1. (Mt) – UML Management Project Skills and Customer Interface Questions
Case The Project Manager/Customer Interface E. Filliben and J. L. Colley, Jr. Reggie Brown,
B&W Nuclear Service Company’s (BWNS) project manager for Nita Light and Power’s Green
Meadow plant, reflected on the dilemma that had plagued him for over a year. His team had
completed an outage for Green Meadow over a year ago last October. The project was
originally designed as a fixed-price contract. Delays and an expanded scope, how- ever,
forced the outage to be changed to a time-and-materials job with a final price that was
significantly higher than the original contract price. Now it was December, well over a year
after the completion of the outage, and the bill had still not been paid in Copyright The
Darden Graduate Business School Foundation, Charlot- tesville, Virginia. Reprinted with
permission. 416 CHAPTER 10 Monitoring and Information Systems full. Insisting that it was
not responsible for the enormous over- run, the utility refused to pay what BWNS’s Special
Products and Integrated Services Division was charging. Brown knew that maintaining a
good relationship with the customer had to take priority over getting the bill paid. Initially,
BWNS sent 40 engineers and technicians to start the work. When the project was in full
swing, close to 100 BWNS personnel were on site. Although the original contract was for
approximately $500,000 worth of work, the actual bill came to over $1,500,000. Some of the
overrun was attributable to U-bend stress relief and added plug inspection, all part of the
expanded scope. Much of the overrun, however, was caused by underutilization of the
personnel who were on site waiting for initial access to the generators. The outage was
completed 44 days after it began, 22 days longer than originally anticipated (see Exhibit 1).
Background The Special Products and Integrated Services Division (SPIS) had been working
with Nita Light and Power (NLP) since 1983. Relations with the utility remained favorable
since then as SPIS performed a wide variety of services for NLP. In the summer last year,
NLP sought a fixed-price contract for work to be performed by SPIS. The focus of the work
was the imminent Fall refueling outage and steam-generator inspection. SPIS rep-
resentatives worked with the utility to develop the fixed-price contract, which totaled
approximately $500,000. The contract assumed that SPIS crews would work on all three of
the utility’s generators concurrently. There were, however, several early signs of potential
prob- lems. Reggie Brown had concerns about delays even before arriv- ing on site in late
August. He expected the badging process to take longer than the time allotted. Moreover,
the SPIS team knew that it would need to relieve stress in the tight-radius U-bends (rows 1
and 2) and perform additional roll inspection, none of which was contemplated at the time
of the original request. Rep- resentatives approached Stan Goodsen, NLP’s site manager, at

2. the end of summer and explained that the outage could not be completed under the original
terms in light of anticipated delays and increased work scope. Goodsen asked for a budget
and a schedule and gave the go-ahead for a time-and-materials billing. Brown’s fear of delay
was realized. First, over Labor Day weekend, badging was completed and the equipment
was staged as far as possible. The process of badging involved a series of tests, including
site-security and health-physics qual- ification, psychological assessment, background
check, finger- printing, and drug screening. The utility did not want to accept SPIS’s badging;
it wanted to have its own separate process, which was quite time-consuming. Second,
because of a delay in the chemical-channelhead decontamination, the three gen- erators
were not turned over to SPIS personnel on time. The first generator was turned over 10
days after the date promised. The second one was turned over 12 days later; the third, 9
days after that. Recognizing that the cost of the work was going to exceed the contracted
amount because of the utility’s delay in turning over the generators, Brown, as project
manager, made numerous attempts to clarify the situation early on and avert any problems
down the road. First, he requested that some of the SPIS personnel be sent home while they
were waiting for the other generators to become available. NLP officials refused, however,
saying that the other two steam generators would be available shortly and that the field
crew needed to be ready to go as soon as they were available. Second, Brown sent letters
detailing the situation to the people identified on NLP’s original purchase order as the
utility’s representatives. The only response was from on-site personnel like Goodsen, who
gave repeated assurances that the SPIS contract had been switched to time-and-materials.
Green Meadow Purchasing Procedures Complicating the overrun situation was the fact that
the util- ity was in the process of converting its purchasing procedures from a centralized to
a decentralized program. The Contract Administrative Group, located at NLP’s corporate
headquarters, was originally responsible for all initial contract negotiations; all added-scope
issues such as delays had formerly been han- dled by the on-site technical people. Over the
years the entire purchasing process had been quite informal, however, especially given
SPIS’s long-term relationship with NLP. Some years ago, SPIS had, for example, completed a
multimillion-dollar project at Green Meadow without any purchase order whatso- ever.
Now, under the new procedures, the individual generating plants would be responsible for
handling the entire purchasing process. Unfortunately, SPIS was never adequately informed
of the changes. Under NPL’s new procedures, Lou Mayhew was assigned to the on-site
Contract Administration Group. He was to be SPIS’s main contact for contract negotiations.
Because the SPIS team had worked at Green Meadow on two previous outages and was not
aware of the purchasing reorganization, it followed the same procedures it had used before.
Although SPIS personnel knew that Mayhew existed because he had participated in the
technical presentations for both previous outages, both of those purchase orders had been
signed downtown at the central office. As there was no indication that the procedures had
changed, the original purchase order was sent to the central office. Timeline August 31:
Verbal okay from Goodsen to go with a time-and-materials arrangement. Utility shut down.
All three generators scheduled to be delivered. None ready. September 1: September 11:
September 23: First generator to SPIS. Memo from Goodsen confirming 8/31 authorization.
September 23: October 2: Second generator to SPIS. Third generator to SPIS. Outage

3. complete. October 14: EXHIBIT 1 The Project Manager-Customer Interface. Case 417 The
Invoice After the outage was completed, a price estimate was compiled in November. It
totaled $1,600,000; additional services, worth an estimated $350,000, were provided at no
cost. The estimate was sent to Bill Jones, a technical specialist who was Stan Good- sen’s
boss, with a carbon copy to Mel Carter in Purchasing. NLP personnel’s initial reaction was
that the estimate looked fine; because the utility had caused the considerable delay, SPIS
was entitled to full reimbursement. The release of the invoice estimate was followed by a
meet- ing on site in February. Several representatives from SPIS sat down with Stan
Goodsen and some technicians from the util- ity and presented them with an initial invoice
for the outage. Throughout the process, SPIS’s on-site personnel dealt exten- sively with
Goodsen. Mayhew had been invited to the meeting but did not attend. Green Meadow’s
technical personnel agreed to accept the invoice “as is.” With NLP’s input, the actual bill was
sent in February to Carter in the central office. The utility usually paid its bills within 60
days. After 90 days, Reggie Brown still had not heard anything and was starting to get
nervous. He recognized, however, that the bill had been sent with volumes of paper work,
including the site sheets that had been signed daily by Goodsen, and he was sure that the
utility’s billing department was simply bogged down with paper work. Nevertheless, Brown
decided to call the util- ity and inquire about the delay; he was assured that there was “no
problem.” The utility eventually did send some money. By this Octo- ber, SPIS had received
a total of $1.2 million. Then, on October 17, Roger Roberts, regional sales manager for SPIS,
received letter from utility Vice President Rus Clemons requesting a meeting. On October
26, Roberts and Jacqueline Doyle, man- ager of Contract Management, traveled to the Green
Meadow plant for a meeting. Reggie Brown, on a field assignment, was unable to attend.
Neither Roberts nor Doyle knew quite what to expect. The Negotiations On the 26th,
Roberts and Doyle met with three NLP officials, Sly Simmons, Lou Mayhew, and Mayhew’s
boss, Rick James. The committee from the utility informed the SPIS team that, because the
original agreement had been a fixed-price contract, not only would the utility not pay any
more money toward the $1.6 million SPIS said it owed, but also that BWNS owed Nita Light
and Power $300,000 plus interest for the amount NLP had overpaid to date. Shocked,
Roberts and Doyle responded with the memo from Stan Goodsen that converted the fixed-
price contract to one for time and materials. Mayhew simply kept repeating one sentence,
“The price is too high.” From 9:00 a.m. to 2:00 p.m., in an extremely frustrating exchange, all
that was accomplished was that the group finally agreed that the contract was on a time-
and-materials basis. Once that agreement was reached, however, Mayhew alleged that SPIS
had loaded the project with people. The same group met again on November 9. that
meeting, Doyle and Roberts laid out the staffing proposal that was origi- nally accepted by
Green Meadow. Then they compared it with the job’s actual staffing numbers, which were
within two people of the projections. Doyle then pointed out that the promised pro- duction
rate, 20 tubes per hour, was also met, as corroborated by the site sheets. The problem
leading to the large overrun was the delay in the utility’s relinquishment of the generators.
During this meeting, Doyle and Roberts also presented NLP officials with an invoice for
$250,000 to cover some of the $350,000 in expenses that were never charged on the first
invoice, bringing the total cost of the outage to roughly $1,850,000. Because they believed

4. that much of the impasse thus far was due to the lack of technical understanding of the
commercial rep- resentatives NLP sent to negotiate, Doyle, Roberts, and Brown requested
that Green Meadow’s technical people be included in a third meeting. The technical people
had agreed to accept the initial invoice “as is.” All subsequent negotiations were con- ducted
with commercial representatives, that is, the Contract Administration Group. These
meetings were frustrating because the business group did not have a solid understanding of
the technical aspects of the project and was, therefore, unsympa- thetic to SPIS’s reasoning.
During the third meeting, the utility’s business representatives purportedly made a phone
call to the technical people. SPIS later found out from on-site personnel, however, that the
call was merely for show and that no attempt was made to include the technical group. Very
little was resolved during the third meeting. The utility’s technical and commercial people
never met together to discuss the invoice. In December, $650,000 was outstanding on the
bill ($1,850,000 in total charges – $1,200,000 previously paid). NLP officials offered
$400,000, bringing SPIS’s total received to $1.6 million. In deciding how to handle the
shortfall, Doyle knew she had to balance the competing interests of maximizing profit and
nurturing this long-term customer relationship. Long-Term Ramifications The overrun had
other serious ramifications for SPIS’s relation- ship with Green Meadow. NLP’s next project
was a five-outage package worth approximately $8 million. For this package, Green Meadow
proposed all new terms and conditions that strongly favored the utility. Following its
proposal of other terms and conditions, SPIS received no response for almost 18 months.
Doyle and Brown started pushing Mayhew and James, who essentially responded, “Take it
or leave it.” In February, SPIS went all out with its proposal for the five-outage package. Its
proposal won the technical staff’s recommendation and also offered the best price. Green
Meadow decided not to award a contract for all five at once, however, but rather to award
the contract for the first (April) outage only. Despite the SPIS pro- posal’s technical and
price advantages, NLP awarded the outage to Westinghouse because the latter agreed to the
utility’s terms and conditions. Word in the industry was that Westinghouse had performed
well on the April outage, coming in 8 hours ahead of schedule. Westinghouse did, however,
contest $1 million after completing the outage Given the events of the past year, Doyle and
Brown knew that SPIS faced an uphill battle for the remaining four outages. They reflected
on the lessons they had learned and wondered how they could apply them in order to put
the relationship with Nita Light and Power back on track. 418 CHAPTER 10 Monitoring and
Information Systems • Control the customer • Get money for work performed • Persevere
Advice for Project Managers In reflecting on SPIS’s experience with NLP, Jacqueline Doyle
provided some advice for project managers. It is crucial to know who is the authorized
agent on site for the utility. I thought Goodsen was authorized. He obviously was not.
Always find out who needs to know about progress and deviations from plans. Keep that
person informed. Given the long-standing practice in the industry, it would not have been
feasible to stop work in the middle. Building a relationship with the utility over the years
means that you agree to work things out as partners. Invoices on a daily or at least weekly
basis would have been a good idea in this case. The biggest lesson, though, was to send
documentation to, and to communicate with, the commercial personnel on a regu- lar basis.
This communication can be complicated by the tension that often exists between technical

5. people and commercial So even though day-to-day communication with the on-site
technical group appears congenial, one person should be appointed to communicate with
the business managers. Doyle also cited the following responsibilities of project
management: Questions 1. What did Brown and BWNS do well in this situation? What could
have been done better? 2. What factors outside Brown’s control interfered with his efforts
to work with the utility? 3. What skills does it take to be an effective interface with the
customer? Has this project been successful for BWNS? 4. In what ways did the project scope
change? How can a company control scope change when the customer is so casual about the
project, until it comes time to pay the bill? 5. Is the customer always right? Do you think any
of the “common reporting problems” described at the end of Section 10.2 may have
occurred here? 6. Should BWNS try to win back NLP’s business at this time? How could
BWNS eventually win back NLP’s business? • Know who the decision makers are • Ask the
right questions of the right people The following reading describes the symptoms that
upper managers need to monitor to make sure that the projects under their responsibility
don’t get off track. Too often, these managers abdicate project responsibility to the PM; yet,
what could be more important than the success of strategic projects to keep or make the
organization competitive? The article describes three major ways of monitoring projects;
through the available metrics and clear symptoms, through meetings and milestones, and
via an open-door culture.