Aacei Houston Jan 2008

Presentation to: AACEI Houston Gulf Coast Section

Oil and Gas Benchmarking Construction Industry Institute (CII) The University of Texas at Austin January 15, 2008 Stephen P. Mulva, Ph.D.

Outline  CII

and its Benchmarking Program  CII Benchmarking Database  Uses for Benchmarking  Metrics  Downstream Oil and Gas  Productivity  Analysis and Reporting  Questions

Construction Industry Institute A consortium of leading owners, contractors, suppliers, and academia working to improve the constructed project and the capital facility delivery process.

CII Mission

CII Strategic Plan January 2005

Add value for members by enhancing the business effectiveness and sustainability of the capital facility life cycle through CII research, related initiatives, and industry alliances. Expand the global competitive advantage realized through active involvement and effective use of research findings, including CII Best Practices.

Owner Members 3M Abbott The AES Corporation Air Products and Chemicals Alcoa Amgen Anheuser-Busch Aramco Services BHP Billiton Biogen Idec BP America Cargill Chevron CITGO Petroleum Codelco-Chile ConocoPhillips Dow Chemical DuPont

Eastman Chemical Eli Lilly and Company ExxonMobil General Motors GlaxoSmithKline Intel International Paper Kaiser Permanente Kraft Foods Marathon Oil NASA NAVFAC NOVA Chemicals Ontario Power Generation Petrobras Praxair Procter & Gamble Progress Energy

Rohm and Haas Sasol Technology Shell Smithsonian Institution Solutia Southern Company Sunoco TVA U.S. Architect of the Capitol U.S. Army Corps of Engrs. NIST U.S. Dept. of Energy U.S. Dept. of Health & Human Services U.S. Dept. of State U.S. General Svcs. Admin. U.S. Steel Weyerhaeuer

Owner Members 10 Years

Budget Factor

96% 94%

1.1%

92% 90% 88% 0

5

10

15

20

Years of CII Membership (3 Year Moving Average) Budget Factor 

Actual Total Project Cost Initial Predicted Project Cost  Approved Change Order

25

Owner Members 10 Years

Schedule Factor

115% 110% 105%

7.0%

100% 95% 90% 0

5

10

15

20

Years of CII Membership (3 Year Moving Average) Schedule Factor 

Actual Total Project Duration Initial Predicted Project Duration  Approved Changes

25

Contractor Members ABB Lummus Global Adolfson & Peterson Constr. Aker Kvaerner Alstom Power AMEC Atkins Faithful & Gould Autodesk AZCO Baker Concrete Construction BE&K Bechtel Group Black & Veatch Bowen Engineering Burns & McDonnell CB&I CCC Group CDI Engineering Solutions CH2M HILL CSA Group Day & Zimmermann

Dick Corporation Dresser-Rand Emerson Process Mgmt. Fluor Foster Wheeler USA Fru-Con Construction Grinaker-LTA GS Engrg. & Construction Hargrove and Associates Harper Industries Hatch Hill International Hilti Hyundai Engrg. & Constr. J. Ray McDermott Jacobs JMJ Associates KBR Kiewit Construction Group M. A. Mortenson

Mustang Engineering Nielsen-Wurster Group Parsons Pathfinder Perot Systems Primavera Systems R. J. Mycka S&B Engrs. & Constructors Shaw Group Siemens Power Generation Skire SNC-Lavalin Technip URS Corporation Victaulic Walbridge Aldinger WorleyParsons Yates Construction Zachry Construction Zurich

Contractor Members 105%

Budget Factor

10 Years

100% 3.9%

95%

90% 0

5

10

15

Years of CII Membership

20

(3 Year Moving Average)

25

Contractor Members 10 Years

Schedule Factor

110% 105%

5.3%

100% 95% 90% 0

5

10

15

20

Years of CII Membership (3 Year Moving Average)

25

Point of Departure 

Five Elements of Project Success     



Work and Work Process Organizational Engineering Leadership and Governance Communication and Information Flow Culture and Environment (Macro, Micro)

Lack Material, Information, Equipment, Labor? 

Results in Poor Productivity (Metrics) • Results in Poor Project Performance (Metrics)



Need for Reliable Metrics

CII Benchmarking & Metrics Overview “CII Benchmarking is a user

friendly, resource efficient, statistically credible benchmarking system that provides quantitative data essential for the support of cost/benefit analyses. ...”

Industry Leaders Choose CII Benchmarking Because it Leads to Success

Enhance Business Effectiveness  

 



22% Schedule Reduction 16% Cost Savings

Measure

Continuous Improvement

PlanandEduction

Continuously Improve

What Gets Measured Gets Improved: Benchmark with CII and Get Results

Benchmarking



rt Sta

Implement BP



Highlight Problems and Root Causes Establish Improvement Goals Implement CII Best Practices (BP) Realize Up to:

CII Benchmarking & Metrics Primer 

1,600 Projects Entered Since 1996  Confidential  Inexpensive  



Free with CII Membership No Consultants Required (Self Evaluation)

Compelling Metrics 

 

Unique Measures of Best Practices & Productivity for Engineering and Construction Not a „Black Box‟ – Easy to Comprehend External Performance Benchmarks of Cost, Schedule, Safety, Change, and Rework

CII Benchmarking Products  

Enable „Best in Class‟ Performance Identify Industry Trends and Drivers 24/7 Internet Data Entry

Project ‘Key’ Reports

Industry Reports

BM&M Committee Gibson, Jim (Co-Chair) – Alstom Power Helland, Harold (Co-Chair) – Abbott Allmen, Carol - General Motors Caggiano, John – U.S. Corps of Engineers Chapman, Bob – NIST Curbello, Chris – CB&I Davis, Shari – Mustang Engineering Dove, Ralph – CH2M HILL Gokey, Mark – Bechtel Gordon, Scott – Shell Oil Company Green, Charlie – Aramco Services Herrington, Bob – Jacobs Hile, Dave – Black & Veatch Kass, Howard – NASA

Neale, David – Fluor Nielsen, Mike – Merck Orellana, Roberto – Procter & Gamble Perkins, David – Rohm and Haas Pitcher, Jon – Eli Lilly Scott, Danny – BE&K Slaughter, Jimmy – S&B Engineers and Constructors Warnock, Steve – Washington Group Woldy, Paul – Chevron Mulva, Stephen (Ex-Officio) – CII Dai, Jiukun (Ex-Officio) – CII DeGezelle, Deborah (Ex-Officio) – CII

CII Benchmarking Associate Director

Research Engineer

Project Team

Account Manager

Benchmarking Associate

Project Team Project Team Project Team

Systems Analyst

Which Questionnaire? Small or Large? • TIC $100K-$5M

• TIC  $5M

• Duration ≤ 14 mo.

• Duration  14 mo.

• Site Wk-Hrs ≤ 100K

• Site Wk-Hrs  100K

• Full-time PM resources not required

• Full-time PM resources required

Small Project Questionnaire

Large Project Questionnaire

Large Project Questionnaire General General Info

Project Scope

Owner PMT

% Union Site Construction Workforce

Performance Budgeted and Actual Project Costs by Function

Planned & Actual Project Schedule

Others Achieving Facility Capacity

Project Outcomes

Work-Hours and Accident Data

Project Impact Factors

Practices Front End Planning

Alignment during FEP

Partnering

Team Building

Project Delivery & Contract Strategy

Constructability

Project Risk Assessment

Change Management

Zero Accident Techniques

Benchmarking

Dispute Resolution

Planning for Startup

Engineering Productivity (Optional) Eng. Description

Concrete

Structural Steel

Instrumentation

Piping

Electrical

Equipment

Direct Hire / Contract / Off-Shore

Construction Productivity (Optional) Concrete

Structural Steel

Electrical

Piping

Instrumentation

Equipment

Insulation

Scaffolding

Targeted Industry Metrics Large Project Supplements * • Pharma Bulk Mfg.

Project and Process Metrics

• Pharma Secondary Mfg.

• Sulfur Recovery Units • Coker Units

• Pharma Laboratory

Pharmaceutical Questionnaire

• Hydrotreaters

* Targeted Metrics Programs Available Through Annual Subscription

Downstream Oil and Gas Questionnaire

System Features

CII Database Domestic

International 292 (19%)

Contractors

686

Domestic

(44%)

1,270 (81%)

 1,562 projects  Worth > $72 Billion  Large & Small Projects Combined

Owners

876 (56%)

CII Database 532

Number of Projects

500

Owner Contractor

400

390 300

244

200

176 100

0

66

48

Buildings

Heavy Industrial

50

Infrastructure

Industry Group

56

Light Industrial

CII Database 300

250

275

Owner

Number of Projects

Contractor 222

200

209

206

182 150 129

100

80

50

90

97

72

0 <= $5MM

$5MM - $15MM

$15MM - $50MM

Cost Category

$50MM - $100MM

> $100MM

CII Database 400

Number of Projects

350

363

Owner Contractor

300 250 200

250

236

247

234

207

150 100 50

16

9

0 Addition

Grass Roots

Modernization

Project Nature

Maintenance

The Value of Benchmarking  Improves

project & company performance when used as an ongoing measure

 Establishes

improvement goals based on external/competitive benchmarks

 Enables

your company to understand & achieve “best in class” performance

Uses for Benchmarking 

Continuous Improvement Implement Best Practices Conduct Training

Measure Results

Select Implementation Tools

Compare to Competition

Identify Opportunities to Improve

Uses for Benchmarking 

Validation of Project Definition/ Gated Approval PDRI: Project Definition Rating Index

Uses for Benchmarking 

Establishing Performance Objectives

Uses for Benchmarking 

Determining Performance Relative to Peers Company A

Company B

Benchmarking Roadmap Determine What to Benchmark (Critical Success Factors)

Define the Metrics

Identify Reasons for Deficiencies (Root Cause for Gap)

Develop Data Collection Methodology

Develop Action Plan (Select Practices to Narrow Gap)

Collect Data

Integrate Best Practices into Project Delivery Processes

Identify Performance & Practice Use Gap

Institutionalize as Part of Continuous Improvement Program Adapted from Robert C. Camp

Single Project Concept Adopted & Formal Project Team Established

Project Sanction

Front End Planning Contract Award to Engineering Firm

FEL2

All Major Equipment Delivered to Site

Procurement

Development of Procurement Plan for Major Equipment

FEL1

Release of all Drawings & Specs

Detailed Engineering

Construction Commencement of Foundations or Driving Piles

FEL3

Business Planning

Concept Planning

Basic Engineering

-Market Analysis -Site Selection -Constraints • Envir. • Market • Resource • Risk Analysis

-Proj Object -Execution -Prelim Opn Plan Plan • Engineer -Permitting • Procurement -Prelim Proj • Construction Document • Operations • Process -Update Project Alts Documentation • Concept • Design Estimate Criteria • Financial • Flow Sheets Analysis • P&IDs • Milestone • Equipment Schedule Specs & Price • Scoping • Project Summary Estimate (+10%) • Detailed Scope • Financial Analysis  CF Curves  IRR • Milestone Schedule

Mechanical Completion

Substantial Completion

Start-up Custody Transfer

Project Implementation Project Implementation -Organization Established • Organization Chart • Roles & Responsibilities • Team Building • Contract Style -Detailed Design -Procurement • Policy • Equipment • Assignment of Contracts • Material -Construction • Execution Plan • Field Admin • Progress Review Meetings

Comm/SU

Commission/SU -Commission Plan -Training Plan -Start-up Plan • Safety • SU Curve • Raw Material • Performance Testing • Acceptance Criteria

Effort vs. Value

Collection Effort

High No

Yes

Low

High Data Value

Types of Metrics 

Performance: 



Relative: Cost Growth, Schedule Growth… (Compares actual to planned) Absolute: $/SF, $TIC/$Process Equipment, Execution Duration/GSF (Actual or “should cost”)



Process: Equipment Count/Capacity (Industry Specific)



Productivity: Engineering & Construction



Practice Use: Front End Planning, Constructability, Zero Accident Techniques…

Normalization Hard Cost (Absolute) Benchmarking Requires



Location and Time Adjustments provide a common basis for comparisons  Projects can be grouped geographically and by time or  Projects can be normalized to a common location & time  Foreign currency exchange

Traditional Performance & Practice Use Metrics Practice Use

Performance 

Cost Performance



Schedule Performance



Safety Performance



Change Performance



Rework Performance



Construction Productivity



Engineering Productivity

Front-End Planning  Alignment  Team Building  Partnering  Project Risk Management  Change Management  Constructability  Zero Accident Techniques  Planning for Startup  Proj. Delivery & Contract Systems  Benchmarking 

Best Practice Use (Safety) TRIR (1989-2006) 16.00

Total Recordable Incidence Rate

14.30

Industry*

14.20

14.00

CII

13.00 13.10 12.20

12.00

11.80 10.60

10.00 8.00

9.90 9.50 8.80 8.60

7.10 6.80 6.40 6.30

7.19 6.12

6.00

8.307.90

5.32

4.31

4.00

3.44 3.00

2.66 2.30

2.00

1.60 1.59 1.67

1.03 1.02 1.23 1.16 0.88 0.72 0.58

0.00 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 325

413

477

497

527

613

644

770

518

765

995

936 1,117 1,073 1,129 1,195 1,333 1,276

Year and Work Hours (MM) *OSH A Construction D ivision, SIC 15-17

R e fle cts OSH A R e porting Cha nge

(updated July 18,06)

Cost Performance Metrics Cost Growth

Actual Total Project Cost - Initial Predicted Project Cost Initial Predicted Project Cost

Delta Cost Growth

| Cost Growth |

Budget Factor

Actual Total Project Cost Initial Predicted Project Cost + Approved Changes

Delta Budget Factor

| 1- Budget Factor |

Phase Cost Growth

Actual Phase Cost - Initial Predicted Phase Cost Initial Predicted Phase Cost

Phase Cost Factor

Actual Phase Cost Actual Total Project Cost

Schedule Performance Metrics Schedule Growth

Actual Total Proj Duration - Initial Predicted Proj Duration Initial Predicted Proj Duration

Delta Schedule Growth

| Schedule Growth |

Schedule Factor

Actual Total Proj Duration Initial Predicted Proj Duration + Approved Changes

Delta Schedule Factor

| 1- Schedule Factor |

Phase Schedule Growth

Actual Phase Duration - Initial Predicted Phase Duration Initial Predicted Phase Duration

Phase Schedule Factor

Actual Phase Duration Actual Total Proj Duration

Safety Performance Metrics TRIR

Total Number of Recordable Cases x 200,000 Total Site Work-Hours

DART

Total Number of DART Cases x 200,000 Total Site Work-Hours

Change Performance Metrics Change Cost Factor

Total Cost of Changes Actual Total Project Cost

Rework Performance Metrics Total Field Rework Factor

Total Direct Cost of Field Rework Actual Construction Phase Cost

Industry Sector-Specific Metrics 

Current   



Upcoming   



Pharmaceutical D/S Oil & Gas COAA (Contract) Healthcare Facilities U/S Oil & Gas Aviation Facilities

Future   

Power Generation Food and Beverage K-12 Education

Downstream Oil and Gas Industry-Specific Metrics Program

Purpose & Scope  Purpose  Develop a user defined, transparent, real time accessible, credible and cost effective benchmarking resource for the oil and gas industry  Scope  Development of the metrics framework, metric definitions, and data collection instrument  Project selection and data input  Data analysis  Report development

Downstream Participants  Round I  Current Participants Aramco Services Chevron Citgo Marathon Oil Shell Oil Petrobras

 Potential Participants ConocoPhillips Sunoco

 60 Projects (10/Company) Committed

Questionnaire  Scope Focused on Refinery Projects

 Detailed Cost Metrics  Two Levels of Benchmarking  Project Level  Process Unit Level Hydrotreating Sulfur Recovery Coking

 Owner Project Management Team (PMT)  Two points of Benchmarking  AFE (Authorization For Expenditure)  Project Completion

Metrics  Project Metrics  Cost (20 Absolute)

 Process Unit Metrics  Cost (14 Absolute)

15 are applicable at AFE & Completion

 Schedule (12 Absolute) 8 are applicable at AFE & Completion

 Productivity (11 Absolute) 9 are applicable at AFE & Completion

 Safety (3 Absolute)  Others (8 Absolute) 6 are applicable at AFE & Completion

12 are applicable at AFE & Completion

 Others (3 Absolute) 3 are applicable at AFE & Completion

 Process Parameters Hydrotreaters (9 Parameters) Sulfur Recovery Units Cokers

Cost Structure 

Project Level

Cost Structure cont’d 

Process Unit Level

Metrics: Example Cost Total FEED Cost TIC Total ISBL Cost ISBL Major Equipment Cost

Schedule FEED Duration Overall Duration

Overall Duration TIC

Downstream Work Plan  Finished Activities  Define Oil and Gas Metrics  Program Data Collection Tool  Training for Data Collection  Currently Ongoing Activities  Input Project Data  Normalization Issues  Future Activities  Analyze data  Generate Key and Summary Reports  Assess Path Forward

Productivity  Engineering

Productivity =

Actual Wk-Hrs* IFC Quantity

* Per Design Component

 Construction

Productivity =

Actual Wk-Hrs Quantity Installed

Categories Concrete Structural

Steel Equipment Piping Electrical Instrumentation Insulation (Construction Only) Scaffolding (Construction Only)

Levels of Detail Construction Example for Concrete

Level I (Future)

Project

Level II

Total Concrete

Level III Level IV

Foundations < 5 CY 5 – 20 CY 20 – 50 CY > 50 CY

Concrete Structures Slabs

N/A

On Grade Elevated Area Paving

Construction Productivity - Concrete Foundations Example 70 • Small sample

Raw Productivity

Better

60

• Use with caution

50 40 30

30.60 20.85

20

Your Circle? 15.74 11.02

10

5.97 0 < 5 CY Wk-Hr / CY N = 21

5-20 CY Wk-Hr / CY N = 26

20-50 CY Wk-Hr / CY N = 20

>50 CY Total Foundations Wk-Hr / CY Wk-Hr / CY N = 19 N = 43

Foundation Size

2D Only 2D+3D 3D Only

Productivity Index

Better Productivity

Lower Productivity

Piping Engineering Productivity by 2D/3D Implementation

2000

2001

2002

2003

2004

3 year moving average

2005

2006

Piping Engineering Productivity by Project Characteristics

Better Productivity Note: at the 90% confidence level

Hr / LF Lower Productivity

Analyzing CII Productivity Measures (Construction Productivity (ISBL Pipe) vs. % Engineering Complete)

Construction Productivity for ISBL (Hr/LF)

12

10

8 6

4

2

0 0

20

40 60 % Engineering Complete

80

100

E 50%

C

What do we Measure? Performance

Practice Use

Correlations

Value of Practice Use

Quantifying Value of Best Practices Better

What is the relationship?

(Scale Metric Dependent)

Performance Metric

How good is the fit? Is it significant?

0

1

2

3

4 5 6 7 8 Practice Use Metric

9

10 Better

How to analyze the relationship?

(Scale Metric Dependent)

Performance Metric

Better

0

1

2

3

4 5 6 7 8 Practice Use Metric

9

10 Better

How to analyze the relationship?

(Scale Metric Dependent)

Performance Metric

Better

Low Use High Use 0

1

2

3

4 5 6 7 8 Practice Use Metric

9

10 Better

Improvement Potential

(Scale Metric Dependent)

Performance Metric

Better

Average Performance Improvement

Low Use High Use 0

1

2

3

4 5 6 7 8 Practice Use Metric

9

10

Project Reports

Individual Project Performance

Project Reports

Metric Details

Industry Analysis Funded Studies Reports

• Impacts of Design & IT on Project Outcomes • Impact of the Delivery System – DB vs. DBB • Best Practices for Project Security

 Hardcopy

Industry Analysis Special Pharmaceutical Metrics Category

Metrics

Cost

TIC / Process Equipment Cost TIC / Gross Square Footage

Schedule

(Design – OQ Duration) / Gross Square Footage (Design – OQ Duration) / Total Equipment Piece Count

Dimension (Process Space SF + Process Related Space SF) / Gross Square Footage Mechanical SF / Gross Square Footage

CII Confidentiality Policy Summary of Key Features  

 



 



Company data are considered confidential. Data can be used to support CII benchmarking, research, and related academic activities only if the confidentiality of companies submitting the data is protected. Access to data is limited to CII staff and authorized researchers only. All persons with access to CII data must sign confidentiality agreements and abide by CII confidentiality policies. When data are provided in support of research activities, all confidential identifiers will be removed and only essential subsets of data will be provided. All data published and/or presented must reflect the aggregate of at least 10 projects from 3 separate companies. Reports and data files containing only individual project or company data are considered confidential will not be published or provided to researchers. In cases where a disproportionate amount of data are provided by a single company, CII will suppress publication of results until the data set is sufficiently large to mitigate confidentiality or bias concerns.

CII Web and Project Central



CII Website: http://www.construction-institute.org/

Project Central – My Projects

Select a Section of the Questionnaire to input or update data

Data Entry  Easy

to Use  Consistent format

Validation Process

Project Managers



Key Participants  BMA Responsibility  CII Responsibility  30 Day Goal

Company Benchmarking Associate

CII Staff, Account Mgrs. & Committee

Project Central - Reports

Progress Key Report

Progress Key Report Summary View with Percentiles Click Here!

Click on the bar or the “n” number to get a statistical summary

Project Key Report

Statistical summary and Project Score for Process Constr. Cost Process Equip. Cost

Data Report Select the level of detail and a metric, click chart-o-rama. 1. Pick your “X” Axis 2. Select your level of detail. 3. Get your chart!

1 2

3

2

Data Report 1. Pick your “X” Axis 2. Select your level of detail. 3. Get your chart!

3

1

Under Development Output Format

Selection Parameters

Choose Your Projects

Aggregate Comparisons

Pick Metrics

Chart-o-Rama V2 Dynamic data mining and reporting tool with aggregate reporting features (Sep 08)

•Chart Only •Chart vs/ Project Data •Datasheet •Key Report

My Selections: Output Format:

Performance Summary Dashboard

Status Bar: Projects:

Selection Parameters:

External / Internal w/ Comparison Metrics: Save Selections

High level performance summary (Mar 08)

Build Report

Clear Selections

BULK MANUFACTURING

OVERALL PROJECT PERFORMANCE OVERALL COST PERFORMANCE Absolute Cost Performance

Relative Cost Performance

PROJECT ID ($Design + $Const. ($Com. + mgmt. $Qual. Cost) Cost) / / $TIC $TIC

Average

Pharma Project Cost Growth

Pharma Delta Cost Growth

Average

4

3.33

4

4

4.00

3.50

2

2.83

1

3

2.00

2.63

1

2

1.33

1

1

1.00

1.25

2.0

2.7

2.5

2.0

2.7

2.3

2.5

$ T IC / $ P ro c e s s E q u ip m e n t Cost

$ F a c ility C o n s t. C o s t / GSF

$ T IC / G S F

$Soft Cost / $Hard Cost

1001

3

4

4

3

2

1002

1

4

3

4

3

1003

1

1

1

2

Overall Metric Performance

1.7

3.0

2.7

3.0

AVERAGE

eCommunity

eCommunity

A Look Ahead  Upstream 





Oil & Gas Program

Support from Fluminense Federal University (UFF) / Petrobras (Brazil) Joint Industry Program (JIP) with UT Petroleum Engineering Other Geographic Areas of Offshore Activity

 Healthcare

Specialty Metrics Program  Extension of COAA Contract  Aviation Facilities

What gets measured, gets improved!

“When you're average, you're just as close to the bottom as you are the top.”

- Unknown