PARTNERING - ITS WORKING!

     In his new book, Making Quality Happen, George Labovitz
spells out the essence of partnering. "Partnering customer and
supplier organizations behave as if they were one company (at
least in the areas in which they've agreed to partner), helping
to improve each other's work processes and sharing each other's
successes and failures. Underlying the partners' interactions is
a belief quite contrary to caveat emptor: For me to succeed, you
must succeed. Ironically, customer and supplier achieve this high
level of trust, communication, and mutual understanding by
shifting their focus away from each other to concentrate instead
on a superordinate goal: Satisfy the ultimate customer." 

     The goal of partnering is to reduce the cost of quality.
There are two parts to this cost. First, the cost to make
products and services right the first time. This is the cost of
producing high quality and is a necessary cost although it can be
minimized. Second, the cost resulting from deficiencies. This is
the cost related to poor quality and is a waste of time and
money.  

     One of the most pervasive areas of waste in highway
construction and contract administration is that of claims by
contractors for unresolved disputes. Because resolution requires
dramatically increased resources, claims represent a lose-lose
situation for both the contractor and the contract
administrators.   

     The reduction in waste that Federal Lands Highway is
achieving with partnering is very encouraging. The results are
now starting to become evident. In 1990, before partnering, there
were 23 active claims on construction contracts totaling $12.4
million. 

     In 1991, as a FLH initiated a few formal partnering
projects, twelve claims  were settled but ten more were added for
a total of $14.6 million. As of the end of FY 1992, when
partnering was begun and continued on multiple projects, there
were virtually zero (0.04 percent) claims on the $73 million of
contractor earnings for the 13 partnered projects underway.
Claims as a percent of the $143 million in contractor earnings
for all 108 projects active during FY 1992 was 9.9 percent, or
$14.1 million. Using the 9.9 percent rate, the claims on
partnered projects could have been expected to be $7.2 million.
Even assuming all of the additional 4.7 percent, $3.4 million,
contract growth on partnered projects is attributable to
partnering (an unreasonably conservative assumption), the
reduction in waste would be $2.5 million.

     Although early indications are very positive, other factors
must be considered. For example, FLH has had only two year's
experience in partnering; there is insufficient completed project
data to reach statistically significant conclusions. Some of the
projects were selected to solve difficult problems on expensive
projects, some were selected for their potential for early
success.  Partnering in FLH has been encouraged, not mandated. In
some cases contractors have turned down the opportunity to enter
into partnering agreements. Some of this may be due to their
being satisfied with existing relationships and some may be due
to fear of additional management resource commitments vs.
anticipated benefits. There has been no directive from management
to eliminate claims on partnered projects. Indeed, as might be
expected in any human endeavor, some partnering efforts have been
very difficult and one or two have been considered by some to
have failed. The real failure, however, would have been never to
have tried.

     The positive facts which cannot be avoided are:

  o  Nearly 50 percent of contractor earnings for the Fiscal Year
1992 were on projects which included formal partnering.

  o  Claims on partnered projects have been virtually nil. 
  o  Engineers and contractors have good things to say about
their experiences. 

For more information call Mark Chatfield, Quality Coordinator,
Federal Lands Highway, 202-366-9492.

[This file originated on MAINSTREET BBS--SysOp]