Dear Tom,

Just wondering if you received the memo, ref c, sent to you for transfer to DE? You had not received it, when we talked yesterday although Max said he got his copy.

Had a good meeting with John, yesterday, ref a, per Max's request.

John is very busy, so it is hard to focus on new ideas for adding "metrics" to communications, and to see how this helps the government on specific claims, even when recommended by counsel, as on Oct 15, 1996.

He seems to be a strong, "common sense" manager, but Communication Metrics is counter-intuitive. It uses "un-common sense" and so lacking experience with it, can lead people to feel it is redundant and does not add value because managers by definition are good "communicators." I wanted to go through the District's report on Communication Metrics, with John yesterday afternoon, but when I came by to deliver the report, he was busy in a meeting, ref b,

One thing that needs to be done is to develop a schedule and WBS for the "claim project" showing tasks and identifying work flow, assignments and so on.

A key task is to regain control of the record, as explained in POIMS.

We have the record for the period from 960920 to 970107, but now we have six months of catch-up to do in order to adequately assess Dutra's claims, and formulate a responsible position. John seemed to indicate yesterday, that Dutra's new claims use the same "house of cards" reasoning they used on the soft-to-hard polygon change and the Todd/ Schnitzer Wing hazardous materials claim. Of course Dutra is scrambling, trying to keep body-and-soul together and are motivated to make any claim to survive. Unfortunately, this causes them to apply their best people to spend their time on claims rather on how to get the work accomplished according to plans and specs. This focus tends to compound damages unless planning is performed to maintain progress of the work.

John and I discussed a serious point yesterday, about how to get the work done without compounding damages the parties may have already suffered to date. The threshold question is what is the cost and schedule to complete the work if it is properly managed? What level of effort and expense is needed to provide adequate management? Do remaining contract funds have that amount, given the fact that Dutra's "management" is mainly working on claims, and if not, then a decision is needed to get new management that is focused on performing contract requirements; and, then to ensure that this management is adequately funded. This is the most direct course to getting the job done at the lowest cost. The government can make a demand on the bonding company, but if the bonding company smells victory for their customer, they are not motivated to change management.

The argument will be made for Dutra at some point that it was fraudulently induced to take on a project that required considerably more management because the scope of the actual work was greater than represented by an order of magnitude, and this caused a series of cascading events that impaired their ability to perform and increased the unit prices of the work, but for the original misrepresentation. They will likely argue there was an affirmative cover up, and that when the misrepresentation was discovered, they were denied the funds needed to perform the actual work and to properly manage this larger project, which further compounded the damages.

Of course, this argument is opposed in the record by Dutra's failure to perform specific management tasks called out in the contract, and its statements that these tasks are unnecessary, etc., etc., showing it was not lack of funding that prevented Dutra from properly managing the work, but rather its own purposeful decision to avoid following the contract, so-on-so-forth. This argument requires command and control of the record, using what we have already and building on that to show pattern and practice that a neutral can recognize as a "fact," per my letter to Max the other day.

John has good instincts on these objectives, in noting during our meeting yesterday morning the need to complete the Oakland project as quickly and cheaply as possible, and to present the case in a simple manner so the judge is not overwhelmed by the record. Dutra is aware of this strategy, as seen from its record on the Navy Sewer Line matter, and from its conduct at the meeting with CESPN on 961213 to present its updated schedule. We began the effort to identify a sensible schedule last November, but the effort got deferred at the end of December. Now there may be greater awareness of the need to look closely at the cost and schedule to complete, which of course are closely related. There is an equal need to ensure that Dutra's effort to obfuscate is overcome by a directed effort to achieve clarity in the record, what Max called identifying the "hiccups."

You might check with John on Monday, about his reaction to the Communication Metrics report and the sample work-product report I provided on the soft-to- hard polygon issue he raised during our meeting yesterday. This method of educating him requires a lot of reading for which he does not have time. So the only alternative is leadership from those he trusts.

Sincerely,

THE WELCH COMPANY

Rod Welch

Copy to:

1. Max Blodgett