Measuring Performance in a Commercial Enterprise Ken Smith Senior Vice President September 12, 2006.
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Transcript of Measuring Performance in a Commercial Enterprise Ken Smith Senior Vice President September 12, 2006.
Fluor Corporation’s Legacy
Founded more than 100 years ago
Executed more than 10,000 projects worldwide
Consistently ranked among the “Top 3” on ENR magazine’s “Design-Build Firms” and “The Top 400 Contractors” lists
One of the world’s safest contractors
Maintains a global presence:
Fluor is one of the world’s largest, publicly owned engineering, procurement, construction, and maintenance companies.
- Asia, 55 years- Africa, 41 years- Australia, 37 years- Europe, 59 years- Middle East, 59 years- South America, 61 years
Corporate Headquarters – Irvine, Texas
Worldwide Projects
Petrochemicals
Downstream
Government
Fernald Environmental
Restoration
Phillips S ZorbTexas EQUATE Project
Kuwait City, Kuwait
KodakXiamen, China
Chemicals
Copper SmelterQueensland, Australia
Mining
Infrastructure
LondonUnderground Ltd.
Government
Hanford Management Contract
Business Group Common Functions
Safety performance and Zero IncidentsSM culture Operating System Requirements
– Drives commonality across all operations globally
Project management Engineering Financial metrics and performance measurement Human Resources
– Global management focus Centralized corporate approach:
– Strategic planning– Business Risk Management Framework (BRMF)– Legal– Finance / cash management / SEC reporting– Public relations / government relations– Security / IR / ESH– Board of Directors / stakeholders
Safety Performance
Operating in 60 countries worldwide; 40,000-employee diverse workforce (with language, educational and cultural differences)
Managing and monitoring 270 million of safe work hours in 2005
Best in class performance– Management commitment to annual performance improvement
Fluor’s culture drives – Focus on precursors to prevent significant injuries/incidents– Continuous improvement– Rigorous reporting– Incident investigation and lessons learned
Senior management expectations are Zero Incidents and safety excellence
Commercial Background
25 years in the EPCM industry
Experience includes three EPCM firms’ cultures to draw upon
Understand the unique differences in Commercial vs. Government client organizations
Recent 3-year President of Fluor’s Manufacturing & Life Sciences group
Commercial Industry differentiators– Commercial industry specialization & market niches – Global sales & execution platform– Flexible procurement requirements– Variety of commercial / contract structures– Individual / flexible client drivers – Business unit autonomy & internal decision making– Flexible Industrial Relations / partnerships with Labor
Personal Operating Philosophy
Focus on safety
Clear roles, responsibility, authority and accountability
Customers want to know three things:– How smart?– How much?– How long?
We owe our client to be the lowest cost producer for a given scope
Cradle-to-Grave project execution– Comprehensive risk management– Baseline Centric approach
Human capital management
Financial performance
“Bringing certainty to Technology Application,
Cost and Schedule”
“Bringing certainty to Technology Application,
Cost and Schedule”
Baseline CentricSM Approach
COST MODEL
• Basis of Estimate• Clarifications• Allowances• FOCUSSM
• CDR
PURCHASING• Scope Reviews• Buy Sheet Tracking• Bid Pkg. Cost Distribution
SCHEDULING• Quantities• Craft• Equipment / Material
COST CONTROL
• Changes• ROM Estimates
GENERAL CONDITIONS
• Staffing• Reimbursables
BASELINE
Baseline Centric Tools
Function– FOCUSsm process– Business Risk Management Framework
Cost– Detail quantity-based control estimates– Prologtm and MaterialManagersm for procurement– FDCost and ProfiToolsm for cost control– FDAS / SAP for accounting– Cost Summary Report for financial performance
Schedule– Primaveratm
– EZTrak– MileMarker
Baseline Centric Deliverables
Establish “A line in the sand early”
Accurate estimate– Detailed quantity takeoffs– Qualifications and clarifications– Allowances and exclusions
FOCUSsm sessions
Constructability reviews / alternative solutions
Value engineering
Manpower scheduling
Business Risk Management Framework
Snapshots during conceptual engineering; change management during detail design
Baseline Centric Flowchart
• Base• Approved Change Orders• Proper Format• Lien Releases
CONTRACTOR, VENDOR &
SUPPLIER INVOICES
PROJECT MANAGEMENT /
CONTROLS
• Confirm Payment From Client • Final Quality Check • Resolve Conflict• Release Payments
• Check Lien Waiver• Check Bonding / Insurance Validity• Check For Signed Contract
& Changes• Check For Proper Authorization• Check For Proper Amounts
- Contract - C.O.’s - Retention
• Check For Payment From Client • Approve For Check Selection
ACCOUNTSPAYABLE
FINANCIAL
• Check For Correct Format• Check % Base Complete • Check % Change Complete • No Sub Tier Claims• Approve For Processing • Disapprove (3 Day Cycle)
Safety– Monitor traditional safety trends– Application of Fluor’s safety alert system– Client feedback
Client satisfaction– Percentage of repeat business– Extensive client review process
Cradle-to-Grave project execution– Earned value management system– Independent project management review teams
Human capital– Turnover / retention
Financial performance– Margins: as sold vs. actual performance– Publicly traded company – stock price
Performance Measurement Approaches
Closing Thoughts
Challenge to provide commercial practices in the Government sector
Project execution success is driven by upfront planning and establishing an accurate Baseline
Managing people – We cannot lose sight of protecting the safety of our individual employees
If we take care of clients, execute projects effectively, protect our employees, then we’ll
achieve financial success
If we take care of clients, execute projects effectively, protect our employees, then we’ll
achieve financial success