Fluor Change Impact Assessment Analyzing Project Changes and by kpy54980

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									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

Cooper Associates
                                                                           1
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



Cooper Associates
                                                                                   2
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


Cooper Associates
                                                                                3
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


Cooper Associates
                                                                             4
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




Cooper Associates
                                                                           5
“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


Cooper Associates
                                                                                                6
“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


Cooper Associates
                                                                                                 7
“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


Cooper Associates
                                                                                                           8
“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


Cooper Associates
                                                                                                                  9
“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


Cooper Associates
                                                                                                                     10
         “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                                                  Hours Expended
                    Work
                             A diagramed version of a story told by thousands of project
                                             Work
                                                        Progress
                                                                              Work
                                                                                       to Date  Expected
                                                                                                Hours at
                                                                                                                                                                             Hiring

  Expected                                To Be Done                       Really Done         Completion                                            Congestion
 Completion
    Time
               Vendor
               Design        managers, a story of impacts on productivity, rework, and                               Morale
                                                                                                                                    Skills and
                                                                                                                                    Experience                          Staff
                                                                                                                                                                                                Turnover
              Progress
                             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
                                                       Progress                                        Time
   Engineering                                                                                                                                                 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
         Cooper Associates
                                                                                                                                                                                                             11
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
Cooper Associates
                                                                             12
            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 Progress
                                                                                                                                    Slower Progress

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




                                                                                                                                             Higher costs
                                                                                                                                             Higher costs
                                                          0.6
                                1.7M hours
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)




            Cooper Associates
                                                                                                                                                                      13
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.

Cooper Associates
                                                                                               14
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.

Cooper Associates
                                                                                                               15
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.

Cooper Associates
                                                                                          16
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


 Cooper Associates
                                                                                                                                17
 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


 Cooper Associates
                                                                                                                                18
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


 Cooper Associates
                                                                                                                               19
 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


 Cooper Associates
                                                                                                                                  20
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


 Cooper Associates
                                                                                                                                21

								
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