Project management at Fluor

FLUOR

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.

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.

Publications

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)