105 Searles

Slide2: 

Breakout Session #105 Paul W. Searles, Esq., Partner, Haynes and Boone, LLP John T. Loving, CPA, Partner, KL Consulting Ric Dexter, Trial Services Coordinator, Haynes and Boone, LLP Date April 24, 2007 Time 1:40 to 2:40 The Art of Successful Claim Preparation for an ADR Setting

CONFLICT: 

CONFLICT Failing to find a business solution to a contract dispute, your recourse under the contract is some form of ADR.

What Can Trigger Disputes?: 

What Can Trigger Disputes? Change proposals Constructive changes Terminations Schedule slippage Cost overruns Job site controversies Equipment problems Specification problems Differing site conditions Work suspensions Excessive inspections Personality clashes Delayed responses Challenged interpretations

How is ADR not like a trial?: 

How is ADR not like a trial? Less adversarial Linear presentations Witnesses have greater flexibility Less acrimonious Broader range of possible solutions

RESOLUTION: 

RESOLUTION A clear presentation of your obviously unassailable position must be set before the “Decider” FACT FACT FACT FACT FACT FACT FACT FACT FACT FACT FACT FACT FACT FACT OPINION OPINION OPINION OPINION INTERPRETATION ASSUMPTION ASSUMPTION ASSUMPTION INTERPRETATION INTERPRETATION INTERPRETATION INTERPRETATION

Can You Maintain the Business Relationship?: 

Can You Maintain the Business Relationship? Building Partnering Non-emotional Non-inflammatory Non-personal Long-term thinking

Art (Dictionary.com): 

Art (Dictionary.com) - noun 1. the quality, production, expression, or realm, according to aesthetic. principles, of what is beautiful, appealing, or of more than ordinary significance. . . . (in printed matter) illustrative or decorative material. the principles or methods governing any craft or branch of learning. the craft or trade using these principles or methods. skill in conducting any human activity: a master at the art of conversation. . . . skilled workmanship, execution, or agency, as distinguished from nature.

First Know Thy Case: 

First Know Thy Case Prepare to Present Your Story Written position paper Oral presentation Application of the Art Use technology

Who Are You Talking To?: 

Who Are You Talking To? Assess your audience Tailor your presentation

What Can Get in the Way?: 

What Can Get in the Way? Litigation posturing Contracting officer’s decision Limitations period expiring Funding availability Pending Board or Court action

What Else Do You Need to Consider?: 

Differences in Perspective/Understanding Different background and training Business owner vs. Contracting Officer What Else Do You Need to Consider? Differences in Perspective/Understanding Different background and training Business owner vs. Contracting Officer Financial accountant vs. government auditor

Communication in ADR: 

Communication in ADR Timely Focused Effective Meaningful

Why Should You Use Technology?: 

Why Should You Use Technology? Persuade Inform Teach Guide

Provide Information: 

Provide Information Information Providers

Active Learning: 

Active Learning FACT FACT FACT FACT FACT FACT FACT FACT FACT FACT FACT FACT FACT FACT OPINION OPINION OPINION OPINION INTERPRETATION ASSUMPTION ASSUMPTION ASSUMPTION INTERPRETATION INTERPRETATION INTERPRETATION Conclusion Select Organize Integrate

Cognitive Guide: 

Cognitive Guide Concept C p C pt C nc pt Conc pt Concept

Communication Isn’t Just Talking: 

Communication Isn’t Just Talking Tone Posture Focus Media

What Else Do You Need?: 

What Else Do You Need? Key facts Legal points Witness statements Charts, graphs and demonstratives

Do Your Homework!: 

Do Your Homework! Contract, specs, drawings Personal logs and diaries Inspection records Correspondence files Pre-proposal/bid documents Memos and periodic reports Photographs Accounting records

Communicate the Necessary Information: 

Communicate the Necessary Information What is being disputed? What do decision-makers need to know? What do you want them to decide? Guide them to a conclusion

A Case Study in Applying the Art: 

A Case Study in Applying the Art BIG OIL vs. Software-R-Us Hearing BIGOIL Claim III-58

Hypothetical Software Dispute: 

Hypothetical Software Dispute SRU agreed to develop and install software to control BigOil’s refinery operations BigOil failed to provide refinery in specified condition SRU delayed installation of software until refinery in specified condition BigOil makes claim for lost profits due to SRU’s delay in installing software

QUESTION: 

QUESTION Prior to BigOil’s completion of the renovations to the refinery, should Software-R-Us have installed the refinery control software?

Answer: 

Answer From an Engineering standpoint: Unprofessional From a Contractual standpoint: Practical Impossibility of Contract Performance From an Economic standpoint: Extremely wasteful of BIGOIL resources

Statement of Facts: 

Statement of Facts BIGOIL wanted to be able to refine heavy crude oil, rather than current light crudes through the addition of a Heavy Crude Processor The Heavy Crude Processor drastically changes the operation of almost all of the major components of the refinery CHANGING crude mix and ADDING the Heavy Crude Processor overwhelms any previously developed control software Installing the software requires the disruption of refinery operations for 6 months to a year

Heavy Crude Processor (“HCP”): 

Heavy Crude Processor (“HCP”)

Not All Crude Oils Are The Same: 

Not All Crude Oils Are The Same Light Heavy Heavier fractions require adding costly processing units, so the crude sells for less

Refinery Operations WITHOUT HCP: 

Refinery Operations WITHOUT HCP Figure 1: Basic Light Crude process block diagram of the refinery and interrelation of units Off Gas Raw LPG Naphtha Jet Fuel Kerosene Diesel GOPA GOLV GOPV Diesel MTBE Diesel Kerosene Jet Fuel Gas LPG Naphtha LPG Reformate Isomerate Alkylate maya isthmus isthmus Vacuum Residue

Refinery Operations WITH HCP: 

Refinery Operations WITH HCP Figure 2: Basic Heavy Crude process block diagram of therefinery and interrelation of units Off Gas Raw LPG Naphtha Jet Fuel Kerosene Diesel GOPA GOLV GOPV Vacuum Residue Coke Combustion Oil Gas Oil Diesel MTBE Diesel Kerosene Jet Fuel Gas LPG Naphtha LPG Reformate Isomerate Alkylate maya isthmus isthmus

What does a refinery do? “Boil and Crack”: 

Crack (FCC) What does a refinery do? “Boil and Crack” Naphtha Kerosene and Diesel Bitumen Gas Oil and Fuel Oil Boil > > > > > > > > > > > > > > > > > >

Operation of Heavy Crude Processor: 

Operation of Heavy Crude Processor

What is RCS?(Refinery Control System): 

What is RCS? (Refinery Control System) Refinery process units all require constant adjustment and monitoring. Hundreds of pieces of information require hundreds of decisions. Proper decisions enhance productivity. Conflicts can be managed manually by operators, or automatically by computers using RCS software.

RCS Example: The Bathtub: 

RCS Example: The Bathtub The RCS algorithm contains a dynamic model of the bathtub The algorithm design is set for certain limits Volume 70 – 110 gal Temp 60F to 120F

RCS Example: The Bathtub: 

RCS Example: The Bathtub Level Indicator Temperature Indicator The RCS algorithm contains a dynamic model of the bathtub Adding a large block of ice puts the water outside those limits Volume 70 – 110 gal now 130 gal Temp 60F to 120F now 40ºF

RCS: 

RCS Air Reactor Spent Catalyst Regenerated Catalyst Cracking Products Light Naphtha Cracked Gas Heavy Cycle Oil to HT Light Cycle Oil to HT Heavy Naphtha Slurry (to HCP) Regenerator Flue Gas V F F F F F F F F V F

Refinery WITH HCPAfter installing RCS for light crude Without HCP: 

Refinery WITH HCP After installing RCS for light crude Without HCP Figure 3: Basic Heavy Crude process block diagram of the refinery and interrelation of units Off Gas Raw LPG Naphtha Jet Fuel Kerosene Diesel GOPA GOLV GOPV Vacuum Residue Coke Combustion Oil Gas Oil Diesel MTBE Diesel Kerosene Jet Fuel Gas LPG Naphtha LPG Reformate Isomerate Alkylate

Negative Impacts: 

Negative Impacts Premature installation of RCS software would have negated the installed RCS applications. It would be necessary to re-install the RCS software from scratch after the HCP was put on line. This would have more than doubled the cost to BIGOIL of software installation and resulted in even greater lost profits from BIGOIL production.

Economic Impact on BigOil: 

Economic Impact on BigOil Estimated profits for sale of oil with RCS Profits derived from sale of oil without RCS Claimed Lost profits due to delay of installation. Contract price for software installation Estimated lost profits from production during Initial installation Projected additional costs of reinstallation of software, including decommissioning. Projected additional lost profits from production during reinstallation Total Projected lost profits for premature installation $ 122,860,000 $ 87,320,200 $ 35,539,800 $ 987,000 $ 11,300,000 $ 122,860,000 $ 87,320,200 $ 23,252,800 $ 987,000 $ 11,300,000 $ 2,167,000 $ 17,002,000 $ 31,456,000 $ 23,252,800 $ 31,456,000

CONCLUSION: 

CONCLUSION BIGOIL was obligated to integrate the Heavy Crude Processor (HCP) into the refinery. Adding an HCP, changing to heavy crude mix, and increasing production would destroy the effectiveness of any previously installed RCS applications. It was impossible for Software-R-Us to install the RCS in accordance with the Contract. Insisting on proceeding with commissioning would have been highly counter-productive, resulting in refinery disruption and loss of production Therefore, Software-R-Us was entirely ethical and professional in refusing to install the RCS software until BIGOIL completed the installation of the HCP.

Artful ADR: 

Artful ADR Preparation Gather your facts Start with the decision you want Organize the facts that lead to that decision Prepare a story that includes those facts Presentation Take advantage of the ADR setting Package your information Design for your audience

Slide42: 

Breakout Session #105 Paul W. Searles, Esq., Partner, Haynes and Boone, LLP John T. Loving, CPA, Partner, KL Consulting Ric Dexter, Trial Services Coordinator, Haynes and Boone, LLP Date April 24, 2007 Time 1:40 to 2:40 The Art of Successful Claim Preparation for an ADR Setting