2011 Annual Conference Chicago Driving Predictable Business Outcomes in a Dynamic Global Market Opening Comments Noé Hernández-Sáenz (Moderator) Burns & McDonnell Engineering

Agenda Safety Moment Context Implementation Session Panelists –Paul Woldy (Chevron) Financial Analyses (Owners and Contractors) –Stephen Mulva (CII) Value of Best Practices –Jesus M. de la Garza (Virginia Tech) Safety Data Trends / Findings –Kirk Morrow (S&B Engineers and Constructors LTD) Regional (Gulf Coast) Productivity Findings Q&A

2011 Annual Conference Chicago Driving Predictable Business Outcomes in a Dynamic Global Market Financial Analyses (Owners and Contractors) Paul Woldy Chevron

Dow Jones Industrial Average vs. CII Owner/Contractor Cohort Index (Normalized to FY2000) Dow Jones Industrial Average (Annual Avg. Improvement) CII Owner Cohort Index (Annual Avg. Improvement) CII Contractor Cohort Index (Annual Avg. Improvement) 1991 → %+30.6%+7.7% 1995 → %+27.7%+4.8% 2000 → %+8.3%+7.0% 2005 → %+10.9%+12.6% 2008 → %-4.7%-12.1%

Owner Project & Financial Performance

Cash Flow/Capital Expenditure CII Owner BMM Cohort vs. CII Owner Cohort (Annual Avg. Improvement) CII Owner Cohort vs. Non-CII Owner Cohort (Annual Avg. Improvement) 1997 → %+7.0% 2000 → %+9.4% 2005 → %+3.1% 2008 → %+14.6% Data courtesy of UT McCombs School of Business

Economic Value Added/Cash Flow CII Owner BMM Cohort vs. CII Owner Cohort (Annual Avg. Improvement) CII Owner Cohort vs. Non-CII Owner Cohort (Annual Avg. Improvement) 2002 → %+11.6% 2005 → %+13.5% 2008 → %+50.9% Data courtesy of UT McCombs School of Business

Contractor Project & Financial Performance

CII BMM Contractor Cohort Project Performance Project Cost Growth (Absolute Difference) Project Schedule Growth (Absolute Difference) 2000 vs %+1.3% 2005 vs %+2.8% Data source: CII Benchmarking & Metrics Program

CII Contractor BMM Cohort vs. CII Contractor Cohort (Annual Avg. Improvement) CII Contractor Cohort vs. Non-CII Contractor Cohort (Annual Avg. Improvement) 2004 → %+47.0% New Contracts Data source: Engineering News Record (ENR)

Economic Value Added FY /New Contracts FY-1 CII Contractor BMM Cohort vs. CII Contractor Cohort (Annual Avg. Improvement) CII Contractor Cohort vs. Non-CII Contractor Cohort (Annual Avg. Improvement) 2005 → %+16.4% 2008 → %+19.7% Data source: UT McCombs School of Business / ENR

2011 Annual Conference Chicago Driving Predictable Business Outcomes in a Dynamic Global Market Value of Best Practices Stephen Mulva CII

Best Practices –Survey of 306 CII Projects ( ) –Corporate and Project Levels Benchmarking Context: 5 Principles of Project Integration –Work and Work Process –Organizational Engineering –Leadership and Governance –Communication and Information Flow –Culture and Environment Point of Departure

Reporting Practice Use Data Zero Accidents Techniques Safety techniques include site specific safety programs and implementation, and auditing and incentive efforts to create a project environment and a level of training that embraces the mind set that all accidents are preventable, and that zero accidents are an obtainable goal.

Use of Best Practices Begins with strong leadership; ends with improved performance. Corporate Strategy Project Level Use of Best Practices (Tactic) Project Performance (Bottom Line) Front End Planning Zero Accidents Techniques Constructability Cost Schedule Safety Quality Change Leadership Improvement culture Funding Incentive Dedicated team

16 Culture A relationship exists between culture and best practice use

17 Project Response Rate

Percent of Projects with High Best Practice Use Project Response Rate

Impact of Planning Best Practice Use on Cost Performance: Owners Front End Planning Alignment for FEP Planning for Start-up =standard error of mean

Impact of Execution Best Practice Use on Cost Performance: Contractors Constructability Project Risk Assessment Change Management =standard error of mean

Owners Use of Front End Planning =standard error of mean

Owners Use of Partnering =standard error of mean

Owners Use of Change Management =standard error of mean

Owners Use of Planning for Startup =standard error of mean

Contractors Use of Constructability =standard error of mean

Contractors Use of Planning for Startup =standard error of mean

CII Performance Assessment System (PAS) Data Miner

2011 Annual Conference Chicago Driving Predictable Business Outcomes in a Dynamic Global Market Safety Data Trends and Findings Jesus M. de la Garza Virginia Tech

Data Envelopment Analysis A Non-Parametric Performance Measurement Evaluation Technique A Non-Parametric Performance Measurement Evaluation Technique InputsOutputs 1/RIR 1/DART Zero Accident Techniques Best Practice Implementation Score Efficiency = Outputs Inputs Decision Making Unit = a project

Calculating the Best Practice Implementation Score (BPIS) ∑ 108 points Zero Accidents Technique FieldsWeight Existence of safety plan10 Frequency of near-miss investigations10 Frequency of safety audits10 Frequency of toolbox meetings10 Level of safety orientation for new-hires10 Safety risk identification in safety plan10 Time commitment of safety supervisor10 Use of safety as criteria for subcontractor selection8 Extent of incentive use6 Extent of pre-employment drug screenings6 Frequency of random drug screenings6 Monthly ongoing safety training6 Site workers per safety professional6

Calculating the Best Practice Implementation Score (BPIS) If data are available for all 13 elements –Normalize to a maximum of 108 points –BPIS= (∑ points scored/108)*10 If data are missing for up to 4 elements –Ignore missing elements and their weights –Re-normalize to include only actual data –BPIS= (∑ points scored/???)*10

Selecting Homogeneous Projects 221 Projects from CII Database 47 Homogeneous Projects Location: Only included lower 48 states Character: Brownfield removed Typical: Non-typical projects removed Survey Completeness: Projects with missing data removed Missing BPIS Fields: ≥ 5 “I Don’t Know” removed Type: Only included Light & Heavy Industrial

47 Homogeneous Projects Inherently Efficient Projects Remainder for Analysis RIR = 0 RIR > 0

1/RIR vs. Normalized BPIS

A A’A’ BPIS= 7.74; 1/RIR = 2.02; Eff = 0.55 BPIS= 7.74; 1/RIR = 3.67; Eff = 1.00 DEA Estimated Efficient Frontier True Efficient Frontier = 1/0 = ∞

1/DART vs. Normalized BPIS

Issues and Next Steps DEA can handle multiple inputs and multiple outputs –(l) Best Practice Implementation Score; (O) 1/RIR & 1/DART We need to study other ways to recalculate the Best Practice Implementation Score when data elements are missing We can generate other homogeneous datasets by adjusting the filters –e.g., Light Industrial vs. Heavy Industrial We can apply “Meta Frontier” techniques to compare the performance across multiple homogenous datasets We can extend this type of DEA analyses to other Best Practices

Data Envelopment Analysis A Non-Parametric Performance Measurement Evaluation Technique A Non-Parametric Performance Measurement Evaluation Technique InputsOutputs 1/RIR 1/DART Zero Accident Techniques Best Practice Implementation Score Efficiency = Outputs Inputs DMU = a project

How do we use this Toolkit? Remember: –Efficient projects are those with RIR = 0 Leave nothing to chance, typically with High BPIS By pure luck, typically with Low BPIS –A Benchmarking Toolkit Determine the relative Safety efficiency of a project Given a BPIS, determine the Safety experience a project should expect Compare a project against “peer” projects

2011 Annual Conference Chicago Driving Predictable Business Outcomes in a Dynamic Global Market Construction Productivity: A First Look at Regional Analysis and Reporting Kirk Morrow S&B Engineers and Constructors, LTD

CII BM&M Construction Productivity Definition Appropriate Level of Detail Only Direct Work-Hours Common Definitions for Direct/Indirect Accounts Raw Productivity = Actual Direct Construction Wk-hrs Quantity Installed

CII BMM Construction Productivity Database 124 U.S. projects with construction productivity data Not every project answers each metric

CII BMM Construction Productivity Database

Construction Productivity: Gulf Coast vs. Other Locations Only the productivity difference between gulf coast and other U.S. locations; Not enough data to examine other factors concurrently.

Concrete Gulf Coast Other Locations

Structural Steel Gulf Coast Other Locations

Electrical Gulf Coast Other Locations

Instrumentation Gulf Coast 2519 Other Locations 1415

Piping Gulf Coast Other Locations

Insulation Gulf Coast 1720 Other Locations 1518