THE WELCH COMPANY
440 Davis Court #1602
San Francisco, CA 94111-2496
415 781 5700
S U M M A R Y
DIARY: August 15, 1997 10:23 AM Friday;
Visited John Lettieri at Marsh & McLennan re Communication Metrics.
2...Corps of Engineers Found Communication Metrics Effective
3...Construction Industry Trying Partnering to Improve Communications
4...Partnering Internalizes Controls; Problems Ignored, Suppressed
5...Avoid Slippery Slope of Expediting that Leads to Murphy's Law
6...Industry Needs Pressure from Sureties for Better Management
7...Failures of established firms like MK, Atkinson and Dutra, reported on
.....An example is Dinwiddie Construction. Their project manager on a
.....Another example is San Francisco International Airport expansion.
8...Construction Boom Offers Opportunity and Risk
9...Paul Downs - Background Formulating Communication Metrics
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0201 - Marsh & McLennan, Inc. 415 393 5132 fax or 800...
020101 - Mr. John T. Lettieri; Senior Vice President =415 393 5132
Locate Decision Maker, Construction (DPB)
Bonding Companies, Partnering
Slippery Slope to Murphy's Law
0805 - ..
0806 - Summary/Objective
080701 - Followed up work at ref SDS 16 line 21, ref SDS 13 line 20.
080703 - Reviewed Communication Metrics methods for meeting growing risks in
080704 - the construction industry from increased complexity in the business
080705 - environment due to technology and regulation. This risk is now
080706 - compounded by a booming market that reduces the availability of people
080707 - to perform the work. Suggested Marsh and McLennan encourage their
080708 - contractors to budget for Communication Metrics in bidding new work,
080709 - in order to account for these higher risks.
080711 - [See follow up submitting notes at ref SDS 18 line 59.]
0810 - Discussion
081101 - Corps of Engineers Found Communication Metrics Effective
081103 - Submitted the Corps of Engineers report on Communication Metrics, ref
081104 - DRP 1 line 108. We considered the main point that contractors, like
081105 - everybody, are overwhelmed by too much information. This causes
081106 - mistakes, claims, lawsuits, losses and failures.
081108 - General Hatch says Communication Metrics is a Risk Management method
081109 - for business intelligence to organize and analyse the record of daily
081110 - information. Better decision support makes leadership effective, ref
081111 - DRP 1 line 111.
081113 - John said there is a problem at Marsh & McLennan of getting too much
081114 - information. It is actually a universal dimension of modern life
081115 - generally described as the Information Highway. Henry Kissinger,
081116 - Robert MacNamera, George Shultz and others have written about the
081117 - "Alice in Wonderland" information environment that challenges
081118 - leadership, ref SDS 15 line 356.
081122 - Construction Industry Trying Partnering to Improve Communications
081124 - John noted that contractors are trying to avoid mistakes in design
081125 - that impact construction through excessive change orders and claims,
081126 - by using business arrangements that combine design and construction
081127 - phases under an integrated team. This is a variant of Concurrent
081128 - Engineering.
081130 - Partnering is one way to combine design and construction, per Kwan
081131 - Henmi's UCB project, ref SDS 12 line 172.
081133 - This solution was considered in meetings with Turner Construction to
081134 - prepare for the Asilomar Conference in 1996, sponsored by the Project
081135 - Management Institute. The conference drew leaders from a cross-
081136 - section of industries to discuss the impact of technology on the
081137 - leadership role to communicate effectively.
081140 - ..
081141 - Partnering Internalizes Controls; Problems Ignored, Suppressed
081143 - Discussions with Turner cited Intel, Microsoft, IBM, Primavera, and
081144 - other settings where design and production are done by one
081145 - organization, ref SDS 10 line 239. This does not solve the problem of
081146 - mistakes in design that hamper construction, ref SDS 3 line 114. It
081147 - merely internalizes problems. Internal management suppresses metrics
081148 - because accountability is not popular, ref SDS 7 line 465. Hierarchy
081149 - and politics impede awareness of mistakes and deviations from
081150 - requirements, ref SDS 7 line 559, also ref SDS 11 line 385. Contracts
081151 - at least have a self-interest dynamic that forces recognition of
081152 - problems so that solutions can be attempted through notice provisions,
081153 - ref SDS 7 line 569, ref SDS 7 line 621 and ref SDS 11 li
081155 - The only way to improve management is to improve the ability of people
081156 - to think, remember and communicate, since that is the cause of
081157 - mistakes. Faster information requires technology to provide faster,
081158 - better, cheaper intelligence.
081161 - ..
081162 - Avoid Slippery Slope of Expediting that Leads to Murphy's Law
081163 - Industry Needs Pressure from Sureties for Better Management
081165 - We considered the need for sureties to encourage contractors to adopt
081166 - better management practices by adding Communication Metrics.
081168 - Competitive bidding pressures lead contractors to avoid essential
081169 - management procedures, until it is too late. I related the meeting on
081170 - 960105 with Max Blodgett, Chief of Con Ops, for the San Francisco
081171 - District, U.S. Army Corps of Engineers, ref SDS 6 line 158.
081172 - Contractors are reluctant to budget for the level of effort needed to
081173 - meet the new business environment of the Information Highway and over
081174 - regulation.
081176 - ..
081178 - Failures of established firms like MK, Atkinson and Dutra, reported on
081179 - 970812, ref SDS 16 8854, provide a strong warning to the industry that
081180 - change is needed.
081183 - An example is Dinwiddie Construction. Their project manager on a
081184 - $100M library project for Getty, advised on 940510 that he was
081185 - waking up at 3:00 AM in the morning screaming for understanding of
081186 - how endless discussions impacted performance, how they relate to
081187 - prior events and contract requirements, ref SDS 1 line 50. Yet
081188 - Dinwiddie management maintains that Communication Metrics is too
081189 - costly and cannot help them. They want their Project Managers to
081190 - "expedite" the work with conversation, ref SDS 13 line 84.
081192 - Another example is San Francisco International Airport expansion.
081193 - On 951112 Kwan Henmi submitted a budget for using Communication
081194 - Metrics to support design of their project, ref SDS 2 0001 and
081195 - revised on 951205. ref SDS 4 4693 SFIA management rejected KH's
081196 - budget because other architects are not using this method. On
081197 - 960424 SFIA insisted KH that adjust the budget to conform with
081198 - historical percentage parameters of competitors. ref SDS 9 7740
081199 - Turner Construction reported in a meeting on 960405 that SFIA
081200 - business meetings are poorly managed and unproductive, ref SDS 8
081201 - 7461. In September 1996 the SFIA management team was replaced,
081202 - ref SDS 12 9043. On 970620 Turner reports continued difficulties
081203 - on SFIA project. ref SDS 14 8945
081205 - I explained briefly how a contractor's desire to "expedite" through
081206 - dialog in meetings and calls, becomes a slippery slope of "guess and
081207 - gossip" that leads to failure. Fear of change and ignorance of
081208 - appropriate change, cited by General Hatch, ref SDS 5 2131, leads to
081209 - denial that change is needed.
081211 - We reviewed the history of CPM introduced in the 50s and 60s.
081213 - Contractors would not budget nor perform CPM, unless it was specified.
081214 - Now, after many lawsuits and failures, contractors use CPM because
081215 - they recognize that cost and schedule control are essential to be
081216 - successful on complicated projects.
081218 - Communication control is much more valuable (and difficult) than cost
081219 - and schedule control, because it proactively discovers and fixes the
081220 - mistakes that cause cost and schedule overruns. Contractors need
081221 - experience so they can discover this advantage the way they discovered
081222 - CPM.
081226 - Construction Boom Offers Opportunity and Risk
081228 - The current business climate of a construction boom with attendant low
081229 - unemployment further escalates the risk of errors as contractors take
081230 - on more work than they can manage.
081232 - The role of risk managers is to encourage adequate budgeting for good
081233 - management during periods of expansion and seeming endless work,
081235 - Sureties, who have value at risk from pay and performance bonds, are
081236 - positioned to help contractors meet this risk by budgeting for
081237 - Communication Metrics as a component of essential risk management.
081239 - John will consider this opportunity to manage risk.
081241 - [See follow up at ref SDS 19 line 61.]
081244 - Paul Downs - Background Formulating Communication Metrics
081246 - We discussed briefly my work with Paul Downs in the 60s and 70s. This
081247 - experience as a general contractor and subsequent litigation on the
081248 - Welch v. State of California, 139 CA 3rd p. 586, case crystalized key
081249 - issues and ideas. Paul offered a lot of important advice on managing
081250 - risk and prudent bidding that later contributed to the development of
081251 - Communication Metrics as a new management science.
081253 - John introduced Bradley Wright, who worked with Paul before he left
081254 - Johnson and Higgens about 10 years ago to join Cleverdon.
081256 - Bradley said Paul is working with Bradley's dad as a litigation
081257 - consultant for the surety business. Paul is living in a retirement
081258 - area near Sonoma.
081260 - Bradley took my business card and will pass it along to his dad, who
081261 - can let Paul know I asked about him.
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