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(Arthur Andersen letterhead) Mr. Thomas Smith Procurement Manager Public Service Electric and Gas Company 80 Park Plaza Newark, NJ 07102 Dear Mr. Smith: This letter and the accompanying reference material constitutes our response to your January 18, 1996 request for information; ABC/ABM resources. We understand you are accelerating your ABM efforts in response to the more competitive environment facing PSEG. Accordingly, you have determined that ABC/ABM resources will be needed over an estimated two year period. Specifically, we understand you require and have requested the following resources and expertise: Leadership resources to guide, direct, and challenge PSEG to ensure the best in class capability. Project managers to lead individual diagnostics for specific areas of the organization. Project support to assist PSEG project leaders in engagements throughout the organization. Knowledge transfer including training materials, experienced trainers and facilitators. We understand the status of your ABM initiatives to be as follows: You have initiated several ABM pilot programs in different areas of the business, the first of which was the customer operations business unit. Each of these pilot efforts were aligned to processes defined by the Corporate Process Improvement Team in late 1993. Primary ABM applications have been product costing, budgeting, and cost estimation. Secondary applications have been process improvement, profitability analysis, performance measurement, cost reduction, reengineering, and project management. As a sponsor of the ABM Best Practice Study you are familiar with the use and application of ABM systems. The remainder of this letter represents a brief overview of the ABC/ABM resources Arthur Andersen can provide to PSEG to assist and effectively complete the initiatives you currently have in place. Leadership Level This is the most important resource we bring to the table. Senior managers must be satisfied that the consulta