THE WELCH COMPANY
440 Davis Court #1602
San Francisco, CA 94111-2496
415 781 5700


S U M M A R Y


DIARY: October 13, 1999 10:15 AM Wednesday; Rod Welch

Received call from Ronald Arana with AR Construction Company.

1...Summary/Objective
2...AR Construction Awarded New Project, Needs Superintendent
3...Luncheon Meeting Developed Ideas to Support AR Construction
4...Background AR Construction
5...Current Work in Progress for AR Construction
6...Goals for AR Construction - Grow the Business with People and Tools
7...Welch Background - Construction, Litigation, Management Systems
8...Welch Tools and Expertise - Communication Metrics
9...Welch Goals - Implement Communication Metrics for Construction
10...Examples of Welch Work Product
11...References - Phone Numbers....

ACTION ITEMS.................. Click here to comment!

1...There is a meeting on 991025 with the City, perhaps for project
2...I recommend early attention on the CPM schedule.
3...We need an automation plan, ref DRP 1 5362, per scope of services with
4...We would need a computer work station configured at ARC's office so it
5...Would like to set up DSL or fiber optic link to ISP, since without it,

CONTACTS 
0201 - A. R. Construction Company           415 656 2800
020101 - Mr. Ronald Arana; President
020102 - aramet@aol.com

SUBJECTS
Inquiries

0403 -    ..
0404 - Summary/Objective
0405 -
040501 - Follow up ref SDS 21 0000, ref SDS 20 0000.
040502 -
040503 - Ronald needs support to launch a new project, and may need someone for
040504 - operations to manage projects while he focuses on business issues.
040505 - There is a strong interest in trying formal PM processes, and in
040506 - looking at automated systems, which can be provided by Communication
040507 - Metrics.  He is thinking along the lines of an initial 3 - 6 month
040508 - trial.  In the afternoon Ronald called and requested phone numbers to
040509 - call for references, so I included these in the record. ref SDS 0 2970
040510 -
040511 - Submitted ref DIT 1 0001 linked to this record.
040512 -
040513 -     [On 991014 problems with email delivery, met again. ref SDS 23
040514 -     0001]
040515 -
040516 -
040517 -
0406 -
0407 -
0408 - Discussion
0409 -
040901 -  ..
040902 - AR Construction Awarded New Project, Needs Superintendent
040903 -
040904 - Ronald Arana called in response to the resume, ref OF 4, he got from
040905 - the web address in the fax on 991004. ref SDS 21 0001
040906 -
040907 - Ronald is president of...
040908 -
040909 -         AR Construction
040910 -         6345 3rd Street
040911 -         San Francisco, CA
040912 -
040913 -     The cross street is James.
040914 -
040915 - His firm performs public works projects.
040916 -
040917 - He has a contract to start a $7.3M reservoir project in 6 weeks.  The
040918 - project is located in Golden Gate Park.  The owner is City of San
040919 - Francisco.
040920 -
040921 - He has been doing projects in the $4M range, so this is a step up.
040922 -
040923 - The firm is completing several other projects.  There are claims
040924 - pending in the amount of $500K.  A superintendent is preparing and
040925 - following up on the claims.
040926 -
040927 - He needs a superintendent to start the new project, and is looking for
040928 - a person to support a project management effort, possibly a
040929 - department.
040930 -
040931 - I said my payment objectives are in the $100K range, and might be
040932 - willing to start at $80K.
040933 -
040934 - Ronald is thinking along the lines of $70K.
040935 -
040936 - Ronald proposed a series of 3 meetings to review this opportunity.
040937 -
040938 - We will meet at 1200 in front of the Holiday Inn hotel on Kearny
040939 - across from the park.
040940 -
040941 -
040942 -
040943 -  ..
040944 - Luncheon Meeting Developed Ideas to Support AR Construction
040945 -
0410 -
0411 -
0412 - 1200
0413 -
041301 - I waited until 1230 and was about to leave, when Ron arrived.  He
041302 - recalled setting the meeting for 1230, so I must not have heard him
041303 - correctly.
041304 -
041305 -
041306 -
041307 -  ..
041308 - Background AR Construction
041309 -
041310 - Ronald is the president of the company.  He studied nuclear
041311 - engineering at UC Berkeley.  He began building fences, then moved into
041312 - the home remodel business.  Not sure if he constructed new homes.
041313 -
041314 - To expand, he began public works construction, and grew the business
041315 - over 10 years to perform $5 - $10M annual volume.
041316 -
041317 - ARC is a family business. His wife is the office manager.  He has two
041318 - sons, sounds like early teens, who will one day take over the firm.
041319 -
041320 - There are two estimators.  One seems to do the take-off and pricing,
041321 - the other negotiates with subs.  ARC calculates quantities and prices
041322 - sub work to support negotiations for favorable sub bids.
041323 -
041324 - I concur with this practice.  It was very effective at Williams and
041325 - Burrows, and later at Welch Co.
041326 -
041327 - ARC bids about one job a week.  They only get 2 - 3 jobs per year
041328 - because Ronald insists on maintaining a 10% margin.  I concur with
041329 - this approach, rather than taking a lot of low margin work, which is
041330 - higher risk, spreading everyone too thin chasing too few dollars.
041331 -
041332 - Ronald has confidence in ARC's legal counsel, who is responsive to
041333 - Ron's calls because ARC is a major client.
041334 -
041335 - Ron enjoys the legal process, but is aware that legal entitlement does
041336 - not always yield a favorable result.
041337 -
041338 -     Concurrent Discovery, ref OF 3 2117, which I prepared for Dave
041339 -     Buonchristiani to deliver at the Asilomar Conference on 960620,
041340 -     may be of interest to Ronald. ref SDS 9 1101
041341 -
041342 - I asked about personalities?
041343 -
041344 - Ronald advised that ARC has its fair share of difficult people to deal
041345 - with.  He appreciates the need for strength and purpose in helping
041346 - people acclimate and transition to a new player, and new methods and
041347 - tools.
041348 -
041349 - I call this leadership with a broader vision in the New World Order...
041350 - paper. ref OF 2 5654
041351 -
041352 -
041353 -
041354 -  ..
041355 - Current Work in Progress for AR Construction
041356 -
041357 - Seems like there are several jobs finishing up, and only one or two
041358 - that have work in progress.
041359 -
041360 - ARC was low bidder on a project which has not been awarded due to a
041361 - challenge by a competitor that ARC made a technical error in
041362 - designating a sub.  ARC is asserting its right to the award, and has
041363 - the backing of the unions because the contesting party is evidently
041364 - not 100% union.
041365 - ..
041366 - The $7.3M job which has been awarded to ARC will be the biggest
041367 - job they have done.
041368 -
041369 - There is a meeting on 991025 with the City, perhaps for project
041370 - launch.
041371 -
041372 - I recommend early attention on the CPM schedule.
041373 -
041374 -
041375 -
041376 -  ..
041377 - Goals for AR Construction - Grow the Business with People and Tools
041378 -
041379 - Ronald wants to do larger projects and grow in annual volume.  This
041380 - requires developing people into a strong "machine" with effective work
041381 - processes.
041382 -
041383 - He mentioned several times the objective to develop...
041384 -
041385 -
041386 -                     "sophisticated systems"
041387 -
041388 -
041389 - ARC has used a superintendent/project management model in recent
041390 - years.  Ronald indicated consideration to segment this function on the
041391 - new project, and larger ones that may be performed in the period
041392 - ahead.  Superintendents typically rise through the ranks of trade
041393 - work, and this can be valuable experience for management, especially
041394 - in organizing and leading work crews.
041395 -
041396 - Larger projects need expertise that focuses on organization of work,
041397 - allocation of resources and coordinating senior people in collateral
041398 - organizations, including stake holders.  This is a communication
041399 - function that requires alignment with project requirements, which is
041400 - difficult to accomplish for a superintendent who is directing daily
041401 - activity on site.  Some people do a good job at this, but often the
041402 - complexity becomes overwhelming and masks problems until it is too
041403 - late to avoid delay and loss.
041404 -
041405 - Ronald noticed that superintendents maintain good relations with
041406 - everyone in order to keep the work running smoothly.  There is also a
041407 - need to ensure that work aligns with requirements and commitments so
041408 - that cost and schedule objectives are met.  These tasks can come into
041409 - conflict in some situations.  When performed by one person, personal
041410 - relations often crowd out good judgement about project management, and
041411 - the firm suffers.
041412 -
041413 - Accordingly, Ronald is moving in the direction of segmenting the PM
041414 - role from superintendence.
041415 -
041416 - ARC is using Expedition and other tools, which is pretty
041417 - "sophisticated" by the standards at Turner, Bechtel and other "big
041418 - name" places that have a lot difficulty managing projects.  Ronald
041419 - seemed to indicate his people are open to using technology to support
041420 - management.
041421 -
041422 - For example on 960629 Turner was trying to use Expedition for an
041423 - Enterprise Management effort, without great success. ref SDS 10 5952
041424 -
041425 - Project Management is itself a "sophisticated" field, as seen from the
041426 - PMBOK and ISO standards reviewed on 950721. ref SDS 7 4612
041427 -
041428 - Ronald's near term goal is to perform $10M - $20M annual volume over
041429 - the next few years.  He feels growth above $5M range can be achieved
041430 - faster relative to the 10 years it took to reach the $5M plateau,
041431 - because he has now earned the confidence of the bonding companies and
041432 - so continued success showing a profit will support a faster growth
041433 - curve.
041434 -
041435 - The strong economy provides ample opportunity to meet ARC's growth
041436 - objectives.  The challenge will be to maintain the quality of
041437 - management while ramping up, to ensure budgeted profit is met or
041438 - exceeded.
041439 -
041440 - Ronald is looking into bidding a $15M job, I believe in Santa Cruz,
041441 - but bonding issues may impact the final decision on whether to
041442 - proceed.
041443 -
041444 - He wants to focus on business issues.  His immediate goal is to build
041445 - an organization that can perform projects on time and on budget.
041446 -
041447 -
041448 -
041449 -  ..
041450 - Welch Background - Construction, Litigation, Management Systems
041451 -
041452 - Reviewed growing up in Cupertino working for my Dad in his home
041453 - remodel business.  During college in Portland, Oregon got a job as the
041454 - personal assistant for Bill Lord, the president of Lord Bros. a medium
041455 - sized engineering contractor.  After two years in Vietnam, joined my
041456 - Uncle's construction firm in Menlo Park as his estimator.  We had a
041457 - falling out, and I joined Williams and Burrows as an estimator.  This
041458 - experience led to the view that "estimating" is the foundation for
041459 - managing projects because it provides knowledge of the work, the subs,
041460 - and terms of the contract, that provide opportunities for scope
041461 - adjustments which increase earning potential.
041462 -
041463 - At 24, my Uncle asked me to start a branch office in Sacramento. This
041464 - worked too well.  Soon the Sacramento office was doing more business
041465 - than Menlo Park, which led to another falling out and I left.  Bill
041466 - Lord then sponsored a branch office of Lord Bros. in Sacramento.  Two
041467 - years later at 26 I got a contractors license and started Welch
041468 - Construction with earnings from the prior partnership ventures.
041469 -
041470 - Five years later the Pier 11 Fender project was undertaken.  At lunch
041471 - I related this 15 year effort.  It is in explained somewhat in the
041472 - letter to Mike Timpane, ref DIP 1 3966, if Ron wants further
041473 - background.  He can also ask his lawyer about the case...
041474 -
041475 -
041476 -         Welch v. State of California, 139 CA Third, page 586
041477 -
041478 -
041479 - This experience provided expertise in claims and litigation, and shows
041480 - significant risk in contracting.  It, also, shows that human relations
041481 - in business ebb and flow over time, with success and difficulties,
041482 - sometimes despite hard work, good ideas and good intentions by
041483 - everyone.
041484 -
041485 -
041486 -
041487 -  ..
041488 - Welch Tools and Expertise - Communication Metrics
041489 -
041490 - Experience in contracting and litigation led to formulation of
041491 - automated tools to improve management.
041492 -
041493 - Not everyone agrees on what it takes to "manage" anything, so strong
041494 - leadership is needed in the beginning to help people experience new
041495 - methods that increase earnings over time.
041496 - ..
041497 - Communication Metrics adds "control" to communication to
041498 - supplement cost and schedule control.  This sounds simple, but is
041499 - quite complex because communication is more difficult than people
041500 - realize.
041501 -
041502 - Command and Control of the Record is explained in POIMS. ref OF 1 1113
041503 -
041504 - Communication Metrics has been used mostly against contractors.
041505 - ..
041506 - ARC presents an opportunity to support the contractor.  I am
041507 - willing to try this, and believe it can improve earnings, but it
041508 - requires initial recognition that people will object for a few months,
041509 - until the benefits begin rolling in, as seen from the meeting with a
041510 - Corps of Engineers rep on 961017. ref SDS 13 5832
041511 -
041512 -     [On 991014 Ronald is concerned subs and engineers will object to
041513 -     email and web mail because they want to use fax. ref SDS 23 2066]
041514 -
041515 - Another example is the discussion with Bob Johnston, President of
041516 - Dutra Construction on 970107. ref SDS 14 4953
041517 -
041518 -
041519 -  ..
041520 - Welch Goals - Implement Communication Metrics for Construction
041521 -
041522 - I would like to support a contractor.  ARC presents a good opportunity
041523 - because they do not seem to have a lot of work underway, and we would
041524 - be starting a project, so there is not a lot of catch up work to do.
041525 -
041526 -     [On 991014 Ronald recognized this opportunity. ref SDS 23 2900]
041527 - ..
041528 - One problem is working full-time at ARC's office.  Since I
041529 - basically work 24 hours a day, commuting wastes a lot of time.  We
041530 - obviously have to interact with the team.  My guess is this will work
041531 - itself out based on performance.
041532 - ..
041533 - There should be no illusions that introducing new systems takes
041534 - a lot of hours that are largely trial and error work.  It is fun and
041535 - productive if leadership supports the effort, but nearly impossible if
041536 - there are endless emotional battles over every sub-level initiative.
041537 - We have to turn out the PM work day-to-day, and this always discloses
041538 - new ideas for improving the tools.  Making those improvements takes
041539 - time to create and test.  We have to teach new concepts and train
041540 - people to implement, and it all has to transition smoothly with ARC's
041541 - exisitng methods. So its a big job - not something for the 8 - 5
041542 - mentality.
041543 -
041544 -      [On 991015 Pat asked about the ability to keep the record up.
041545 -      ref SDS 24 3381]
041546 - ..
041547 - Ideally, we can gain leadership support in the beginning with
041548 - the vision and planning for new systems on a reasonable scale. ARC is
041549 - a fairly good setting because there are not many levels of management
041550 - to wade through for approvals.
041551 - ..
041552 - So this is doable, if there is initial buy-in at the top.  That
041553 - seems to be Ronald's concept.
041554 -
041555 - We need an automation plan, ref DRP 1 5362, per scope of services with
041556 - Corps of Engineers. ref DRP 1 4929
041557 -
041558 - We would need a computer work station configured at ARC's office so it
041559 - is easy to transfer stuff.  This might cost $2K or so.  I would be
041560 - willing to pay for the thing to ensure proper configuration.
041561 -
041562 - Would like to set up DSL or fiber optic link to ISP, since without it,
041563 - things go a little too slow for expeding daily operations.  That may
041564 - already be done.
041565 -
041566 -      [On 991014 discussed automation planning. ref SDS 24 1581]
041567 - ..
041568 - I mentioned at lunch that $80K with some incentives, is probably
041569 - a better figure to shoot for than Ronald's initial idea.  Buying
041570 - expertise too cheap, tends to cause people to listen to other more
041571 - expensive players.  They don't follow advise and things fall apart. In
041572 - any case, the role of this investment is to increase earnings.  If it
041573 - does not do that, $80K or $100K won't be the issue.
041574 -
041575 - A $7M project, along with a $15M annual volume, presents a lot of
041576 - opportunity to "discover" bigger earnings, provided ARC holds to its
041577 - course of 10% margins.  If we can jump it to 12% or even 15% through
041578 - effective management, $10K is not an issue.
041579 - ..
041580 - I suggested giving a presentation to ARC on Com Metrics to
041581 - explain the "plan, perform, report" process. ref OF 1 1103  If he and
041582 - his people feel they can support this method, then maybe something can
041583 - be worked out.
041584 -
041585 -     [On 991015 explained Com Metrics at ARC's office. ref SDS 24 3002]
041586 -
041587 - Ron raised the idea of trying a 3 - 6 month commitment.
041588 -
041589 - I agree with this.  It can be on a contract basis, rather than payroll
041590 - to minimize AR Construction's paperwork, and fits well with the NSF
041591 - initiative set out in the Welch resume. ref OF 4 4690
041592 -
041593 - We will try to meet again in a few days.
041594 -
041595 -    [On 991014 Ronald called and requested a meeting. ref SDS 23 2275]
041596 -
041597 -
041598 -  ..
041599 - Examples of Welch Work Product
041600 -
041601 - I suggested that Ron and his team review some Welch meeting notes to
041602 - get a feel for the process and see if this is something they want to
041603 - try.
041604 -
041605 -     920128 analyse replace v. retrofit speed increaser on generator
041606 -     for Broadwater Dam. ref SDS 2 0001
041607 -
041608 -     940928 saving money on PG&E project with CDWR. ref SDS 5 0001
041609 -
041610 -     961009 progress meeting notes. ref SDS 11 0001
041611 -
041612 -     970320 Construction Launch meeting notes. ref SDS 15 0000
041613 -
041614 -     990910 meeting with Doctor Boulris. ref SDS 19 0000
041615 -
041616 -
041617 -  ..
041618 - References - Phone Numbers....
041619 -
041620 - In the afternoon, Ronald called back and requested phone numbers for
041621 - references in the resume.
041622 -
041623 -
041624 -     1.  Max Blodgett at USACE              415 977 8444
041625 -         Background Meeting on 960105
041626 -         ref SDS 8 0001
041627 -
041628 -     2.  Bill DeHart at PG&E                415 973 1014
041629 -         Background Meeting on 941004
041630 -         ref SDS 6 4920
041631 -
041632 -     3.  Wayne Wetzel at DNRC               406 444 6722
041633 -         Background Meeting on 911205
041634 -         ref SDS 1 8402
041635 -
041636 -     4.  Dave Buonchristiani                415 392 6320
041637 -         Attorney with TRP
041638 -         Background Telecon on 990419
041639 -         ref SDS 17 9420
041640 -
041641 -     5.  Denis Henmi at Kwan Hemin          415 777 4770
041642 -         Background Telecon on 990419
041643 -         ref SDS 16 0000
041644 -
041645 -     6.  Morris Jones at Intel              408 545 9521
041646 -         Background Telecon on 991010
041647 -         ref SDS 22 0001
041648 -
041649 -
041650 -
041651 -
041652 -
041653 -
041654 -
041655 -
041656 -
041657 -
041658 -
041659 -
041660 -
041661 -
0417 -
Distribution. . . . See "CONTACTS"