Measuring Performance in a Commercial Enterprise

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Measuring Performance in a Commercial Enterprise

• Ken SmithSenior Vice President
• September 12, 2006

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Fluor Corporations Legacy
Fluor is one of the worlds largest, publicly
owned engineering, procurement, construction, and
maintenance companies.

• Founded more than 100 years ago
• Executed more than 10,000 projects worldwide
• Consistently ranked among the Top 3 on ENR
  magazines Design-Build Firms and The Top
  400 Contractors lists
• One of the worlds safest contractors
• Maintains a global presence

• Asia, 55 years
• Africa, 41 years
• Australia, 37 years
• Europe, 59 years
• Middle East, 59 years
• South America, 61 years

Corporate Headquarters Irvine, Texas
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Fluor Industries and Clients
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Worldwide Projects
Infrastructure
Government
Chemicals
Government
LondonUnderground Ltd.
Hanford Management Contract
Kodak Xiamen, China
Fernald Environmental Restoration
Downstream
Petrochemicals
Mining
Phillips S Zorb Texas
EQUATE Project Kuwait City, Kuwait
Copper Smelter Queensland, Australia
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Business Group Common Functions

• Safety performance and Zero IncidentsSM culture
• Operating System Requirements
• Drives commonality across all operations globally
• Project management
• Engineering
• Financial metrics and performance measurement
• Human Resources
• Global management focus
• Centralized corporate approach
• Strategic planning
• Business Risk Management Framework (BRMF)
• Legal
• Finance / cash management / SEC reporting
• Public relations / government relations
• Security / IR / ESH
• Board of Directors / stakeholders

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Safety Performance

• Operating in 60 countries worldwide
  40,000-employee diverse workforce (with language,
  educational and cultural differences)
• Managing and monitoring 270 million of safe work
  hours in 2005
• Best in class performance
• Management commitment to annual performance
  improvement
• Fluors culture drives
• 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

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Safety Lost Workday Case Rate
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Safety Recordable Incident Rate
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Commercial Background

• 25 years in the EPCM industry
• Experience includes three EPCM firms cultures to
  draw upon
• Understand the unique differences in Commercial
  vs. Government client organizations
• Recent 3-year President of Fluors Manufacturing
  Life Sciences group
• Commercial Industry differentiators
• 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

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Personal Operating Philosophy

• Focus on safety
• Clear roles, responsibility, authority and
  accountability
• Customers want to know three things
• How smart?
• How much?
• How long?
• We owe our client to be the lowest cost producer
  for a given scope
• Cradle-to-Grave project execution
• Comprehensive risk management
• Baseline Centric approach
• Human capital management
• Financial performance

Bringing certainty to Technology Application,
Cost and Schedule
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Baseline CentricSM Approach

• COST MODEL
• Basis of Estimate
• Clarifications
• Allowances
• FOCUSSM
• CDR

• PURCHASING
• Scope Reviews
• Buy Sheet Tracking
• Bid Pkg. Cost Distribution

• SCHEDULING
• Quantities
• Craft
• Equipment / Material

BASELINE

• COST CONTROL
• Changes
• ROM Estimates

• GENERAL CONDITIONS
• Staffing
• Reimbursables

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Baseline Centric Tools

• Function
• FOCUSsm process
• Business Risk Management Framework
• Cost
• 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

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Baseline Centric Deliverables

• Establish A line in the sand early
• Accurate estimate
• Detailed quantity takeoffs
• Qualifications and clarifications
• Allowances and exclusions
• FOCUSsm sessions
• Constructability reviews / alternative solutions
• Value engineering
• Manpower scheduling
• Business Risk Management Framework
• Snapshots during conceptual engineering change
  management during detail design

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Baseline Centric Flowchart
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Performance Measurement Approaches

• Safety
• Monitor traditional safety trends
• Application of Fluors safety alert system
• Client feedback
• Client satisfaction
• Percentage of repeat business
• Extensive client review process
• Cradle-to-Grave project execution
• Earned value management system
• Independent project management review teams
• Human capital
• Turnover / retention
• Financial performance
• Margins as sold vs. actual performance
• Publicly traded company stock price

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Closing Thoughts

• Challenge to provide commercial practices in the
  Government sector
• Project execution success is driven by upfront
  planning and establishing an accurate Baseline
• 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 well
achieve financial success