Managing the Dynamics of Projects

and Changes at Fluor

Cooper Associates

July 2009
Imagine an industry where

Primary differentiator between competitors is their history of project

outcomes
Highly educated individuals, fresh out of college or graduate school,
have no idea of what could be the most career-damaging event
Professionals through personal experience know the consequences
of certain events affecting project outcomes, but for decades had
no credible method to analyze (much less explain or foresee) such
events
Senior executive careers have been ended as a result of failing to
fully understand and grasp the consequences of these events
A major international corporation recognizes hundred of millions of
dollars in losses in large part from not understanding and acting in
time to mitigate those losses
That same corporation budgets an amount equal to an entire year’s
earnings to fund dispute resolution activities arising from these
same events

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A few words about Fluor

“Architect to Industry” ($20 billion revenue)

Highly centralized
Resistant to change
Business line specific cultures
Highly diversified
– Energy (production, refining, chemicals, power)
– Commercial (hotels, office buildings, concert halls, food products)
– Industrial (mining, pharm/bio, manufacturing, consumer goods)
– Infrastructure (airports, hospitals, highways, high speed & light rail, ports)
– Federal Government - DOD, DOE (nuclear fuel cycle), DOS

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Introduction

We have designed, built, tested, and implemented a model-based system to

aid project management at Fluor Corporation

Model is set up for and tailored to each engineering & construction project

Used to foresee future cost & schedule impacts of project changes & events,
and most important, test ways to avoid the impacts

Rapidly growing use of this “Change Impact Assessment” system--now been

used on well over 100 different Fluor projects

Hundreds of project managers and planners have been trained in the ongoing
internal use of the system

Cost savings for Fluor and its clients exceeds $1.3 billion

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The Rework Cycle

Work as a flow, executed by people working at a variable productivity, and

performing work that may need subsequent rework the need for which may
go undetected for some time.
Staff on
Project
Productivity

Progress
Work to be Work Really
Done Done

Known Undiscovered
Rework Rework
Rework
Discovery

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A story from one project, experienced by many

Have you seen any of these next conditions on a project ?

Staff on
Quality
Project
Productivity

Progress
Work Work
To Be Done Really Done

Known Undiscovered
Rework Rework
Rework
Discovery

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“The customer added (+) and changed (Δ) work
so much, we staffed up more.”

Staffing
Staff on Requested
Quality
Scheduled Project
Completion Productivity
Time
Hours Expended Expected
Progress to Date Hours at
Work Work
Expected To Be Done Really Done Completion
Completion
Time
Known Undiscovered
Rework Rework
Rework
Discovery
+&Δ
Perceived
Progress

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“We used lots of overtime and had to hire in tight
markets.”

Hiring

Turnover
Staff
Overtime
Staffing
Staff on Requested
Quality
Scheduled Project
Completion Productivity
Time
Hours Expended Expected
Progress to Date Hours at
Work Work
Expected To Be Done Really Done Completion
Completion
Time
Known Undiscovered
Rework Rework
Rework
Discovery
+&Δ
Perceived
Progress

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“Less skilled new hires also needed more
supervision.”

Hiring

Skills and
Experience Turnover
Staff
Overtime
Staffing
Staff on Requested
Quality
Scheduled Project
Completion Productivity
Time
Hours Expended Expected
Progress to Date Hours at
Work Work
Expected To Be Done Really Done Completion
Completion
Time
Known Undiscovered
Rework Rework
Rework
Discovery
+&Δ
Perceived
Progress

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“Rework caused more rework.”

Hiring

Skills and
Experience Turnover
Staff
Overtime
Staffing
Staff on Requested
Quality
Scheduled Project
Completion Productivity
Time Out-of-Sequence
Work Hours Expended Expected
Progress to Date Hours at
Work Work
Expected To Be Done Really Done Completion
Completion Vendor
Time Design
Progress
Known Undiscovered
Engineering Rework Rework
Rework
Errors Discovery
+&Δ
Perceived
Progress

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“Under pressure, morale suffered.”

Hiring

Skills and
Experience Turnover
Morale Staff
Overtime
Staffing
Schedule Staff on Requested
Quality
Scheduled Pressure Project
Completion Productivity
Time Out-of-Sequence
Work Hours Expended Expected
Progress to Date Hours at
Work Work
Expected To Be Done Really Done Completion
Completion Vendor
Time Design
Progress
Known Undiscovered
Engineering Rework Rework
Rework
Errors Discovery
+&Δ
Perceived
Progress

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 “Late and changing engineering hurt
construction.”

Hiring

Skills and
Experience Turnover
Morale Staff
Overtime
Staffing Construction
Schedule Quality Staff on Requested
Scheduled Pressure Project
Completion Productivity
Time Out-of-Sequence
A diagramed version of a story told by thousands of project
Hours Expended Hiring
Work to Date Expected
Progress Hours at
Work Work
Expected Completion Congestion
managers, a story of impacts on productivity, rework, and
To Be Done Really Done

Completion Vendor Skills and

Time Design Experience Turnover
Progress Morale Staff
the interacting conditions that drive those impacts.
Engineering
Errors
Known
Rework
Rework
Undiscovered
Rework
Late
& Changing
Overtime
Staffing
Discovery Engineering
Quality Staff on Requested
Scheduled Schedule Project
Perceived Completion Pressure Productivity

Engineering Progress Time

Progress
Hours Expended
to Date Expected
Work Work Hours at
Expected To Be Done Really Done Completion
Availability of
Completion Vendor
Time Materials
Known Undiscovered
Construction Rework Rework

Errors Rework
Discovery

Perceived
Progress

A show of hands
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Industry benchmarks, company data, project data, and
project market conditions are combined to provide a
customized model of each project

Standards + Customized Factors Seeking the best of both worlds

Model
Structure
Industry-
Standard
Factors

Surveyed Fluor Project-

Business Area and
Office-Specific Customized Specific
Factors Project Model Impact
Avoidance
Analysis
Project Teams’
Tailored Conditions
Project Plans
& Schedules

The Survey
45,000 years of experience in the
latest company world-wide survey
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 Successively higher levels of change cause higher staffing
with lower productivity, slower progress, and higher craft
labor costs

Higher Staffing Lower Productivity Slowed Progress

2,500 1.2 100 5,000
More changes, Engineering
lower productivity Progress

3.3M hours 1.0

2,000 80 With more 4,000
changes Slower
Slower Progress
Progress

2.5M hours
0.8
1,500 60 3,000
2.0M hours

costs
Higher costs
0.6
1.7M hours

Higher
1,000 40 2,000
1.6M hours 0.4

500 1.5M hours 20 Craft 1,000

0.2 Labor

0 0.0 0 0
0 6 12 18 24 30 36 0 6 12 18 24 30 36 0 6 12 18 24 30 36

Time Time Time

(months) (months) (months)

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More and later changes create not just more
impact, but disproportionately more impact

Later
changes
80% 80%
70% Engineering Impact 70% Craft Impact
60% (% of budget) 60% (% of budget)
50% 50%
40% 40%
30% 30%
20% 20%
10% 10%
0% 0%
0% 5% 10% 15% 20% 25% 0% 5% 10% 15% 20% 25%
Engineering Changes' Direct Impacts Engineering Changes' Direct Impacts
More changes

Secondary impacts of engineering changes permeate the entire project. The amount of
impact varies with the amount and timing of the changes. The modeling allows Fluor to
foresee future impacts and to quantify the impacts of engineering changes.

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Advance quantification and diagnosis show how
much, when, and why
CHANGES NOW FUTURE IMPACTS
Sequence Effect on Eng Productivity
1.0
300 0.9
0.8
Engineering 0.7
0.6
Labor 0.5
0 6 12 18 24 30 36 42
200 Time
Eq. heads

Rework Effect on Eng Productivity

1.0
0.9
0.8
0.7
100 0 6 12 18 24 30 36 42
Time
Experience Effect on Eng Productivity
1.0
0.9
0.8
0 0.7
0 6 12 18 24 30 36 42 0.6
0 6 12 18 24 30 36 42
Time Time
(months)
2 years!

The modeling effort allows Fluor to identify the timing of future impacts and diagnose the
causal components of the impacts.

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There are measureable tradeoffs between (a) costs and
(b) construction start and completion dates

25
Completion Date
+ 1 month + 2 months
20

15
Savings
($M)
10

Completion Date
5
as Planned

0
0 1 2 3 4 5 6 7
Construction Start Date
(Months later than base plan)

The modeling effort allows Fluor to examine scheduling options and their effect on cost
impacts.

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Project applications and benefits are growing
strongly

2005 First Uses

200 $1,800,000,000
A few pioneering projects
Applications
180 $1,600,000,000
Savings
Management funds first training
160
$1,400,000,000

Clients: No exposure 140

Project Applications
$1,200,000,000

Cost Savings
120
$1,000,000,000
100
$800,000,000
80
$600,000,000
60

$400,000,000
40

20 $200,000,000

0 0
2004 2005 2006 2007 2008 2009
Savings

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 Project applications and benefits are growing
strongly

2006 Increasing Acceptance

200 $1,800,000,000
Global productivity survey
Applications
180 $1,600,000,000
Savings
Increased use to quantify many
160
change impacts $1,400,000,000

140

Project Applications
$1,200,000,000
Management funds all project

Cost Savings
120
applications, mandates use on $1,000,000,000
‘risk’ projects 100
$800,000,000
80
Clients: initial exposures with
$600,000,000
positive responses 60

$400,000,000
40

20 $200,000,000

0 0
2004 2005 2006 2007 2008 2009
Savings

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Project applications and benefits are growing
strongly

2007 Upswing in demand, positive response

200 $1,800,000,000
Projects routinely use at the
Applications
start of Engineering to assess 180 $1,600,000,000
Savings
pre-emptive actions
160
$1,400,000,000

Management: widespread 140

Project Applications
$1,200,000,000
commitment

Cost Savings
120
$1,000,000,000
Clients: more are briefed on 100
selected projects $800,000,000
80

$600,000,000
60

$400,000,000
40

20 $200,000,000

0 0
2004 2005 2006 2007 2008 2009
Savings

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 Project applications and benefits are growing
strongly

2008 Institutionalized Use

200 $1,800,000,000
Used to pre-plan projects,
Applications
advance cost mitigation 180 $1,600,000,000
Savings
160
Training required for all Project $1,400,000,000

Managers 140

Project Applications
$1,200,000,000

Cost Savings
120
Management: accepted as $1,000,000,000
valuable, even as sales 100
advantage $800,000,000
80

$600,000,000
Clients: global executives 60
briefed, strong response $400,000,000
40

20 $200,000,000

0 0
2004 2005 2006 2007 2008 2009
Savings

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Project applications and benefits are growing
strongly

2009 A competitive differentiator

200 $1,800,000,000
New global productivity survey
Applications
180 $1,600,000,000
Savings
Industry awareness – ECRI, CII
160
$1,400,000,000

Many clients view Change 140

Project Applications
$1,200,000,000
Impact Assessment as a

Cost Savings
120
distinctive value-added benefit $1,000,000,000
100
Nothing short of a paradigm $800,000,000
80
shift in project management
$600,000,000
thinking 60

$400,000,000
40

20 $200,000,000

0 0
2004 2005 2006 2007 2008 2009
Savings

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