CONTACTS 
0201 - Marsh & McLennan, Inc.             415 393 5132 fax or 800...
020101 - Mr. John T. Lettieri; Senior Vice President =415 393 5132

SUBJECTS
Locate Decision Maker, Construction (DPB)
Bonding Companies, Partnering
Slippery Slope to Murphy's Law

0805 -    ..
0806 - Summary/Objective
0807 -
080701 - Followed up work at ref SDS 16 line 21, ref SDS 13 line 20.
080702 -
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.
080710 -
080711 -    [See follow up submitting notes at ref SDS 18 line 59.]
080712 -
080713 -
080714 -
0808 -
0809 -
0810 - Discussion
0811 -
081101 - Corps of Engineers Found Communication Metrics Effective
081102 -
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.
081107 -
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.
081112 -
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.
081119 -
081120 -
081121 -
081122 - Construction Industry Trying Partnering to Improve Communications
081123 -
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.
081129 -
081130 - Partnering is one way to combine design and construction, per Kwan
081131 - Henmi's UCB project, ref SDS 12 line 172.
081132 -
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.
081138 -
081139 -
081140 -  ..
081141 - Partnering Internalizes Controls; Problems Ignored, Suppressed
081142 -
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
081154 -
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.
081159 -
081160 -
081161 -  ..
081162 - Avoid Slippery Slope of Expediting that Leads to Murphy's Law
081163 - Industry Needs Pressure from Sureties for Better Management
081164 -
081165 - We considered the need for sureties to encourage contractors to adopt
081166 - better management practices by adding Communication Metrics.
081167 -
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.
081175 -
081176 -  ..
081177 -
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.
081181 -
081182 -
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.
081191 -
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
081204 -
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.
081210 -
081211 - We reviewed the history of CPM introduced in the 50s and 60s.
081212 -
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.
081217 -
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.
081223 -
081224 -
081225 -
081226 - Construction Boom Offers Opportunity and Risk
081227 -
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.
081231 -
081232 - The role of risk managers is to encourage adequate budgeting for good
081233 - management during periods of expansion and seeming endless work,
081234 -
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.
081238 -
081239 - John will consider this opportunity to manage risk.
081240 -
081241 -      [See follow up at ref SDS 19 line 61.]
081242 -
081243 -
081244 - Paul Downs - Background Formulating Communication Metrics
081245 -
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.
081252 -
081253 - John introduced Bradley Wright, who worked with Paul before he left
081254 - Johnson and Higgens about 10 years ago to join Cleverdon.
081255 -
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.
081259 -
081260 - Bradley took my business card and will pass it along to his dad, who
081261 - can let Paul know I asked about him.
081262 -
081263 -
081264 -
0813 -