managing the dynamics of projects and changes at fluormanaging the dynamics of projects and changes...
TRANSCRIPT
Cooper Associates
Managing the Dynamics of Projects and Changes at Fluor
July 2009
1Cooper Associates
Imagine an industry where…
Primary differentiator between competitors is their history of project outcomesHighly educated individuals, fresh out of college or graduate school, have no idea of what could be the most career-damaging eventProfessionals 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 eventsA major international corporation recognizes hundred of millions of dollars in losses in large part from not understanding and acting in time to mitigate those lossesThat same corporation budgets an amount equal to an entire year’s earnings to fund dispute resolution activities arising from these same events
2Cooper Associates
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
3Cooper Associates
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
4Cooper Associates
The Rework Cycle…
Productivity
Progress
Rework Discovery
Known Rework
Work Really Done
Work to be Done
Undiscovered Rework
Staff on Project
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.
5Cooper Associates
Quality
Productivity
Progress
UndiscoveredRework
KnownRework
WorkReally Done
WorkTo Be Done
ReworkDiscovery
Staff onProject
Have you seen any of these next conditions on a project…?
A story from one project, experienced by many…
6Cooper Associates
Staff onProjectQuality
Productivity
Progress
UndiscoveredRework
KnownRework
WorkReally Done
WorkTo Be Done
ReworkDiscovery
ScheduledCompletion
Time
ExpectedCompletion
Time
StaffingRequested
ExpectedHours at
Completion
Hours Expendedto Date
PerceivedProgress
+ & Δ
“The customer added (+) and changed (Δ) work so much, we staffed up more.”
7Cooper Associates
“We used lots of overtime and had to hire in tight markets.”
ScheduledCompletion
Time
ExpectedCompletion
Time
Staff onProject
StaffingRequested
ExpectedHours at
Completion
Hours Expendedto Date
Quality
Productivity
Progress
UndiscoveredRework
KnownRework
WorkReally Done
WorkTo Be Done
ReworkDiscovery
Overtime
Hiring
TurnoverStaff
+ & ΔPerceivedProgress
8Cooper Associates
“Less skilled new hires also needed more supervision.”
ScheduledCompletion
Time
ExpectedCompletion
Time
Overtime
Hiring
Turnover
Staff onProject
StaffingRequested
ExpectedHours at
Completion
Hours Expendedto Date
Quality
Productivity
Progress
Staff
UndiscoveredRework
KnownRework
WorkReally Done
WorkTo Be Done
ReworkDiscovery
+ & Δ
Skills andExperience
PerceivedProgress
9Cooper Associates
“Rework caused more rework.”
ScheduledCompletion
Time
ExpectedCompletion
Time
Skills andExperience
Overtime
Hiring
Turnover
Staff onProject
StaffingRequested
ExpectedHours at
Completion
Hours Expendedto Date
Quality
Productivity
Progress
Staff
UndiscoveredRework
KnownRework
WorkReally Done
WorkTo Be Done
ReworkDiscovery
+ & ΔPerceivedProgress
Out-of-SequenceWork
Vendor Design
ProgressEngineering
Errors
10Cooper Associates
“Under pressure, morale suffered.”
ScheduledCompletion
Time
ExpectedCompletion
Time
Morale
SchedulePressure
Out-of-SequenceWork
Overtime
Hiring
Turnover
Staff onProject
StaffingRequested
ExpectedHours at
Completion
Hours Expendedto Date
Vendor Design
ProgressEngineering
Errors
Quality
Productivity
Progress
Staff
UndiscoveredRework
KnownRework
WorkReally Done
WorkTo Be Done
ReworkDiscovery
+ & Δ
Skills andExperience
PerceivedProgress
11Cooper Associates
Engineering
ConstructionMorale
ScheduledCompletion
Time
ExpectedCompletion
Time
SchedulePressure
Out-of-SequenceWork
Skills andExperience
Overtime
Hiring
Turnover
Staff onProject
StaffingRequested
ExpectedHours at
Completion
Hours Expendedto Date
Vendor Design
ProgressEngineering
Errors
PerceivedProgress
Quality
Productivity
Progress
Staff
WorkTo Be Done
WorkReally Done
UndiscoveredRework
KnownRework
ReworkDiscovery
Morale
ScheduledCompletion
Time
ExpectedCompletion
Time
SchedulePressure
Skills andExperience
Congestion
Overtime
Hiring
Turnover
Staff onProject
StaffingRequested
ExpectedHours at
Completion
Hours Expendedto Date
Availability of Vendor
MaterialsConstruction
Errors
PerceivedProgress
Quality
Productivity
Progress
Staff
WorkTo Be Done
WorkReally Done
UndiscoveredRework
KnownRework
ReworkDiscovery
Late & Changing Engineering
“Late and changing engineering hurt construction.”
A diagramed version of a story told by thousands of project managers, a story of impacts on productivity, rework, and the interacting conditions that drive those impacts.
A show of hands
12Cooper Associates
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
The Survey…45,000 years of experience in the
latest company world-wide survey
Surveyed Fluor Business Area and
Office-Specific Factors
Industry- Standard Factors
Project Teams’ Tailored Conditions
Project Plans & Schedules
Model Structure
Customized Project Model
Project- Specific Impact Avoidance Analysis
13Cooper Associates
Successively higher levels of change cause higher staffing with lower productivity, slower progress, and higher craft labor costs…
Higher Staffing
0 6 12 18 24 30 36
Time (months)
0
500
1,000
1,500
2,000
2,500
2.5M hours
2.0M hours
1.7M hours
1.6M hours
1.5M hours
3.3M hours
Slower Progress
Craft Labor
Hig
her c
osts
Time (months)
Slower ProgressSlower Progress
Hig
her c
osts
Hig
her c
osts
100
0
20
40
60
80
0 6 12 18 24 30 36
Engineering Progress
Slower Progress
Hig
her c
osts
0
1,000
2,000
3,000
4,000
5,000
Slowed Progress
With more changes…
Lower Productivity
Time (months)
0.0
0.2
0.4
0.6
0.8
1.0
1.2
0 6 12 18 24 30 36
More changes, lower productivity
14Cooper Associates
More and later changes create not just more impact, but disproportionately more impact…
0%
10%
20%
30%
40%
50%
60%
70%
80%
0% 5% 10% 15% 20% 25%Engineering Changes' Direct Impacts
0%
10%
20%
30%
40%
50%
60%
70%
80%
0% 5% 10% 15% 20% 25%Engineering Changes' Direct Impacts
Later changes
More changes
Engineering Impact (% of budget)
Craft Impact(% of budget)
0%
10%
20%
30%
40%
50%
60%
70%
80%
0%
10%
20%
30%
40%
50%
60%
70%
80%
0% 5% 10% 15% 20% 25%Engineering Changes' Direct Impacts
0% 5% 10% 15% 20% 25%Engineering Changes' Direct Impacts
0%
10%
20%
30%
40%
50%
60%
70%
80%
0%
10%
20%
30%
40%
50%
60%
70%
80%
0% 5% 10% 15% 20% 25%Engineering Changes' Direct Impacts
0% 5% 10% 15% 20% 25%Engineering Changes' Direct Impacts
Later changes
Later changes
More changes More changes
Engineering Impact (% of budget)
Craft Impact(% of budget)
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.
15Cooper Associates
Advance quantification and diagnosis show how much, when, and why…
The modeling effort allows Fluor to identify the timing of future impacts and diagnose the causal components of the impacts.
FUTURE IMPACTSCHANGES NOW
2 years!
0.50.60.70.80.91.0
0.70.80.91.0
0 6 12 18 24 30 36 42
0 6 12 18 24 30 36 42
0 6 12 18 24 30 36 42Time
Time
Time
0.60.70.80.91.0
Sequence Effect on Eng Productivity
Rework Effect on Eng Productivity
Experience Effect on Eng Productivity
0 6 12 18 24 30 36 42Time
(months)
0
100
200
300
Eq. h
eads
Engineering Labor
FUTURE IMPACTSCHANGES NOW
2 years!
0.50.60.70.80.91.0
0.50.60.70.80.91.0
0.70.80.91.0
0.70.80.91.0
0 6 12 18 24 30 36 42
0 6 12 18 24 30 36 42
0 6 12 18 24 30 36 42Time
Time
Time
0.60.70.80.91.0
0.60.70.80.91.0
Sequence Effect on Eng Productivity
Rework Effect on Eng Productivity
Experience Effect on Eng Productivity
0 6 12 18 24 30 36 42Time
(months)
0 6 12 18 24 30 36 420 6 12 18 24 30 36 42Time
(months)
0
100
200
300
0
100
200
300
Eq. h
eads
Engineering Labor
16Cooper Associates
There are measureable tradeoffs between (a) costs and (b) construction start and completion dates…
The modeling effort allows Fluor to examine scheduling options and their effect on cost impacts.
Savings ($M)
0
5
10
15
20
25
0 1 2 3 4 5 6 7
Construction Start Date(Months later than base plan)
Completion Date+ 1 month + 2 monthsCompletion Date+ 1 month + 2 months
Completion Date as Planned
17Cooper Associates
Project applications and benefits are growing strongly
2005… First Uses
A few pioneering projects
Management funds first training
Clients: No exposure
Cost Savings
0
$200,000,000
$400,000,000
$600,000,000
$800,000,000
$1,000,000,000
$1,200,000,000
$1,400,000,000
$1,600,000,000
$1,800,000,000
0
20
40
60
80
100
120
140
160
180
200
Savings2005 2006 2007 2008 20092004
Proj
ect A
pplic
atio
ns
ApplicationsSavings
18Cooper Associates
Project applications and benefits are growing strongly
2006… Increasing Acceptance…Global productivity survey
Increased use to quantify many change impacts
Management funds all project applications, mandates use on ‘risk’ projects
Clients: initial exposures with positive responses
Savings2005 2006 2007 2008 20092004
Proj
ect A
pplic
atio
ns
ApplicationsSavings
Cost Savings
0
$200,000,000
$400,000,000
$600,000,000
$800,000,000
$1,000,000,000
$1,200,000,000
$1,400,000,000
$1,600,000,000
$1,800,000,000
0
20
40
60
80
100
120
140
160
180
200
19Cooper Associates
Project applications and benefits are growing strongly
2007… Upswing in demand, positive response…Projects routinely use at the start of Engineering to assess pre-emptive actions
Management: widespread commitment
Clients: more are briefed on selected projects
Savings2005 2006 2007 2008 20092004
Proj
ect A
pplic
atio
ns Cost Savings
0
$200,000,000
$400,000,000
$600,000,000
$800,000,000
$1,000,000,000
$1,200,000,000
$1,400,000,000
$1,600,000,000
$1,800,000,000
0
20
40
60
80
100
120
140
160
180
200
ApplicationsSavings
20Cooper Associates
Project applications and benefits are growing strongly
2008… Institutionalized Use…
Used to pre-plan projects, advance cost mitigation
Training required for all Project Managers
Management: accepted as valuable, even as sales advantage
Clients: global executives briefed, strong response
Savings2005 2006 2007 2008 20092004
Proj
ect A
pplic
atio
ns Cost Savings
0
$200,000,000
$400,000,000
$600,000,000
$800,000,000
$1,000,000,000
$1,200,000,000
$1,400,000,000
$1,600,000,000
$1,800,000,000
0
20
40
60
80
100
120
140
160
180
200
ApplicationsSavings
21Cooper Associates
Project applications and benefits are growing strongly
2009…A competitive differentiator
New global productivity survey
Industry awareness – ECRI, CII
Many clients view Change Impact Assessment as a distinctive value-added benefit
Nothing short of a paradigm shift in project management thinking
ApplicationsSavings
Savings2005 2006 2007 2008 20092004
Proj
ect A
pplic
atio
ns Cost Savings
0
$200,000,000
$400,000,000
$600,000,000
$800,000,000
$1,000,000,000
$1,200,000,000
$1,400,000,000
$1,600,000,000
$1,800,000,000
0
20
40
60
80
100
120
140
160
180
200