THE WELCH COMPANY
440 Davis Court #1602
San Francisco, CA 94111-2496
415 781 5700
S U M M A R Y
DIARY: November 5, 1991 10:24 AM Tuesday;
Called Sarah re discussion with John Williams and other matters.
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0201 - Dep Natrl Rscrs & Consvn 406 444 6699 fax 6721
020101 - Ms. Sarah Ann Bond, Esquire
020102 - Department Counsel =406 444 6660; Legal Division
Voith Contract Closeout
Replace v. Retrofit, 920120
0707 - ..
0708 - Summary/Objective
070901 - Sarah considered discussion notes between John Williams and
070902 - Welch, ref SDS 8. She faxed a letter John cited and some language
070903 - ideas for a response. I called her back and discussed objectives and
070904 - strategy. I then drafted a letter and an explanation of same for DNRC
070905 - to consider in treating this matter.
070907 - Faxed to DNRC a draft analysis.
070909 - We may also want to include the request for Tudor to submit an
070910 - engineering budget for project closeout.
0712 - Discussion
071301 - The initial fax, ref DIP 4, had not yet been delivered to Sarah's
071302 - office.
071305 - ..
0715 - 1130 Sarah called back
071601 - She feels the most significant point Tudor raises is the contention
071602 - that it recommended that DNRC replace the speed increaser rather than
071603 - repair the gear set. ref SDS 8 0084
071605 - She is unsure about the record on this point, and so will research it
071606 - this afternoon. She expects that Tudor's engineer, John Williams, is
071607 - referring to an August, 1991, letter in which Tudor sets out various
071608 - lost revenue scenerios. ref SDS 8 3111
071610 - While we talked, Sarah said she found Tudor's letter on 910816. She
071611 - said it does not identify cost trade offs, and does not indicate DNRC
071612 - is entitled to a new speed increaser. She said Rick Bondy reviewed
071613 - Tudor's letter and concurred that Tudor's scenarios are unsupported.
071614 - She is unaware of a written or verbal recommendation from Tudor on
071615 - this. Sarah noted that sometimes offhand remarks by Tudor reps later
071616 - become "verbal recommendations."
071618 - [On 920120 received document Tudor submitted on 910816 showing
071619 - analysis that supports replacing the speed increaser. ref SDS 10
071620 - 8851
071622 - [On 910224 Rick Bondy clarified that he did not review the entire
071623 - document Tudor submitted dated 910816, ref SDS 13 4476
071625 - Sarah will draft a response and fax to me for comment.
071627 - I called Millie and alerted her that something is coming along.
071630 - ..
0719 - 1830 received documents
072001 - Sarah faxed a copy of Tudor's 910816 letter to Wayne, which is at
072002 - ref DRT 1 0000 and was received by DNRC oa 910826. Tudor's letter
072003 - sets out options and possible down time that might occur relative to
072004 - replacing the speed increaser or retrofitting it. This is the letter
072005 - Sarah discussed this morning. (see above, ref SDS 0 2572)
072007 - Sarah did not include the attachments.
072009 - [On 920120 received entire document, ref SDS 10 8851, discussed
072010 - with Rick Biondy on 920124, ref SDS 13 4476
072011 - ..
072012 - Sarah's cover letter says that no one at DNRC recalls anyone
072013 - from Tudor ever recommending that DNRC is entitled to or otherwise
072014 - should replace the existing unit with a new speed increaser, even
072015 - though Tudor has at all times recognized the speed increaser does not
072016 - work correctly.
072018 - [On 910120 discovered Tudor had provided analysis that supports
072019 - replacing the increaser. ref SDS 10 8851
072021 - [On 920123 Sarah related understanding Tudor's letter on 910816
072022 - does not support replacing the speed increaser. ref SDS 11 8856
072023 - In a meeting later on the same day Rick Bondy supported Sarah's
072024 - understanding. ref SDS 12 9054
072026 - [On 920124 Rick explained his analysis did not consider support
072027 - information attached to Tudor's letter on 910816. ref SDS 13 4476
072029 - Sarah pointed out the Sep 3, agreement reflected only limited
072030 - knowledge of defects in the gear set. Within the past few weeks DNRC
072031 - has learned as a result of further engineering research that the
072032 - entire speed increaser is defective, and so it must be replaced.
072034 - I explained this information points the way to a response idea which I
072035 - will write up this evening and fax for review by DNRC in the morning.
0723 - 2035 drafted response to 910816 letter
072401 - Below is some language for DNRC to consider in responding to Tudor's
072402 - 910816 letter, ref DRT 1:
072404 - The objective of the language is to create a position that accomodates
072405 - the Sep 3, Agreement. We do this by saying we performed what we said
072406 - we would do and this led to the conclusion to replace. We use the
072407 - Engineer's advice in the Aug 16 letter by acting promptly when we had
072408 - adequate information to determine the least costly solution. We give
072409 - Tudor a deadline to act and a specific task to do, and we get ready to
072410 - take our next step depending upon whether they do something we like or
072411 - do nothing. They now have the ball under the color of their own Aug
072412 - 16, analysis.
072414 - I am inclined for now to avoid discusison of presumed damages or lost
072415 - revenue. DNRC may be able to recover either or both. We could put
072416 - Tudor under a bit more pressure by asking them to submit an opinion on
072417 - this, because it would require them to confront their record. For
072418 - now, it seems better to defer the issue, since essentially it is a
072419 - legal argument. What we are after is for the Engineer to direct a
072420 - contractor to perform, and for the contractor to get going or default
072421 - or come in with a new proposal.
072423 - Timing
072425 - We should act soon, but I think DNRC should not issue any response
072426 - until after the Friday meeting on Nov 8. Let's see what transpires,
072427 - and then give the letter its final tone, i.e. either confirming an
072428 - "understanding," or silently demanding like the language below. But
072429 - response should go out on Nov 8, and be mailed and faxed, so it can be
072430 - an agenda item they have thought about for the Helena meeting the
072431 - following week.
072434 - Dear John,
072436 - Your letter of August 16, 1991, has been under review relative to
072437 - the Department's efforts to correct the speed increaser failure.
072439 - As you know the Department entered into an Agreement on September
072440 - 3, 1991, to permit Voith to solve the problem by replacing the gear
072441 - set, if it could do so. The Department and Voith have differed on
072442 - who is liable for lost revenue owing to downtime, but in any case
072443 - the Department feels that all parties are best served by getting
072444 - the work done at the least cost. Your August 16, letter is helpful
072445 - in that context.
072447 - Our research now indicates the speed increaser is defective. The
072448 - history of continued speed increaser failures together with new
072449 - engineering studies done under the September 3, Agreement, show the
072450 - speed increaser does not meet the contract requirements, such that
072451 - mere replacement of the gear set is not a sufficient remedy. We
072452 - believe Tudor should direct Voith to replace the speed increaser
072453 - with one that meets the contract specification.
072455 - Please submit within 10 days your proposed directive to Voith and
072456 - schedule for completing the design, engineering review/approval and
072457 - construction of this work, pursuant to your August 16, analysis and
072458 - the Voith contract provisions. If you need more time, or have any
072459 - questions, please call me so we can work out whatever is needed to
072460 - proceed as quickly as possible.
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