Looking back at Bechtel and Hoover Dam’s Construction nearly a century later.
A couple years ago, I read Sally Denton’s book The Profiteers – Bechtel and the Men who Built the World.
The beginning of this book takes the reader through the early stages of building one of the greatest construction feats of all time: The Hoover Dam. If you haven't already read it, and are as passionate about construction and mega-construction marvels like this one as I am, I highly recommend it.
Think about all the moving parts: the sheer caliber of the project teams; coordinating tens of thousands of tasks. That alone is enough to make most people cut and run.
What I found most fascinating about this mega project was the fact that this was merely a starting point for Bechtel, who like many at the time, was struggling with the downfalls of the Great Depression. But what started as an attempt to control the Colorado River, turned into a hell of a starting point for Bechtel and his men. It ended up turning a staggering profit.
Here are some noteworthy highlights around the project’s financial and contract details that really jumped out at me:
First off, the Hoover Dam was awarded to a consortium of 8 contractors, together creating the corporation to be named Six Companies Inc. It included:
- W.A. Bechtel Co. (San Francisco)
- Henry J. Kaiser Co. (Oakland)
- Morrison and Knudson (Boise)
- The Wattis Bros from Utah Construction Co. (Ogden)
- MacDonald and Kahn Co. (San Francisco)
- J.F Shea Co. (Los Angeles)
- Pacific Bridge Co. (Portland)
- General Construction Co. (Oregon)
Six Companies could barely scrounge up $5M to cover what was, at that time, the largest construction bond ever written.
Frank Crowe, initially the general superintendent for the United States Reclamation Service (today the United States Bureau of Reclamation (USBR)), left his job to join Six Companies. It was a good move, since Crowe certainly proved himself to be the corporation’s secret weapon.
He knew the contract, design, and execution better than any of the other proponents. Crowe led the tender to a submission price of $45.8M, $24K above the engineering estimate and a whopping $10M below the price of the highest bidder!
By the time the project was turned over to the owner, Six Companies had turned an estimated profit of $7M, equivalent to over $100M in current day.
For those truly invested in mega-project management, this group and the history of the Hoover Dam’s construction showcase some interesting rate negotiation strategies:
- Interesting Unit Rate #1– The unit rate billed by Six Companies for a cubic yard of dirt excavated was $8 while their cost was estimated at $5.50. This margin grew over the contract as the Great Depression kept pressing the cost of labor, equipment, and material downwards.
- Interesting Unit Rate #2– The contract provided $800 for each staff house built while Six Companies built each for only $145.
- The average cost per worker day was $4.
Even just viewing this project from a more generalized standpoint, the facts are fascinating. Take, for instance, the incredible 6 million tons of concrete required to build the dam. If you picture it, that’s enough concrete to construct a 16-ft. wide highway from San Francisco to New York City. The government plan also called for Six Companies to move 10M cubic yards of rock.
What can today’s Project Managers take away from the early construction of the Hoover Dam? For me, there’s an appreciation here that even as the industry has evolved so far, the core principles in great management still remain true.
Quality. For instance, General Electric constructed the most tech-advanced X-ray machine of its day to photograph over 25M square inches of pipe weld for the dam.
Human Resources. The employment opportunities the project held couldn’t have come at a more critical time. Six Companies and Frank Crowe determined they would need to start the project with 1,500 bodies. The first hiring effort took place in Las Vegas, where the population was a mere 5,000 at that time. And, remember, this was all taking place in the middle of the Great Depression when unemployment rates surpassed 25%. When Crowe arrived, he was shocked to see that 10,000 men had traveled from around the country just to try their luck at gaining employment.
Safety. Keeping that desert location in mind, it’s also important to note that safety issues came into play, likely accompanied by key learnings. On summer days, temperatures could soar to 130 degrees Fahrenheit on the floor of the canyon. With that, unfortunately, came fatalities.
Schedule. The dam’s construction showed an impressive execution of time management. At one point, the project was so far ahead of schedule, Six Companies had their surety bond returned as it was clear they were not going to default on the contract terms they’d agreed to. They were also provided with $1M in contract incentives, a bonus that would equal nearly $17M today.
Given the scope of mega construction projects currently underway around the world, delving into industry history like Denton has provided in her book is an interesting exercise in comparison. We’ve seen incredible advances in the way we manage large projects over the decades, but sometimes it’s comforting to see the fundamentals and values behind excellent project management are still as true today.
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