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


S U M M A R Y


DIARY: October 21, 1999 11:30 AM Thursday; Rod Welch

Meet Ronald on agreement for new assignment with ARC.

1...Summary/Objective
2...Mobilize PM
3...Scope of Work Project Manager - Risk and Opportunities
4...Change from Owner Directed to Project Management is Difficult
5...City College Situation Needs Project Management
6...One Year Agreement with Quarterly Check Points
7...Payment Once a Month
8...Consultant Agreement for Welch Co, Rod Welch Project Manager
9...Welch Provides Leadership and Training at ARC Office
10...ARC Offers Transportation; Goal to Minimize Travel Time and Expense
11...Automation Plan - $5K to $10K
12...Communication Metrics on the Internet Shows Self-Evident Benefits
13...Office Ergonomics Support Efficient use of Com Metrics
14...Payment for SDS and Mobilization Supports ARC's Goals
15...Payment to Commence According to Value Added for the Project
16...Project Management of $80K+ for $12M+ Volume is Good Investment


..............
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CONTACTS 
0201 - A. R. Construction Company           415 656 2800
020101 - Mr. Ronald Arana; President =414 656 2806
020102 - aramet@aol.com

SUBJECTS
Inquiries

0403 -    ..
0404 - Summary/Objective
0405 -
040501 - Follow up ref SDS 19 0000, ref SDS 18 0000.
040502 -
040503 - Ronald presented new ideas for a Project Management position based on
040504 - risks and opportunities ahead for ARC. ref SDS 0 3855  He feels more
040505 - work is needed on developing an equitable compensation program, and
040506 - cited "big risks." ref SDS 0 9766  Ronald proposed incentives for
040507 - additional compensation based on a 1 - 10 scale. ref SDS 0 2691  Set
040508 - automation plan based on new information from meeting today with Yves
040509 - Barbero. ref SDS 0 4819
040510 -
040511 - Submitted ref DIT 1 0001 linked to this record to confirm
040512 - understandings.
040513 -
040514 -
040515 -
040516 -
040517 -  ..
0406 -
0407 -
0408 - Discussion
0409 -
040901 -  ..
040902 - Mobilize PM
040903 -
040904 - The steps needed to accomplish Ronald's objectives include...
040905 -
040906 -   1.  Agreement finalize
040907 -
040908 -   2.  Configure office at ARC
040909 -
040910 -       Procure CPU
040911 -       Configure CPU
040912 -       Install CPU
040913 -       Install furnishings
040914 -       Install telephone
040915 -       ..
040916 -   3.  Inspect vehicle
040917 -
040918 -       Procure any repairs required
040919 -       Parking???
040920 -
040921 -   4.  Meeting ARC office staff
040922 -
040923 -       Introductions
040924 -       Procedures
040925 -
040926 -           Ronald explain president's vision of goals and time tables
040927 -
040928 -           Rod's time in the office will evolve as we ramp up to full
040929 -           support and implementation.
040930 -       ..
040931 -       Communication Metrics
040932 -           ..
040933 -           Ronald explain goals, set training and support
040934 -           objectives Rod explain general concepts
040935 -
040936 -   5.  Golden Gate Park Reservoir project
040937 -
040938 -       Preliminary review plans and specs
040939 -       Review contracts
040940 -       Meeting ARC team, estimators, Ronald, Superintendent
040941 -       Review plans and specs
040942 -
040943 -
040944 -  ..
040945 - Scope of Work Project Manager - Risk and Opportunities
040946 -
040947 - We reviewed the level of effort for ARC project management...
040948 -
040949 - ARC has following projects...
040950 -
040951 -   1.  Golden Gate Park starting                       $7M
040952 -
040953 -   2.  City College nearing completion, superintendent quit, see
040954 -       separate analysis. ref SDS 0 3431
040955 -
040956 -                                                       $3M
040957 -
040958 -   3.  Port of Oakland, 3rd bidder, but pursuing entitlement to be
040959 -       named lowest responsible bidder.
040960 -                                                       $8M
040961 -         ..
040962 -         Ronald may have indicated receiving a letter that the
040963 -         Port is negotiating with the bidder who was too low.
040964 -
040965 -         ARC would have a strong case to make that this violates
040966 -         competitive bidding statutes and procedures, which harms the
040967 -         Port and all contractors.
040968 -
040969 -   4.  Oakland Navy project, ARC low bidder, concerned too low
040970 -
040971 -                                                       $2M
040972 -
040973 -   5.  City of San Francisco Garage, low bidder, being challenged by
040974 -       another contractor who is non-union
040975 -
040976 -                                                       $8M
040977 -   6.  Pat's project being completed.
040978 -                                                       $4M
040979 -
040980 -  ..
040981 -   7.  Claims.........                         $500K - $2M
040982 -
040983 - Potential value at risk............................  $35M
040984 -
040985 -
040986 - This is a complex situation that requires effective management to
040987 - realize budgeted earnings, and avoid loss.
040988 -
040989 - Ronald noted today that he is willing to take a risk that Rod Welch
040990 - can provide professional project management.
040991 - ..
040992 - Driving back to the Welch office for our meeting, Ronald noted
040993 - that he forgot important documents at the ARC office that he needs to
040994 - turn in to the City later today in order to get started on a new
040995 - contract.  He feels that more volume will enable hiring more qualified
040996 - people and this will relive the burden on him of having to remember
040997 - every detail.  We discussed briefly the prospect that more volume will
040998 - escalate the number of details and, also, the cost to him, as the
040999 - owner, when things slip through the cracks.
041000 -
041001 - On 970910 a presentation by the Project Management Institute (PMI)
041002 - reported that every executive faces the growing complexity of
041003 - information overload, ref SDS 5 3479, reviewed recently on 990924 as
041004 - the main cause of mistakes, loss and conflict in all human enterprise.
041005 - ref DIP 2 0001
041006 - ..
041007 - Communication Metrics helps meet this challenge by using
041008 - technology to make leadership effective, as reported by the U.S. Army
041009 - Corps of Engineers. ref DRP 1 6172
041010 - ..
041011 - In order for this to be effective, however, another
041012 - consideration must be faced.
041013 -
041014 - Ronald's success has produced a well deserved life-style, as with all
041015 - successful businessmen, of taking direct action when opportunity or
041016 - problems appear.  Andy Grove, CEO of Intel, calls this the "inertia of
041017 - success," reviewed on 980307. ref SDS 7 3740
041018 - ..
041019 - Consideration of Communication Metrics shows willingness to
041020 - avoid the "inertia of success" by recognizing new challenges that must
041021 - be met in order to reach the next level of growth, also cited by
041022 - Grove. ref SDS 8 1660
041023 -
041024 -
041025 -
041026 -  ..
041027 - Change from Owner Directed to Project Management is Difficult
041028 -
041029 - A very big challenge will be arranging communications with ARC staff,
041030 - subs and customers so that Project Management is effective.  In a
041031 - small business, everyone feels the presence of the owner, and the
041032 - owner's risk and authority encourage taking immediate and direct
041033 - action, rather than acting through the Project Manager.  On a human
041034 - scale, it is very difficult for a man of action to draw back and allow
041035 - others to take actions that may seem at the moment to be incorrect or
041036 - at least less than optimal. as set out in the record of the meeting on
041037 - 991019. ref SDS 19 2590  For example, the mistakes Ronald made today
041038 - of forgetting important papers, per above, ref SDS 0 U84N, can be
041039 - easily overlooked by the boss, but if others make similar mistakes
041040 - these appear momentous to the boss, and this disparity in perspective
041041 - makes the transition to project management difficult to implement.
041042 - ..
041043 - Ronald cited his practice of "controlling the controllers,"
041044 - referring to his support for onsite superintendents, who provide
041045 - construction administration, and represent ARC with owners, design
041046 - professionals, and subs.  He advised that ARC maintains a staff of 3
041047 - full time field laborers/mechanics.  This reflects the focus on
041048 - subcontracting.
041049 -
041050 - There was discussion of plans to hire an experienced office
041051 - administration person when Jacki takes maternity leave in February,
041052 - showing continued commitment to improving management.
041053 -
041054 - Ronald explained his goal to brain-storm with the Project Manager and
041055 - other key people to create a powerful "business machine," and to avoid
041056 - back-door channels that undermine communication.
041057 - ..
041058 - He reiterated the practice of letting people "fly" on their own,
041059 - including the Project Manager.
041060 - ..
041061 - We recognize this is the correct posture, but only time will
041062 - tell if the chemistry is effective.
041063 -
041064 -
041065 -  ..
041066 - City College Situation Needs Project Management
041067 -
041068 - Follow up ref SDS 19 0660.
041069 -
041070 - Ronald advised that during the 6 hour meeting yesterday to review
041071 - project status and formulate plans as a result of ARC's superintendent
041072 - suddenly quitting, the architect disclosed that his firm had, also,
041073 - had a key employee suddenly quit. The Dean of the college advised of
041074 - similar past problems. ref SDS 21 2205
041075 -
041076 - Ronald remarked that everyone seems to be pulling together to address
041077 - a crisis.
041078 -
041079 - The risk and allure of Crisis Management is reviewed in the review on
041080 - the "High Cost of Medical Mistakes." ref DIP 2 2904 developed on
041081 - 990924. ref SDS 14 2066
041082 - ..
041083 - Evidently ARC's superintendent who quit had not been performing
041084 - normal duties the past several weeks, and has left a backlog of tasks
041085 - to catch up.  The range of issues and seriousness will unfold in the
041086 - period ahead.  Sometimes people quit suddenly when past unauthorized
041087 - and high-risk initiatives eventually result in emanate exposure of
041088 - failure or loss, and they are not equipped emotionally to face
041089 - colleagues and superiors.  Ronald did not discuss having discovered at
041090 - the meeting yesterday any major problems.  He indicated the person who
041091 - quit may have gotten a better offer from another firm.  Ordinarily
041092 - getting a better offer would not cause a professional person to quit
041093 - without notice.
041094 -
041095 - Ronald seemed to indicate this may extend completion by a month or
041096 - so.  He now expects to complete the project in 3 months.
041097 - ..
041098 - Ronald feels he could complete the City College job.  Currently
041099 - he has assigned Pat to help, and his estimating crew are also filling
041100 - in while Ronald adjusts to these new circumstances.
041101 - ..
041102 - He has decided to take the $2M job in Oakland on which he was
041103 - low bidder Tuesday. ref SDS 19 7138  He can hire a superintendent for
041104 - that job, who can be used to finish the City College project.
041105 -
041106 - These conditions reflect elevated risk to ARC.
041107 -
041108 - Com Metrics is a risk management process which Ronald cited in our
041109 - meeting on 991015. ref SDS 17 5175
041110 -
041111 -
041112 -  ..
041113 - One Year Agreement with Quarterly Check Points
041114 -
041115 - Follow up ref SDS 19 8933.
041116 -
041117 - We confirmed terms Ronald proposed on Tuesday for me to work with ARC
041118 - for a year, and provide check points every 3 months to mutually
041119 - evaluate progress.
041120 -
041121 -
041122 -  ..
041123 - Payment Once a Month
041124 - Consultant Agreement for Welch Co, Rod Welch Project Manager
041125 -
041126 - Follow up ref SDS 19 4966.
041127 -
041128 - We confirmed ACR will contract with Welch Company, and will issue
041129 - payment once a month for project management services.
041130 -
041131 - ARC will present Rod Welch as the "Project Manager."
041132 -
041133 -
041134 -
041135 -  ..
041136 - Welch Provides Leadership and Training at ARC Office
041137 - ARC Offers Transportation; Goal to Minimize Travel Time and Expense
041138 -
041139 - Follow up ref SDS 19 0799.
041140 -
041141 - We confirmed ACR will provide a vehicle suitable to support
041142 - professional project management.
041143 -
041144 - Welch will provide leadership and training at ARC's office in using
041145 - Communication Metrics and professional project management, as
041146 - discussed on 991019.
041147 -
041148 - Ronald plans to support transition to Communication Metrics by using
041149 - Pat to help develop initial contract management for the Golden Gate
041150 - Park Reservoir project.
041151 -
041152 -
041153 -  ..
041154 - Automation Plan - $5K to $10K
041155 - Communication Metrics on the Internet Shows Self-Evident Benefits
041156 - Office Ergonomics Support Efficient use of Com Metrics
041157 -
041158 - Follow up ref SDS 19 3038.
041159 -
041160 - We confirmed ACR will provide adequate office facilities, including
041161 - computers and Internet access to support professional project
041162 - management, as discussed on 991019. ref SDS 19 3038
041163 -
041164 - Ronald feels comfortable that the City will be willing to provide
041165 - computer files needed for Communication Metrics, per analysis in
041166 - connection with the letter from Pat on 991019. ref SDS 20 0875  He
041167 - advised that project plans and specs are provided to contractors on a
041168 - computer disk, and the contractor prints the number of copies needed.
041169 - ..
041170 - This is a good solution and indicates that prior the problems
041171 - working with the Corps of Engineers may be solved on this project.
041172 -
041173 - The next big challenge will be converting ARC and City standard
041174 - construction management forms into HTML for display on web browsers,
041175 - so we can embed links that provide the control and "intelligence" that
041176 - Ronald wants.
041177 - ..
041178 - Ronald mentioned today that working with Communication Metrics
041179 - online is an eye-opening experience.  This aligns with planning on
041180 - 971021 in creating the system. ref SDS 6 9999  It reflects favorable
041181 - assessment from Dave Vannier at Intel on 990907. ref SDS 12 0149
041182 -
041183 - Ronald said that his son has already mastered the Welch system of
041184 - "clicking" online to get background, authority and alignment with
041185 - requirements and objectives.  Ronald feels it is much easier to
041186 - "click, click, click" than to hunt for documents and information in
041187 - mountains of paper, and to search endless email lists for information.
041188 -
041189 - In order for this method of "click, click, click" to support daily
041190 - management, we need to create standard construction forms in HTML for
041191 - display on web browsers, e.g., transmittals, submittals, RFIs, etc.
041192 - ..
041193 - HTML conversion may cost $4K or so.
041194 -
041195 -    It might be possible that the City would isse a change order to
041196 -    defray this cost, if we can present the cost and time advantages.
041197 -    This would be reviewed in visiting with the City's Project Manager,
041198 -    propsosed on 991015. ref SDS 17 3630  In fact, the City may
041199 -    already be working on this project.
041200 -
041201 - Ronald says ARC has a scanner, but he is not familiar with
041202 - performance.  Accordingly, this may be another item of cost, since
041203 - without doubt some scanning will be necessary.
041204 -
041205 - The cost of 2 computers will run about $3K.  We discussed that we may
041206 - only need one new one, but I am going to lobby hard for the second
041207 - one.
041208 - ..
041209 - Accordingly, a ballpark budget is $5 - $10K.
041210 -
041211 - The cost of DSL access for a year at the ARC office and on the GGP
041212 - project, will run about $3K, which is an extension of telephone
041213 - service.
041214 -
041215 - DSL is important, because it will give ARC access to the Interent at
041216 - the 3rd Street office, which is not now available.
041217 -
041218 - Ronald explained he is getting Welch correspondence now on his son's
041219 - computer at home, because of problems reported on 991014. ref SDS 16
041220 - 2673
041221 -
041222 -
041223 -
041224 -  ..
041225 - Payment for SDS and Mobilization Supports ARC's Goals
041226 -
041227 - Follow up ref SDS 19 3270.
041228 -
041229 - To protect ARC's interests, we considered paying for the SDS program
041230 - on the basis of half at the start of the project, due on 991026 in the
041231 - amount of $2,500, and the other half, due in three months at the end of
041232 - the first check point, in the amount of $2,500.  If ARC decides not to
041233 - proceed, then it will not owe the second payment of $2,500.  ARC can
041234 - further deduct $2,500 from the monies owed for the last month of
041235 - service, if ARC elects to stop using SDS.  In other words the 3 months
041236 - is a trial period.  However, if ARC elects to continue using SDS, then
041237 - it will owe the $2,500 plus payment for the last month of service.  In
041238 - that case, Welch will support ARC with program updates and support for
041239 - a period of a year at no additional cost to ARC.
041240 -
041241 -
041242 -  ..
041243 - Payment to Commence According to Value Added for the Project
041244 -
041245 - Follow up ref SDS 19 3504.
041246 -
041247 - There was no specific discussion today on this subject, however, I am
041248 - not meeting with the City Engineer, as planned on 991015, per Ronald's
041249 - instructions yesterday. ref SDS 21 3224
041250 -
041251 - This reduces the level of effort during the current period.  Therefore
041252 - I am willing to accept payment for one week of time instead of two, as
041253 - set out in the letter on 991015. ref DIP 4 3621
041254 -
041255 - Ronald seemed to indicate today that part of the reason for not
041256 - wanting me to meet with the City Engineer is to avoid having the City
041257 - discover the potential for using Communication Metrics in dealing with
041258 - the contractor.
041259 -
041260 -
041261 -  ..
041262 - Project Management of $80K+ for $12M+ Volume is Good Investment
041263 -
041264 - Follow up ref SDS 19 3740.
041265 -
041266 - We reviewed monthly payment ideas discussed on Tuesday.
041267 -
041268 - I offered to accept payment in the amount of $6K per month, as Ronald
041269 - proposed, for the first three months, so that ARC can assess
041270 - performance of Welch and Communication Metrics.  If ARC decides to
041271 - continue with Welch, then it will owe $3K for the balance earned
041272 - during the first three months, and payment for the following 3
041273 - quarters will be at the rate of $7K per month.  If ARC decides not to
041274 - continue, ARC will not owe the $3K balance for the first three months.
041275 - The fourth transition month can be paid at $6K rate.
041276 - ..
041277 - This allows ARC to assess Welch and Communication Metrics at a
041278 - rate ARC believes is fair.  It provides a window of opportunity to
041279 - discover whether increased payment to the $7K per month rate is
041280 - justified by increased earnings.
041281 -
041282 - It will pay for...
041283 -
041284 -     •  launching ARC's new projects
041285 -     •  expert claims support.
041286 -     •  professional project management expertise.
041287 -
041288 - Lessor payment will not provide the quality of management needed to
041289 - meet the risks and opportunities ARC faces, as reviewed above.
041290 - ref SDS 0 3855
041291 - ..
041292 - Ronald feels the Welch proposal is not fair.  He does not have a
041293 - good feeling about these ideas.
041294 - ..
041295 - Ronald seemed to indicate that he feels Welch and Communication
041296 - Metrics are worth the $90K or so contemplated in this package for 12
041297 - months.  This aligns with self-evident benefits he cited above.
041298 - ref SDS 0 4968
041299 -
041300 - There was concern expressed about "big risks" ARC faces in accepting
041301 - the Welch method of payment.
041302 - ..
041303 - Ronald offered to pay at the rate of $6K per month, rather than
041304 - $7K per month for a period of one year, plus an incentive bonus that
041305 - would work as follows...  At the end of the year, he would assess on a
041306 - scale of 1 - 10 ARC's satisfaction with Welch and Communication
041307 - Metrics.  If, for example, satisfaction is found to be "6" then ARC
041308 - would pay Welch 60% of the difference between the $6K rate and the $7K
041309 - rate plus the $5K cost for SDS and mobilization.
041310 -
041311 - This is an imaginative solution that seems to present a wide range of
041312 - eventual interpretations.
041313 -
041314 - Ronald will let me know if ARC wants to proceed.
041315 -
041316 -
041317 -
041318 -
041319 -
041320 -
041321 -
041322 -
041323 -
041324 -
Distribution. . . . See "CONTACTS"