THE WELCH COMPANY
440 Davis Court #1602
San Francisco, CA 94111-2496
415 781 5700
S U M M A R Y
DIARY: July 14, 1992 12:07 PM Tuesday;
Discussed final billing for DNRC, and contract closeout.
3...DNRC Feels Welch Did Not Perform Agreed Services
........DNRC Management Meets Industry Standards
.....record is there and needs to be reconciled with the parties duties
4...DNRC Filed for Arbitration
5...Power Refuses to Determine Contract Claims
6...Expert Supplemental Counsel
7...Strategy to Fund Dec, 92 Bond Payment
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0201 - Dep Natrl Rscrs & Consvn 406 444 6699 fax 6721
020101 - Mr. Wayne Wetzel
020102 - Director's Office
Loan to DNRC to Evaluate SDS, 920304
Scanner, HP & OmniPage OCR software
Osmos Tech "Complus FM1414," CPU #6
0806 - ..
0807 - Summary/Objective
080801 - Wayne agreed Welch can bill DNRC for the computer, keyboards and
080802 - memory, but not the scanner, per ref SDS 6 line 40.
080804 - I forgot to ask about the mouse. Walt came by with the scanner and
080805 - software. I asked him about billing for the mouse, and he said he
080806 - is using the mouse, so we can bill for it.
080809 - Wayne decided he does not need the high speed modem, so I will
080810 - replace it with the original 2400 baud modem.
080813 - DNRC Broadwater Computer 3,500
080815 - 4 MB Ram extra for Windows $200
080816 - Mouse for Windows 60
080819 - Keyboards for Mike and Broadwater plant 160
080820 - -------
080821 - $3,920
080824 - He is not paying for the phone bills because he feels they were
080825 - incurred for Welch's convenience.
080829 - Pending Tasks
080831 - Need to alert Wayne to set aside funds for Welch invoice.
Welch DNRC Contract
DTL Claim, Review by DNRC
Determine Claims, Distutes, etc.
Legal outside counsel
Late completion, presumed damages
Strategy on Evaluating all Claims
Contract, 910915 (DNRC #WE-WC-325)
"Feel Good Management"
Leadership & Change, 930119
Case Study Broadwater
201501 - ..
201502 - DNRC Feels Welch Did Not Perform Agreed Services
201504 - Wayne feels DNRC cannot use Welch services again because it did not
201505 - get the level of effort expected under the original contract.
201507 - I maintained that DNRC received excellent support which included good
201508 - advice that would benefit DNRC, if followed. Wayne emphasized that
201509 - DNRC management strongly disagrees and has found that Welch's advice
201510 - has not been adequately informed on current project status.
201512 - I explained my general sense that the tension among DNRC staff
201513 - with respect to Welch advice arises from the fact that it entails
201514 - some adjustments in management practice which are not yet seen to
201515 - be needed. Advice that has been rejected and later borne out by
201516 - subsequent events, has caused ill feelings, rather than confidence
201517 - and willingness to follow the consultant's advice. That such a
201518 - state of affairs is normal and was recognized in entering the
201519 - contract on 911011, ref SDS 1 9382, does not diminish the anguish
201520 - felt on all sides.
201522 - This presents a classic management challenge, which DNRC has tried
201523 - hard to meet. Indeed everyone involved has worked hard to ensure
201524 - the Department succeeds with the Broadwater project. I am greatly
201525 - pleased to have had the opportunity to work with such dedicated
201526 - people; and I am deeply disappointed to have been unable to win
201527 - the support of key DNRC staff, even though I know that most often
201528 - in human relations, advocating change, risks alienation. At the
201529 - very least, however, the project record will one day provide a
201530 - valuable source of research to advance the Department's core
201531 - interest in improving management.
201534 - DNRC Management Meets Industry Standards
201536 - This by no means suggests that DNRC's management is less than
201537 - that reasonably required by its contract with Voith. Every
201538 - organization, large and small faces the challenge every day of
201539 - managing its corporate knowledge and ideas in relation to
201540 - individual interests and abilities. I have found that DNRC
201541 - management is within industry standards, and appears to surpass
201542 - that of the Voith management in quality and energy on the
201543 - matters in dispute between the parties.
201546 - Wayne cited the submission of claim work product by Welch in March,
201547 - 1992, rather than December, 1991, as evincing inadequate performance.
201549 - Amendment #2 of the Welch contract reconciles this delay, and that
201550 - the Department's decision was correct (i.e. to concentrate its
201551 - management resources on hiring and transitioning a replacement
201552 - Engineer, planning project closeout, developing its doc log, and
201553 - arranging and preparing for a meeting with Voith in Jan, 1992, to
201554 - get the plant fixed, rather than prepare claims). The Department's
201555 - decision in this regard is supported by industry experts (see
201556 - David Rafael's memo received on 911216, ref SDS 4 9472, stating
201557 - DNRC should concentrate on hiring an Engineer and fixing the
201558 - plant).
201561 - Wayne advised that DNRC has found little of the Welch work product on
201562 - claims to be helpful, since it draws on the project SDS record.
201564 - I did not point out that this was the express assignment in the
201565 - Welch contract, but noted that DNRC has a good chance of achieving
201566 - a successful project, if it carefully follows the reasoning set
201567 - out in the Welch work on claims.
201570 - Wayne expressed concern that SDS records "conflict" with DNRC's
201571 - entitlement to recover against Voith.
201573 - I affirmed my understanding that the SDS record for the Broadwater
201574 - project in toto shows that DNRC has significant entitlement
201575 - against Voith, and that so far no specific entries in the record
201576 - have been shown to harm DNRC's interests. In any event, the
201577 - record is there and needs to be reconciled with the parties duties
201578 - and rights under their contract. Ignoring the record is generally
201579 - not a good idea.
201582 - DNRC Filed for Arbitration
201584 - Wayne said that DNRC filed for arbitration against Voith about 2 weeks
201585 - ago, without obtaining an Engineer's determination. Evidently the
201586 - pending issues focus primarily on presumed damages.
201589 - Power Refuses to Determine Contract Claims
201591 - He advised that Power has refused to make a determination on the
201592 - matter because they were not engaged as the engineer during the period
201593 - at issue, and that Hainline Co. has advised DNRC that an Engineer's
201594 - Deterimination is unnecessary and/or would not be helpful to the
201595 - Department under the circumstances in this case. I pointed out that
201596 - obtaining Engineer's Determinations on DNRC claims was a primary
201597 - reason for hiring an Engineer, and that Power specifically committed
201598 - to make such determinations, see ref SDS 2 line 188, and ref SDS 3
201599 - line 59. I suggested that DNRC obtain written opinions on these
201600 - points from Power and Hainline. Wayne indicated that such opinions
201601 - have been received by DNRC.
201603 - Wayne advised that DNRC is working on confirming potential testimony
201604 - from Jeff Ghilardi and Norm Barnard. Walt still has to develop his
201605 - testimony.
201608 - Expert Supplemental Counsel
201610 - DNRC has discussed getting outside counsel to try the case. Sarah is
201611 - opposed to this step.
201613 - We discussed the advantages of finding ways to avoid having someone
201614 - with a lot of personal, emotional capital invested in a dispute,
201615 - bear the full burden of trying the case. Generally lawyers hire
201616 - others to represent them. For a variety of reasons this situation
201617 - is thorny.
201619 - I suggested the Department consider hiring counsel that specializes
201620 - in public works litigation to assist Sarah in hearing preparation,
201621 - and defer the issue of who trys the case. Another idea would be to
201622 - have the case submitted to outside counsel for an opinion. Wayne
201623 - advised he has asked the Department's lead counsel to review the
201624 - Department's case, as presently constituted, and furnish an
201625 - opinion. I noted this is helpful, particularly if this person has
201626 - litigated complex public works cases.
201628 - Wayne belives the Hainline Co. may be reviewing DNRC's case. I
201629 - concur this is helpful, but generally it is better to get an
201630 - opinion from an attorney who has tried cases. What about Peter
201631 - Lamb in whom Sarah seems to have confidence and has developed a
201632 - good working relationship?
201636 - Strategy to Fund Dec, 92 Bond Payment
201638 - DNRC is considering doing the current aribitration in order to obtain
201639 - funding for a December, 1992 bond payment. I advised it is very
201640 - optimistic to expect that this case will be heard before the end of
201641 - the year. While it may seem that the late completion issue is narrow,
201642 - a competent defense will advance a wide range of performance issues by
201643 - DNRC and Tudor that will result in a long drawn out case. I also noted
201644 - the liklihood that any significant judgement will likely be appealed
201645 - under arbitration provision in Voith's contract.
201647 - Wayne is advised that a favorable award will permit the Department to
201648 - use currently withheld contract payments, to service the DNRC bond
201649 - debt, even if Voith does not make an immediate payment. I expressed
201650 - the view that such funds should be available to the Department now.
201651 - Wayne indicated that Sarah or others have affirmed DNRC's right to use
201652 - the withheld funds, but that apparently there are limitations with
201653 - respect to payment of bond obligations which the arbitration is
201654 - intended to remove.
201656 - Evidently Voith has not responded to DNRC's arbitration notice within
201657 - the prescribed period.
201659 - I advised that the pending arbitration will be very expensive and that
201660 - DNRC should develop a budget and schedule showing what will be requir-
201661 - ed to accomplish the current objective. DNRC management needs to
201662 - recognize that even though the arbitration budget will surely appear
201663 - significant, it really points to leverage against Voith because they
201664 - will be forced to spend comparable money.
201666 - It is going to be interesting to see how Voith approaches this
201667 - thing. They do not have any budget to finish the work at the plant,
201668 - so it seems like coming out to Montana to do litigation will present
201669 - some real incentives for them to settle. I expect them to try more
201670 - of the conversation mode, by putting off the Department with more
201671 - promises, that won't be kept. They will get into discovery, maybe
201672 - do a pre-hearing conference, then propose settlement. The settlment
201673 - will break off, then get going again, all the while pressure is
201674 - mounting on DNRC with its Dec, 92 bond payment coming due and more
201675 - plant failures, to get a deal. The Department needs to be vigilent
201676 - in avoiding further stretch out of action. Any settlement will have
201677 - to have some real teeth in it. In all cases make sure a hearing
201678 - date is set, to provide a cut off for settlement discussions.
Backcharges to Voith from Sletten
Blade Hub Bolt Failure, 920708
Bolt Failure on Blade Hub, 920708
Submittals, complete review, 911118
2408 - Summary/Objective
240901 - Wayne advised he was successful in getting the Broadwater staff to
240902 - initiate a submittal review to determine the level of engineering
240903 - support for the plant, or otherwise discover what the real condition
240904 - is, as previously discussed.
Distribution. . . . See "CONTACTS"