COMMUNITY RESEARCH AND DEVELOPMENT, INC.
INTRAOFFICE MEMORANDUM
January 11, 1966
TO:
Willard G. Rouse
William E. Finley
Richard L. Anderson
Wm. Purnell Hall
Wallace Hamilton
FROM:
James W. Rouse
Morton Hoppenfeld
Robert E. Huff
J. Leonard Ivins
David W. Warner
Robert E. Whiteford
The purpose of this memorandum is to make clear to each of you your special
responsibilities with respect to budgets, cost control, and the reporting
systems necessary to carry out these responsibilities.
The primary discipline in the development of Columbia is the Columbia economic
model plus the individual budgets and land sale projections on which the CEM
is based.
We have an enormous opportunity in Columbia. I believe that all of us are
convinced it is a practical, obtainable opportunity which, upon being fulfilled,
will have great impact upon the future development of the American city and
will bring substantial profits to our Company and our financial partners.
It is clear that we have the capacity to plan it imaginatively and resourcefully;
that we can effectively promote it; that we can attract important institutional
innovations to Columbia. It is also increasingly clear that we have a substantial
market for housing, business, and industry.
The greatest risk we now face involves our ability to account in advance for all
of our financial needs; to budget them properly; to live within the budgets; to
minimize unforeseen costs; to provide for contingencies with adequate allowances;
and to develop our sales program in phase with our projections of land sale proceeds. The figures we are dealing in are so big and our margins so close that
relatively small percentage swings can throw the projections in our development
schedule into serious peril.
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Memo To: WGR, WEF, RLA, WPH, WH,
MH, REH, JLI, DWW, REW
January 11, 1966
Probably no developer has ever had such latitudes as are available to us with
our $50,000,000 financing. No developer has been so free of pressing and
limiting deadlines. No developer has had such flexibility and freedom in
fashioning the details of a large project and obtaining approval to proceed
with the funds readily available to back up the approval.
Therefore, we have a very special responsibility to set, within our organization,
effective disciplines to assure that we operate comfortably and continuously
within the economic model and our budget approvals.
The margins are now much too tight. It is inevitable that we will be faced with
costs that we have not anticipated. We will hit rock, or mud, or time pressures
that will cause overtime. We will discover that we have omitted provision for
an essential culvert, or bulkhead, or retaining wall. We will come upon some
special opportunity such as a program for a Belgian Village, or a space needle
with a restaurant atop, or a great art collection, or a new college—but seizing
the opportunity will require a large sum of money which will seem small in
relationship to the total gain to Columbia. But unless we have margins in our
economic model for such contingencies, or opportunities, we will be faced
with unhappy distortions of our development program.
In short, each day as we make a decision on the size and cost of a dam, a child
care center, a community hall, a town plaza, a road, the length or width or
materials in a path system, the relationship of roads, lots, sewer, and water—
in all of these and in every other seemingly little decision—we are making a
choice that by spending this money for this purpose it is not available for some
other purpose which will surely arise and for which we will thus not have the
funds.
This is the invigorating discipline of the market place. These are the mature
realities of measuring, evaluating, and choosing carefully as we proceed. The
choices are never as neat and comprehensible as we would like them to be,
because most of the time we cannot see the other alternatives. We must
simply know from experience that they exist and will assert themselves. The
only answer, therefore, is thoughtful, prudent measurement of every element
entering a design program; of every desire and choice; of every negotiation
with consultants and contractors; of every supervisory function. We cannot
be anesthetized against such diligence by the size of the project; the funds
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Memo To: WGR, WEF, RLA, WPH, WH,
MH, REH, JLI, DWW, REW
January 11, 1966
available to us, or the rush and pressures of the myriad of projects and the
daily decisions they generate. We must each find a way to approach every
element of the task with the care that we would exercise in designing and
building our own individual homes.
The quantity of decision making which lies ahead demands the development of
orderly, dependable processes and systems which all of us can understand and
follow. By having the decision making process clear and firm, we will not
suffocate our operation—but emancipate it. Approvals, authorizations, and
budgets, faithfully followed and fulfilled, will provide parameters within
which we can each proceed with full authority to carry out our individual
responsibilities.
It may seem to you, over the next few weeks, that we are "oversystematizing"
the Columbia operation. If this proves to be true, we will revise and simplify.
It will certainly be necessary to make many changes. But, it is vital to our
task that we establish forms, systems, procedures, and controls that are positive
and well understood. They will emanate largely from Bill Finley and will
derive to a considerable extent from the work of Len Ivins and others.
They will also come from Dick Anderson who carries a very special responsibility as budget director for Columbia. Dick will report through Bill Finley
and me to the HRD Board. It is his responsibility to see to it that the budgets
approved by the Board are carried out and that no expenditures are made which
are not within a budget approval. It is his responsibility to institute the reports
and controls necessary to this task. He is expected to examine the adequacy
of budget estimates, based on our growing experience, so that there is provision for appropriate contingencies, and develop adequate control and reporting
systems to assure that departures from budget are quickly identified and corrective measures instituted wherever possible. Where corrections are
impossible in individual budgets we will insist upon the elimination of other
items or the cutting of other budgets to make adjustments necessary for compliance
with the economic model. This is a heavy responsibility, and we will need your
sympathetic cooperation at every point of contact.
James W. Rouse