CONTACTS 
0201 - Turner Const. SF                   415 274 2900 fax 989 1370
020101 - Mr. Steve Rule; Territory Engineer =415 274 2917; Engineering Department

SUBJECTS
Proposal, Contract & Support
Turner, San Francisco
Cost/Benefit of Better Communications
Market Fears Being First to Use New Methods
Communication Manager Fewer People More
Cost Benefit - Increase Usefulness, Reduce
Overhead Calculate Cost Benefit
PM Cost Percentage Direct Cost
SFIA Projects

1711 -    ..
1712 - Summary/Objective
1713 -
171301 - Follow up ref SDS 14 0000, ref SDS 11 0000.
171302 -
171303 - Steve has not had a chance to read the Corps of Engineers report.  He
171304 - wants a cost/benefit analysis showing how Communication Metrics
171305 - improves Turner's competitive posture.
171306 -
171307 - Submitted ref DIT 1 0000, transmitting this record and notes of
171308 - meeting with Intel on 970603. ref SDS 12 0000
171309 -
171310 -
171311 -
1714 -
1715 -
1716 - Progress
1717 -   ..
171701 - Steve's wife and new daughter are both doing fine. ref SDS 11
171702 - 0000
171703 -
171704 - He indicted that Turner is competing for the 49er Football
171705 - stadium/mall project, now that the referendum for City financial
171706 - support has passed.
171707 -
171708 -
171709 -  ..
171710 - Communication Metrics Improves Management by "Guess and Gossip"
171711 -
171712 - Steve has glanced through, but has not had enough time to read the COE
171713 - report, ref DRP 1 6172, delivered on 970509 via ref ref DIP 2 0000,
171714 - per ref SDS 7 0000.
171715 -
171716 - I explained that David Vannier at Intel read the government's report.
171717 - In a meeting with Dave on 970603 he saw the advantage of overcoming
171718 - the risks of conventional management using "guess and gossip" that
171719 - causes project difficulties. ref SDS 12 5803
171720 -
171721 - As a result, Intel is considering Communication Metrics for a
171722 - world-wide project David is heading up to position Intel for the
171723 - challenge of an emerging low-cost PC market. ref SDS 12 4884
171724 - ..
171725 - Steve asked if Dave is using Communication Metrics now?  I
171726 - advised of the project approval meeting Dave has on 970624 (next week)
171727 - for approval of his project management plan.
171728 -
171729 -      [On 970818 Dave Bouncristiani at TMJ&B suggested wider use of
171730 -      Communication Metrics will enable contractors to feel safe trying
171731 -      it, ref SDS 22 1385.]
171732 -
171733 -  ..
171734 - SFIA New Management Team Needs Communication Metrics
171735 -
171736 - Steve indicated the SFIA project is complex and so may be conducive to
171737 - Communication Metrics because the large of number of organizations
171738 - involved causes miss-communication.  He expressed "... frustration
171739 - working with idiots" - reflecting the view on 960405 that SFIA needs
171740 - better management. ref SDS 2 7461  This indicates the new management
171741 - team at SFIA, reported on 960911, ref SDS 5 9043, is not doing much
171742 - better than the prior group.
171743 -
171744 -      [On 970815 discussed bonding companies helping contractors and
171745 -      professionals recognize need for Communication Metrics to succeed
171746 -      in a changing business environment. ref SDS 20 6499]
171747 -
171748 -      [On 970919 report that Turner has changed its management on SFIA
171749 -      project 3 times. ref SDS 23 6388]
171750 -
171751 -      [On 990302 called SFIA on this problem. ref SDS 26 2556]
171752 -
171753 -      [On 990308 needed to define problme. ref SDS 27 3996]
171754 -
171755 -  ..
171756 - Turner's Marketing Advantage Increased by Communication Metrics
171757 -
171758 - Steve feels Turner is a strong "communicator" and this gives them a
171759 - marketing advantage.
171760 -
171761 - We discussed increasing this advantage by enabling Turner to add
171762 - "metrics" to its communications, which its competitors cannot do.
171763 -
171764 - I explained the benefit of Communication Metrics that Dave Vannier set
171765 - out on 970603 to reduce the drift away from common understandings that
171766 - occurs among team members at Intel. ref SDS 12 5803.
171767 -
171768 - Turner can bring this advantage to its clients and stakeholders, as
171769 - well.
171770 -
171771 -      [On 970812 report that Guy F. Atkinson, who had a reputation for
171772 -      excellent management and communication, filed for bankruptcy. see
171773 -      ref SDS 19 8854]
171774 - ..
171775 - Steve is worried that adding a Communication Manager will give
171776 - their competitors a cost advantage.  He said Turner has to work within
171777 - industry standards for Project Management overhead cost in order to be
171778 - competitive.  He wants to see a cost/benefit analysis showing less
171779 - cost and increased benefits for the customer.
171780 -
171781 -  ..
171782 -
171783 - Steve said that even though there is a lot more work now than there
171784 - has been the past few years, Turner's margins are still very thin at
171785 - post-recovery levels, so it is difficult to see where is room for the
171786 - cost of a Communication Manager.
171787 -
171788 -        [See scenario explaining cost/benefit analysis, ref SDS 15 line
171789 -        177.]
171790 -
171791 -        [See report of building boom and record low unemployment in
171792 -        California, causing increased risks to effective management,
171793 -        ref SDS 18 0000.]
171794 -
171795 -        [On 980511 report U.S. productivity declined, unit labor costs
171796 -        rose dramatically in 1st quarter 1998. ref SDS 25 0000]
171797 -
171798 -        [See work to calculate "cost/benefit" ref SDS 16 line 113.]
171799 -
171800 -        [See contact at Stanford on project management costs, ref SDS
171801 -        17 line 103.]
171802 -
171803 -      ..
171804 -     Cost Project Management Percent Direct Cost
171805 -     Industry Norms Recognize Realities of Business Environment
171806 -
171807 -     We did not discuss the risk these economics pose for both Turner
171808 -     and its customers, as found by Dr. Ray Levitt's studies at
171809 -     Stanford, as reported on 960723, ref SDS 3 2502, and at a PMI
171810 -     event on 960927. ref SDS 6 0200.  On 970526 a Cal Tech seminar on
171811 -     management effectiveness reported similar findings from a study on
171812 -     communication. ref SDS 9 7003.  The chance of error goes up as
171813 -     unemployment drops and work loads increase. Narrow margins reduce
171814 -     the cushion to absorb error and this means the value of avoiding
171815 -     mistakes goes up.  It must be included in the cost of the work
171816 -     either as a contingency or by adding personnel and technological
171817 -     strength to meet the risk.
171818 -
171819 -        [On 970723 research calculating project management. ref SDS 17
171820 -        6292
171821 -
171822 -  ..
171823 - Cost/Benefit:  Doing Better Work with Fewer People
171824 -
171825 - Force structure, and therefore cost, is a function of the work to be
171826 - performed.  A large, complex, high risk project needs more management
171827 - than a small, less complex job.  On a particular project one
171828 - contractor might budget for a project manager, a project engineer, 5
171829 - superintendents and 2 control engineers.  Another contractor will
171830 - budget for a project manager, an assistant project manager, 4
171831 - superintendents and a controls manager.  Others will budget according
171832 - to their assessment of complexity and needs of the project.  A
171833 - contractor who proposes using one project manager and two
171834 - superintendents would have a big cost advantage; yet the customer
171835 - would properly ask about the risk of incurring extra cost because the
171836 - management team will be overwhelmed by the volume of communications,
171837 - per Stanford's VDT analysis program presented during a professional
171838 - event sponsored by PMI on 960911. ref SDS 6 0200
171839 -
171840 -        [On 970701 develop scenario explaining cost/benefit analysis.
171841 -        ref SDS 15 0075
171842 -
171843 -        [On 971008 received report from USACE showing ROI for Com
171844 -        Manager role using SDS is 10:1. ref SDS 24 5775
171845 - ..
171846 - Why would the customer make this inquiry?
171847 -
171848 - Because experience shows that complex projects need sufficient
171849 - management strength to avoid misunderstandings that cost money and
171850 - delay the work, again as Dr Ray Levitt reported from studies at
171851 - Stanford, reported on 960723. ref SDS 3 2502  If everybody else has a
171852 - team of 8 to 10 top people and one contractor proposes using 5 - 6
171853 - people, then bells go off in the minds of stakeholders. If, however,
171854 - the contractor submits the Corps of Engineers report showing a
171855 - Communication Manager is more effective than 2 - 4 people using
171856 - conventional construction management practices of "guess and gossip,"
171857 - then the cost/benefits of a Communication Manager become evident.
171858 -
171859 - For a 4 year $500M project, there would be a savings of say 3 people x
171860 - $120K x 4 years = $1.440M.  Communication Metrics costs would be 4 x
171861 - $200K = $800K.  This is a 40% savings of $640K.
171862 -
171863 -
171864 -  ..
171865 - Benefit of Risk Avoidance Dwarfs Cost of Communication Manager
171866 -
171867 - For a $500M project, $640K is not sufficient incentive, according to
171868 - management guru, Peter Drucker, for an established firm like Turner to
171869 - improve its work practices.  However, the customer/stakeholder must
171870 - consider cost/benefit of risk avoidance, ref SDS 1 line 678.  The
171871 - report from the Corps of Engineers on Communication Metrics sets out
171872 - numerous examples where "intelligence" discovered opportunities, and
171873 - avoided mistakes that would have otherwise cost money and caused
171874 - delays, ref DRP 1 line 498, which must be covered in the project
171875 - contingency budget.  Using hypothetical calculation methodology cited
171876 - recently by an IT firm, ref SDS 13 line 121, a $500M project requires
171877 - on average a 5% - 15% contingency budget.  Using 10% produces a $50M
171878 - exposure; and, it should be supplemented by $3M - $5M for legal costs
171879 - from inception through the execution phase.
171880 - ..
171881 - As the unemployment rate goes down, this contingency must be
171882 - increased to account for reduced availability of skilled personnel.
171883 - Currently, the unemployment rate is at a 20 year low, and so comprises
171884 - an increased risk of 10% or $5.4M on our hypothetical project, making
171885 - a total contingent cost of about $60M.
171886 -
171887 -        [See report of building boom and record low unemployment in
171888 -        California, causing increased risks to effective management,
171889 -        ref SDS 18 line 39.]
171890 -
171891 - Additionally, early completion incentive for a $500M project can
171892 - typically approach $50K per day, including mortguage and lost revenue
171893 - opportunities.  Communication Metrics should discover a 10% reduction
171894 - over conventionally calculated completion period based on other
171895 - projects of similar work volume and conditions.  Say 100 days at $50K
171896 - = $5M.
171897 - ..
171898 - Failure to align team members with design requirements causes
171899 - stakeholder loss, even if budget and completion objectives are met,
171900 - because operation of the project cannot meet performance standards,
171901 - and maintenance costs sore.  Communication Metrics ensures the team is
171902 - aligned with requirements throughout the project life cycle.  This
171903 - cost of this risk could be the entire project price of $500M.  To
171904 - estimate cost benefit of Communication Metrics, assume a conservative
171905 - $20M cost for 10 years, that would be $8M for 4 years which is the
171906 - planning horizon for original stakeholders to determine success or
171907 - failure of the project.
171908 -
171909 - Thus, identifiable risks cost at the low end $70M over 4 years to
171910 - perform the project.  More realistically a $500M project has $150M at
171911 - stake due to increased chance of error caused by the false hope of
171912 - reliance on the Information Highway.  Communication Metrics expense is
171913 - about $2M to provide the business "intelligence" required to avoid the
171914 - mistakes and discover the opportunities that result in $70M savings.
171915 -
171916 -
171917 -
171918 -  ..
171919 - Existing Roles Can Perform Communication Metrics
171920 -
171921 - Of course it isn't necessary to call this role a "Communication
171922 - Manager."
171923 -
171924 - Assistant Project Manager, Controls Engineer, Helper are fine.  The
171925 - critical point is that Turner can offer Communication Metrics that
171926 - improves management productivity, and its competitors cannot do this.
171927 -
171928 -
171929 -  ..
171930 - Communication Metrics Can be an Option
171931 -
171932 - We considered the idea of presenting Communication Metrics as a
171933 - potential capability which the client could select based on the Corps
171934 - of Engineers report, if the customer wished to address the risks of
171935 - costly mistakes prospectively, rather than wait for problems to occur
171936 - and then hire assistants, cost engineers, accountants, claims managers
171937 - and lawyers to fix them and clean up the mess.
171938 -
171939 - Presenting Communication Metrics as an option, lays the groundwork for
171940 - use later in the project to solve the problems caused by not using it
171941 - in the beginning, and alerts customers to the capability for future
171942 - projects where the need may be more apparent for strong risk
171943 - management.
171944 -
171945 -
171946 -  ..
171947 - Communications Integrated with Planning, Cost and Schedule Control
171948 -
171949 - Another way to approach the Communication Manager is as an enhanced
171950 - planning and control support.  This integrates Communication Metrics
171951 - with project controls.  We did not discuss whether Steve looked at
171952 - appendix E in the COE report showing the CPM scheduling function,
171953 - integrated with Communication Metrics, discussed with Dave Vannier at
171954 - Intel, ref SDS 12 line 297.
171955 -
171956 - The Communication Manager cost is included with the cost of forming a
171957 - project organization, preparing schedules, budgets and WBS.
171958 -
171959 -
171960 -
171961 -