FLUOR

 

Name Managing the Dynamics of Projects and Changes at Fluor
Modelers Kenneth Cooper, Gregory Lee
Discussion Please join the discussion here.
Client/Participant FLUOR
Client Type Corporation
The Official Website For added information, or with any questions, see CooperSDNetwork.com, or contact Ken via email: Ken.Cooper@CooperSD.com

 

The Issue You Tackled Fluor is one of the world’s largest engineering and construction firms, with 2008 revenues over $20 billion. The US-based firm operates in every major business sector and geography. A large part of Fluor’s work is organized in the form of projects, which are typically market-driven with aggressive cost and schedule targets and evolving client needs. It is the tension among these different objectives that is often the underlying dynamic for generating changes on projects. In an initiative by Fluor’s Chairman, a comprehensive quantitative review examined all Fluor projects over several years. For many in the industry, there is a misperception that contractors improve their performance with more changes. This company-wide review was unequivocal in refuting that notion. There is a clear, unambiguous relation between the level of changes and the cost and schedule performance of projects: more changes bring ever-worsening performance on projects.

Formal disputes between contractor and customer pervade the large global civil construction industry. At the core of many such disputes is who is responsible for how much of a project cost overrun. By far the most difficult and contentious aspect of such a dispute is the cost of the “secondary impacts” of design and scope changes. This goes by many names…knock-on impact, delay & disruption, cumulative impact, productivity loss… Whatever the label, the impacts are typically misunderstood, unforeseen, under-estimated, and usually mismanaged. Fluor undertook a major initiative to change the way it dealt with project changes, to mitigate their impacts proactively, and thus avoid large disputes.

What You Actually Did

After Fluor had identified and quantified the business need for improving the practice of project change management, two external consultants first built and piloted and validated a project model to assess change impacts on several initial projects. In the four years since then, the model has been used in the “Change Impact Assessment” system to conduct thousands of analyses on over 100 client projects. Fluor projects analyzed with this model range in size from less than $10 million to more than $10 billion. The system rapidly tailors a model to simulate each engineering and construction project. Each model is then used to foresee future cost and schedule impacts of project changes, and most important, test ways to avoid the impacts.

We developed a project model based on our prior modeling work with Fluor, and built a system around it, with defined practices to rapidly and automatically tailor the model to a specific project. We set up an interface to allow dozens of trained company users to test proactively project-wide impacts of proposed design or scope changes. We conducted worldwide training of executives and managers and analysts, ensuring the focus was on foreseeing and mitigating future change impacts. The system was applied to hundreds of Fluor projects.

The Results

A cultural change occurred in the company, focused on proactive mitigating efforts that reduce change impacts on the projects.As a result, many disputes were avoided (some had cost tens of millions of dollars), and cost impacts were reduced by proactive actions identified in the analyses, amounting to over $1.3 billion savings to Fluor and their clients.

 

Related Publications Managing the Dynamics of Projects and Changes at Fluor Download
Related Publications Managing the Dynamics of Projects and Changes at Fluor (slides) Download

 

Did You Know?

System Dynamics Application Award

The System Dynamics Applications Award is presented by the Society every other year for the best “real world” application of System Dynamics. In 2009, the Society awarded its Applications Award to Kenneth Cooper and Gregory Lee for their work Managing the Dynamics of Projects and Changes at Fluor. To see the slides that they used at the conference follow this link.To see the citation that was made by Kim Warren at the conference, please follow this link. (Jul 2009)

2011 INFORMS Edelman Prize Finalist

On March 21nd of 2011, the Institute for Operations Research and the Management Sciences (INFORMS®) announced six finalists that will compete for the 2011 Franz Edelman Award for Achievement in Operations Research and the Management Sciences in Chicago. Fluor Corporation was among those finalist for Project Management and Change – A Simulation Based System for Better Performance. You can watch their presentation in this event here.

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