U.S. Army Corps of Engineers
San Francisco District
333 Market Street
San Francisco, CA 94105 1905

CESPN-PM (Keesling, 415 977 8473) October 7, 1997


CEMP-E (Jim Jones)
HQUSACE Washington, D.C.
Subject:   Communication Metrics Cost Savings
Preparing for the 21st Century

  1. References:
    1. Memo to CEMP-E, Jim Jones Sep 29, 1997
    2. Jim Jones memo (email) to Keesling, received Sep 4, 1997
    3. Keesling memo (email) to Jim Jones, Sep 4, 1997
    4. San Francisco District report on Comm Metrics, Mar 28, 1997
    5. Estimate Cost Savings Comm Metrics, Oct 7, 1997 (Attach 1)
    6. Strategic Vision, USACE Commander, Lt. Gen. Joe N. Ballard

  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. 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

  1. 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 ..
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. ..
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. ..
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 ..
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. ..
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. ..
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.