigation, if necessary.
..
Litigation
----------
Jim Stout, former member of District counsel staff, who
specialized in contracts, examined Communication Metrics
work product on the Oakland Harbor project. In a meeting
on October 15, 1996, Jim advised the Contracting Officer,
Tom Benero, that the methodology of providing context and
alignment with requirements and prior events and
commitments is helpful to the District, and should be
continued for the duration of the Oakland project to
assist in resolving disputes.
..
Communication Metrics was ended OA December 31, 1996.
The Contractor filed for Chapter 11 Bankruptcy at about
the same time. Contractor claims have since been filed
in a total amount of about $65M. District counsel have
requested support from Communication Metrics for the
reasons cited by Jim Stout, who has since retired.
..
Communication Metrics is intended to avoid disputes and
litigation by using Concurrent Discovery to accomplish
win/win results for the Corps of Engineers and for the
Contractor, as was done on the Navy Sewer Line matter.
Such outcomes advance our partnering policy objectives,
and our project management goals for cost reduction.
..
Of course situations arise, where, for example, a
contractor in severe financial difficulty may find it
useful to present unfounded claims in hopes of salvaging
its existence. This observation makes no reference to the
Dutra situation per se. As well, legitimate differences
in the application of contract provisions and the law may
require determination by a neutral, and this is essential
to a vital procurement program.
..
Where litigation cannot be avoided, the record produced
by Communication Metrics is essentially court-room ready
evidence. This saves the Corps of Engineers significant
legal expense, as found by Jim Stout.
..
Currently, the District has two full time lawyers working
on the Oakland project, and approximately 6 claims
management staff. I estimate that by virtue of enhanced
organization, faster information handling and retrieval,
Communication Metrics would, if used for Construction
Management (see expense para 3c) permit reduction of
one-half lawyer and 2 claims management staff. Assuming
this savings accrues for 10 months, which seems likely
based on current progress, the total savings would be;
2.5 x 40 x 52 x 10/12 x $150 = $650K
..
Saving $650K of direct expense is of course not the big
prize. The interest of the Corps is to ensure that it
avoids paying more than is equitable to the contractor.
We have identified above some specific issues claimed by
the contractor which appear at this time will result in
cost avoidance, or savings, of approximately $3M
attributable directly to Communication Metrics. This
savings comes at a cost of under $50K which produced other
benefits and direct savings, as shown in para 3b, above.
The most notable example is $500K claimed on the Navy Sewer
Line that was resovled by Communication Metrics without
requiring extra payment to the contractor.
..
Since Contractor's claims have escalated, Communication
Metrics should realize a much larger savings, or cost
avoidance, if applied for litigation support of current
exposure. The amount is not clear enough at this time to
form a judgement and so renders any such estimate too
speculative for evaluating Communication Metrics.