Measuring Performance in a
Commercial Enterprise
Ken Smith
Senior Vice President
September 12, 2006
Fluor Corporation’s Legacy
Fluor is one of the world’s largest, publicly owned engineering,
procurement, construction, and maintenance companies.
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Founded more than 100 years ago
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Executed more than 10,000 projects worldwide
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Consistently ranked among the
“Top 3” on ENR magazine’s
“Design-Build Firms” and “The Top
400 Contractors” lists
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One of the world’s safest contractors
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Maintains a global presence:
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Asia, 55 years
Africa, 41 years
Australia, 37 years
Europe, 59 years
Middle East, 59 years
South America, 61 years
Corporate Headquarters – Irvine, Texas
Fluor Industries and Clients
Worldwide Projects
Infrastructure
Government
Chemicals
Government
London
Underground Ltd.
Hanford Management
Contract
Kodak
Fernald
Environmental
Restoration
Xiamen, China
Downstream
Petrochemicals
Phillips S Zorb
Texas
Mining
EQUATE Project
Kuwait City, Kuwait
Copper Smelter
Queensland, Australia
Business Group Common Functions
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Safety performance and Zero IncidentsSM culture
Operating System Requirements
– Drives commonality across all operations globally
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Project management
Engineering
Financial metrics and performance measurement
Human Resources
– Global management focus
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Centralized corporate approach:
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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
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Operating in 60 countries worldwide; 40,000-employee diverse
workforce (with language, educational and cultural differences)
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Managing and monitoring 270 million of safe work hours in 2005
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Best in class performance
– Management commitment to annual performance improvement
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Fluor’s culture drives
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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
Safety – Lost Workday Case Rate
Safety – Recordable Incident Rate
Commercial Background
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25 years in the EPCM industry
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Experience includes three EPCM firms’ cultures to draw upon
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Understand the unique differences in Commercial vs. Government
client organizations
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Recent 3-year President of Fluor’s Manufacturing & Life Sciences
group
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Commercial Industry differentiators
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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
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Focus on safety
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Clear roles, responsibility, authority and accountability
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Customers want to know three things:
– How smart?
– How much?
– How long?
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We owe our client to be the lowest cost producer for a given scope
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Cradle-to-Grave project execution
– Comprehensive risk management
– Baseline Centric approach
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Human capital management
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Financial performance
“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
BASELINE
• Quantities
• Craft
• Equipment / Material
COST CONTROL
• Changes
• ROM Estimates
GENERAL CONDITIONS
• Staffing
• Reimbursables
Baseline Centric Tools
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Function
– FOCUSsm process
– Business Risk Management Framework
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Cost
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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”
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Accurate estimate
– Detailed quantity takeoffs
– Qualifications and clarifications
– Allowances and exclusions
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FOCUSsm sessions
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Constructability reviews / alternative solutions
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Value engineering
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Manpower scheduling
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Business Risk Management Framework
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Snapshots during conceptual engineering; change management
during detail design
Baseline Centric Flowchart
PROJECT
MANAGEMENT /
CONTROLS
CONTRACTOR,
VENDOR &
SUPPLIER INVOICES
• Base
• Approved Change Orders
• Proper Format
• Lien Releases
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Check For Correct Format
Check % Base Complete
Check % Change Complete
No Sub Tier Claims
Approve For Processing
Disapprove (3 Day Cycle)
ACCOUNTS
PAYABLE
• Check Lien Waiver
• Check Bonding / Insurance Validity
• Check For Signed Contract
& Changes
• Check For Proper Authorization
• Check For Proper Amounts
- Contract
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- C.O.’s
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- Retention
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• Check For Payment From Client
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• Approve For Check Selection
FINANCIAL
Confirm Payment From Client
Final Quality Check
Resolve Conflict
Release Payments
Performance Measurement Approaches
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Safety
– Monitor traditional safety trends
– Application of Fluor’s safety alert system
– Client feedback
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Client satisfaction
– Percentage of repeat business
– Extensive client review process
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Cradle-to-Grave project execution
– Earned value management system
– Independent project management review teams
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Human capital
– Turnover / retention
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Financial performance
– Margins: as sold vs. actual performance
– Publicly traded company – stock price
Closing Thoughts
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Challenge to provide commercial practices in the
Government sector
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Project execution success is driven by upfront planning
and establishing an accurate Baseline
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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