15 October 2010

Bob Haldeman Interview (46)

Selecting Bids for the Mine Expansion 

Haldeman: We had to choose an engineering construction company, and we had 
three companies bidding. (I won't mention the names of the 
companies.) Each of them was associated with local Chilean 
companies . 

Swent: That was for this new half-Codegua plan? 
Haldeman: Yes. 

Now came the big political pressure through the Chilean 
associates of these companies to try and get the job. We got 
the bids in, and all my people evaluated it. I called Mr. 
Simian and said, "Before we have a board meeting, Ed, 1 want you 
to go over all these numbers with me." He's an engineer and 
understands all this. I had two of my staff there, and we went 
over and over it. The lowest bid was not the best. The highest 
bid was the best. 

Swent: Best in what sense? 

Haldeman: It had better people. Their way of determining their costs was 
absolutely crystal clear. The other one had all these hidden 
costs and threw charges on this and that; it was vague. You 
went through it, and you couldn't find out exactly who was going 
to be responsible for something and if there were overhead. 
They included things in general overhead, which shouldn't have 
been in overhead, at 60 percent. Right off the bat you know 
you're going to have to sit there and go to arbitration and 
chisel all the time. 

The highest bidder had a super team of professionals in the 
business of mining, smelting, concentrater, and electrical, 
which were the principal components. We were getting an awful 
lot of flak from the lower bidder. He had a lot of political 
clout with the president and the Congress, and he was in the 
Christian Democrat Party. He put a lot of pressure on the 
government members of the board. He said, "We know we have the 
lowest bid." I knew we were going to have fireworks. 

We went over the bids for a couple of days, and Ed finally 
became convinced that the [higher] bid we were going to take was 
the proper bid to have. I said, "After all, too, I have to be 
responsible for it, because I have the management contract. And 
Kennecott is responsible; it's not just me alone." 

Ed said, "All right, let's have the board meeting." 

At six o'clock that afternoon we had all the board in, and 
my project manager, Mr. B. B.. Smith, made the presentation. He 
was an excellent chap. We put all the numbers up on the board, 
and his number-two man, Mr. Samuelson, went through the details 
on it. I said, "So the management recommendation to this board 
is to pick Group A." Silence. 

Then, "What was that cost again?" 

The Chilean board for El Teniente Mine, 1967. Bob Haldeman is third from the left, front row seated in front of the table.  (click for larger image)

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