Project management at Fluor Utah, Inc.
H. Frederick Wohlsen
Douglas R. Mitchell
Fluor Utah, Inc.
Ed note: The Northern California Chapter of PMI has conducted an ambitious lecture series designed to provide a forum for evaluating project management approaches and methods. These state-of-the-art lectures present existing techniques as developed within major engineering and construction firms. As this lecture series presents a unique opportunity to learn the latest project management methods, they are being published in Project Management Quarterly for the benefit of all the membership. The following is the fourth in the series.
Project management is more of an art than a science and, therefore, it is not practical to attempt to define it in precise terms. There are, however, certain basic truths or concepts used by Fluor Utah project managers in directing the execution of Engineering, Procurement and Construction contracts that meet the project objectives imposed or agreed upon with the Client. As has been stated by a past president of Fluor Corporation, the first of these basics might be “Don’t refer to an Owner as a Client until he comes to you with repeat business.” In this paper, we confidently use the word “Client” rather than “Owner” to refer to the contracting party.
To some degree, Fluor Corporation has always operated under a strong task force organization headed by a project manager. When Si Fluor, Sr. acted as project manager over the small engineering and construction projects performed at the company’s beginning, he recognized long before the term “task force” was conceived that advantage accrued to the owner and the project by having total responsibility under a single individual and a single organization. Then, as technology grew and projects became larger and more sophisticated — and Fluor began performing a number of these larger projects simultaneously — it became necessary to develop a different type organization and method of managing the company and its projects. From this need was developed what we refer to as the task force/department “matrix-type” organization at Fluor.
During the early 1960s, after hundreds of projects had been completed, it became apparent that many projects successfully achieved their basic project objectives, while some failed to achieve budget, schedule and performance objectives originally established.
The history of many of these projects was carefully reviewed to identify conditions and events common to successful projects, vis-a-vis those conditions and events that occurred frequently on less successful projects. A. common identifiable element on most successful projects was the quality and depth of early planning by the project management group. Execution of the plan, bolstered by strong project management control over identifiable phases of the project, was another major reason why the project was successful.
This review provided the first recognition of the phased concept and subsequent project execution by phase control. Since that beginning, the task force method of executing projects by phase control has been developed to the point where Fluor is fully dedicated to the task force/project management concept of performing projects.
Fluor Utah executes projects by the task force approach on small- and medium-sized projects up through the very largest, including the $750 million turnkey Cuajone copper complex in Peru, which was completed on schedule in late 1976.
Since it is not practical to cover all facets of project management in a single paper, we have selected several subjects to illustrate project management as it is practiced at Fluor Utah. These are: task force organization; task force and departmental responsibilities; corporate management and the task force; prime project management considerations; communications with the Client; project execution by phase control; variables in the practice of project management; Fluor Utah’s project manager development program; and a summary. Because we believe phase control plays a major role in successful project execution, it is discussed in greater detail than other concepts.
Task Force Organization
We structure the task force under the direction of a project manager who is primarily responsible for the company’s performance of the contract. The task force is comprised of Engineering, Procurement, Construction, Project Controls and Administrative personnel functioning under the direction of the project manager. These persons are assigned to each task force by the various section or department heads who retain certain authority and responsibility for the quality of the work in accordance with established company procedures. Now, let us take a moment to examine a typical task force organization chart (Figure 1).
This organization was used for a medium-sized domestic project. It indicates the key personnel reporting to the project manager and the functional responsibilities of each of the key members of the task force. Shown on this organization chart are the dotted lines between each of the key personnel and his respective department, or section manager. The latter has responsibility for furnishing personnel to the task force and giving necessary technical direction to assure the quality of work.
Task Force and Departmental Responsibilities
The definition of the respective authorities and the responsibilities of the project manager and his key task force personnel, with respect to the department and section managers, are the keys to the orderly functioning of a matrix organization such as ours. To achieve an accepted definition of these responsibilities, we prepared division of responsibility matrices.
Figure 2 shows a representative division of responsibility matrix chart. It partially delineates the responsibilities of various task force and Engineering Department personnel. Figure 3 shows a similar chart showing a portion of the Construction Department’s division of responsibilities.
Corporate Management and the Task Force
Corporate management and project managers recognize that even though they are fully dedicated to the task force concept, corporate management cannot abdicate its responsibilities when delegating authority to a project manager. We instill in our project managers the ability to determine when they should meet with management or seek management’s advice. Also, the project manager must make the “dotted-line” relationships work. If a specialist on the task force is not receiving dotted-line technical direction from his department, then the project manager and his key task force personnel are at fault for not fulfilling one of their prime responsibilities.
Section and department managers also have responsibility to see that assigned task force personnel receive proper technical direction. These managers fulfill their responsibility by being involved in the conceptual design, in some of the project planning and in participating in and approving project procedures relating to their area of expertise. They also make periodic visits to the task force, are present at certain task force meetings and approve appropriate project documents in accordance with company and project procedures.
While Fluor Utah corporate management is informed of the project’s status on an informal basis, it is at the Quarterly Project Reviews that a complete, formal review of the project is made. These Quarterly Reviews are held in two sessions chaired by the project manager. The first, involving key task force and section management personnel, is an in-depth working review of the project’s status. Attending this meeting are the project manager, senior task force personnel and appropriate section and department managers.
Agenda for this meeting is:
Specific problem areas
Section managers’ comments
The purpose of the second meeting is to inform corporate management of the project’s status, seek management’s guidance and advice on policy matters, and obtain any required approvals. Attending this meeting are the project manager; president; senior vice presidents of Operations, Administration and Marketing; and the vice presidents of Project Management, Construction and Engineering.
Agenda for this meeting is:
Project plan — revisions
Performance of key individuals
Financial status (client payment)
Task force/department relations
Specific problem areas
Department V.P. comments
An important funciton of this meeting is to review the performance of key task force individuals. Outstanding work as well as personnel problems are discussed and acted upon.
Prime Project Management Considerations
On every project there are four prime project management considerations, namely:
Task Force Performance
Project Cost and Schedule
Fluor Utah Business Interests
One facet of the art of project management stressed at Fluor Utah is for the project manager to keep these four major considerations in balance. When concentration of effort is on one, two or even three of the above without full consideration of the others, the result is always a less successful project. Neither the interests of the Client, nor the engineering construction company, nor the project cost and schedule should have an overriding influence on the project manager’s execution of the project. It is the project manager’s responsibility — because of his position, as well as his experience, training and knowledge — to see that the four factors are kept in balance.
Communications with Client
Proper communications with the Client’s organization is another important part of project management, particularly on reimbursable-type work. To facilitate this, we aim for the following:
1. Obtain owner input and approval of the project plan and procedures; make these “live” documents by their review and revision.
2. Establish a “team approach” with the client.
3. Schedule and hold periodic summit meetings with top-level Client and Fluor Utah management personnel to assure that both are kept fully informed, and that the Client understands and supports instructions being given by his resident engineers.
4. Assure understanding by the Client of the estimates and cost forecasts presented to him.
5. Strive for owner representation at home office for duration of activities to make decisions and give timely approvals. Similar representation in the field is highly desirable.
Project Execution by Phrase Control
Project execution by phase control is a management system used by Fluor Utah to control projects. This system, which divides a project into identifiable phases, enables Fluor Utah to complete projects on schedule and within budget. Each phase contains a defined work function with a specific input and goal. Phase control eliminates unexpected difficulties in identifying adverse trends in their early stages, from which positive corrective action is taken to reverse these trends. Thus, by monitoring and controlling the progress of each phase, it is possible to control an entire project.
As stated earlier, total responsibility is placed in our project manager. He is totally responsible for the execution of a project from its earliest stages right through to completion. We recognize the need to keep Fluor Utah management totally informed, so that they may apply their expertise to any problems that may arise.
Lastly, and most importantly, we recognize the need to keep the client fully informed so he is totally involved. Only in this way can we work together as a team in the successful execution of a project.
A typical project is divided into seven phases:
Phase I — Planning, data gathering and procedures
Phase II — Studies and basic engineering
Phase III — Major review
Phase IV — Detail engineering
Phase V — Detail engineering/construction overlap
Phase VI — Construction
Phase VII — Testing and commissioning
Phases are divided into periods as percentages of total project time. Each phase contains a defined work function with a definitive input and a recognizable result.
As the project moves from phase to phase, the number of persons and the talents are changed. Changes in staffing are continuous in order to respond to changing job conditions. Control features allow continuous job progress while providing for necessary reviews. As you see on the bar chart (Figure 4), various phases may overlap in time. Every project will vary from this example.
In addition to calendar reviews, specific reviews are required at phase change points. These identify positive control points, typical of which is the status of schedule and cost.
Project execution phase charts indicate how an engineering and construction project is controlled in each phase. The same phases shown on the flow chart (Figure 5) were previously shown on the bar chart.
The flow chart and each individual phase chart show Fluor Utah’s organization on the lower line and the Client organization on the upper line. They run concurrently through the life of the project.
For example, Phase V — Detail Engineering/Construction Overlap (Figure 6) shows the peak of functional activities and persons involved. Various symbols are used to depict different functions, locations or length of assignment as shown in the legend.
Note that an individual or a group maintains the same code throughout each phase chart and that both the Client’s and Fluor Utah’s organizations are assigned specific tasks during each phase of the project.
We will now explain the phases in detail and enumerate the salient responsibilities of each organization during each phase.
Phase I — Planning, Data Gathering and Procedures
Phase I begins upon contract award, or letter of intent. Its purpose is to establish the work plan for the entire project.
In the planning phase, we have a typical planning organization consisting of a project manager, construction engineer, engineering manager, project controls manager (who is responsible for estimating, scheduling and cost engineering) and project procurement manager. This key group, augmented by other personnel for a specific projectas required, forms a project directorate, which stays with the project throughout its life, relocating as necessary. It is the project directorate that performs the vital planning and control functions.
The phase chart also indicates the Client’s parallel organization and project directorate. In this case, we have simply shown a project manager, process engineer, general representative and site representative. We have indicated a communications link between Fluor Utah management and Client management.
The various phase charts indicate the principal activities of Fluor Utah and the Client. During Phase I, Fluor Utah establishes the task force, develops the project execution plan and procedures, gathers data from site and client, prepares project execution flow chart and recommends a program of studies.
Concurrently during Phase I, the Client will establish his project team, define scope of work, provide site and available process data, provide information on work to be performed directly by Client or others, approve project execution plan and procedures, review and agree to program of studies.
A project manager and his key task force members make a more detailed review of the proposed project plan, as well as the available technical and general data, to determine what additional data should be obtained and what revisions to the proposed project plan may be required. Alternative conceptual design studies may be required bythe contract or may be suggested by task force members in the interest of improved performance, cost and schedules. The financing for the project is reviewed to determine what restrictions may be imposed by the loaning agencies. The alternatives of construction vs. construction management will be reviewed. Standard project procedures will be reviewed and modified for applicability to the project and for later discussions with the Client.
Shortly after the initial task force meeting, arrangements and an agenda for the very important initial Client meeting will be made. Major agenda items for this meeting will be transmittal of data, establish communication procedures, agree upon document distribution, review and confirm scope of project, arrange for detail site visit, and review Fluor Utah’s plan of execution and project procedures.
One of the tasks Fluor Utah performs during this initial planning phase is to prepare charts, such as Figure 6, to identify each phase and to indicate what must be accomplished by Fluor Utah and the Client during each phase.
Prior to moving to the next phase, there is a joint review of progress with the Client’s and Fluor Utah’s management. This and similar joint review meetings provide assurance to the client that he has total control over the execution of this project, or as much control as he wishes to maintain.
Phase II — Studies and Basic Engineering
In the preliminary engineering phase, a larger engineering organization is at work in either Fluor Utah’s home Office (or in the office of the engineering subcontractor) than existed in Phase I. The Client’s organization may likewise change during this preliminary engineering phase.
The objective of Phase II is to provide a complete engineering package for the project, or portions thereof, to the point where the work has been fully defined and its completion becomes routine. This will permit production man-hour and cost budgets, staffing, scheduling and work plan to be accurately and realistically produced and reported.
During Phase II, the following basic engineering will be accomplished: process flowsheets, preliminary piping and instrument diagrams, electrical one-line diagrams, initial general arrangement drawings and plot plans. Specifications for long-lead items will be prepared, quotations received and analyzed, and recommendations made to Client for purchase. Final engineering and procurement schedules will be developed during this period.
The construction and material plan will be developed during this phase, and construction methods will be investigated to suit site conditions and the availability of construction equipment. A review of capabilities of local subcontractors will be made to amplify the construction plan.
The project control estimate of engineering and construction costs as well as the overall project schedule will be developed during this phase. Project procedures will be finalized during Phase II.
The project manager has the responsibility for preparing project procedures as soon as possible after contract award and for preparing them in general accordance with Fluor Utah’s standard procedures. He is also responsible for explaining procedures to the Client and other parties, and obtaining all necessary approvals. Preparation of the project procedures early in the job will force all of the task force supervisors and the Client to think through and understand how they will execute all phases of the project. Many problems can be minimized or avoided by preparation of comprehensive procedures covering all facets of the Client’s participation. These include who the Client’s representatives will be, where they are to be located, who is to receive what information and which Client representative has approval and decision-making authority in each area of project operations.
Near the completion of Phase II activities, a major review meeting is arranged with the Client. This is called Phase III.
Phase III — Major Review
Before proceeding to the Detail Engineering Phase IV, it is necessary to ensure before the build-up of a large staff that the design is basically frozen. It is important to determine that the Client is satisfied with process flowsheets, piping and. instrument diagrams, electrical one-lines, plot plans, general arrangements, etc. This makes possible a “one pass” engineering effort. For this reason, a major or summit review phase is scheduled prior to proceeding with detail engineering.
Most important, we make sure all parties understand that this package (scope, design criteria, flowsheets and piping and instrument drawings, one-line electrical drawings, equipment lists, specifications, general arrangements drawings, estimate and schedule) becomes the basis for controlling project costs and schedule. Any changes from the data base will result in project trend reports or change orders covering either costs or schedules, or both!
Upon completion of the Phase III Review, we are ready to begin production of detail engineering.
We — at times — perform only this portion of the engineering and other tasks in the home office. For these projects, we transfer a preliminary engineering package to another office overseas along with key task force engineers and managers to complete the work. This is another reason for adopting the phased concept of project execution.
Phase IV — Detail Engineering
In the first three phases, the project has been described by flowsheets, equipment specifications and general arrangement drawings. Its construction cost has been estimated and execution has been scheduled and planned. All of these activities have been discussed with and approved by the Client. Orders have been given to proceed with the project.
With all this preparation, we should be able to sit back and watch the project develop. Unfortunately, as we all know, things just don’t work out that way. Our project planning must continue to the project’s end because many forces are constantly at work that could cause changes to the best of plans.
Some typical changing conditions that must be dealt with are:
Product specification variations
Material and equipment shortages
Project Financing Requirements
In addition to project plan revisions caused by these factors, supplementary plans must be developed in detail for the successful completion of the project:
Testing and commissioning
During the detail engineering (Phase IV) Fluor Utah will prepare construction drawings and specifications, material take-off, subcontract documents and continue procurement activities as developed in earlier phases. Costs of engineering and purchased items will be monitored. Their effect on schedules and control estimate will be evaluated.
Fluor Utah’s activities during this phase include material take-off and bulk orders of piping and electrical materials. Bulk materials are combined with the equipment list on a computer inventory program. Purchasing information, expediting reports and scheduling requirements are constantly added to the program so that the status of all major equipment and materials is monitored to project completion.
Detail engineering and procurement schedules are prepared during this phase and are integrated into the construction schedule. The time for receipt of data from the Client, and Client approval is an important part of such schedules.
It should be noted that approval to start detail engineering and construction is often specifically delineated in the prime contract between the Client and Fluor Utah. The procedure for approvals of other items is agreed upon during preparation of project procedures in Phase II, as mentioned earlier. In day-to-day meetings in our home office, the authorized Client representative will approve the items developed during the design engineering phase.
Phase V — Detail Engineering and Construction Overlap
The phase during which the most diverse activities proceed concurrently is known as Phase V, Detail Engineering and Construction Overlap. Coordination between all parties — Engineering, Procurement, Construction and the Client — during this phase forms the basis for the ultimate success of the project. At this time, all planning to date gets its first major test and is revised as required.
In Phase V, the field staff is mobilized by Fluor Utah and initial construction is started. Subcontractors are selected and their work supervised. Material and equipment are received. A detail construction schedule is developed. Design is completed and construction drawings and specifications issued.
Client representation at both the field and home office by persons with authority to act is vital in this phase so that timely approvals can be obtained.
Phase VI — Construction
Detailed construction schedules of the subcontractors and Fluor Utah construction superintendents are coordinated and implemented during this phase.
The organizational arrangement in Figure 6 shows the start of the build-up of personnel engaged in construction activities. This build-up reaches its peak in Phase VI. Lead design engineers are held available for advice, design interpretation and support during the construction phase.
Although members of the Client’s operating organization may be available during earlier design phases, it is necessary that managers of Operations and Maintenance be on hand during this phase to familiarize themselves with various systems and maintenance procedures.
During this phase, the construction planning of earlier phases meets its greatest test as material shortages, late equipment deliveries, labor relations problems, subcontractor difficulties and weather uncertainties necessitate constant monitoring of schedules and costs with timely reevaluations.
Even though we are in the early stages of construction, planning of the final project stages is an important activity. The startup and checkout team is firmed up and pre-operational checkout procedures are completed. These procedures will be used to check out all piping, electrical, material handling and control systems with their attendant instrumentation.
Toward the end of this phase, the project completion schedule is developed showing detail times of construction completion of the project units. Preoperational checkout and testing and the transfer of care, custody and control of such units to the Client are shown in detail.
Phase VII — Testing and Commissioning
The final phase of the project (Phase VII) is where organizational arrangements change slightly to show the addition of checkout or startup engineers. The testing, commissioning, startup and Fluor Utah’s closeout activities occur in this phase.
Whereas the Client has been a part of the team during the life of the project, Fluor Utah’s project manager is the leader of the team until preoperational testing and checkout have been completed. At this point, the Client’s Operations management accepts care and custody of the plant and becomes the leader.
With the assistance of Fluor Utah process, checkout and startup engineers and construction supervisors, the Client’s staff starts up and operates the plant. Equipment vendor warranties are enforced and equipment functions checked out under operating conditions.
Although the project facilities are basically completed at the plant’s commissioning, closeout activities continue for some time after that to button up the punch lists and paper work. Fluor Utah has a program of periodic follow-up visits to the project by project management and process engineers to review plant operations and performance after startup and project closeout have been completed.
Variables in the Practice of Project Management
It would be less than candid to conclude without acknowledging that the approach to, and the practice of, project management at our company vary considerably depending upon a number of factors that influence the manner in which we execute projects.
Several examples of these variables are:
The prime contract
International project considerations
Client attitude or philosophy
Client key personnel
Geographical location of project
Services provided by client or third parties
The project manager himself
Because of these considerations, no contract is performed precisely as any other. We have found it of value to accomodate these variables by preparing a comprehensive project plan with detailed project procedures at the beginning of each job. The insistence upon early planning for each project assures that the project team thinks through, in advance, how it will perform each aspect of the job. This gives us the necessary flexibility required and assures the proper communication among the key members of the task force, the Client and responsible third parties.
Project Manager Development Program
We would like to make reference to something that is much more important to successful project management than the most highly developed state-of-the-art. That “something” is our project managers. We recognize that no system, procedures or state-of-the-art as practiced by any organization can perform the most routine project management function. Only people manage or perform anything. Because of this conviction, we have established a Project Manager Development Program, participated in by all project managers and by some personnel from other departments. In this comprehensive program, we strive not only to improve the skills of the participants in order to better manage our projects, but also to improve the state-of-the-art of project management as practiced at Fluor Utah.
We recognize the value of developing our own project managers rather than relying on recruiting such highly-skilled individuals from outside the organization. With this emphasis on internal development, our project managers over a period of time become thoroughly familiar with our systems and procedures, our organization and its key personnel, the corporate philosophy and approach to executing projects, and thus gain the confidence of corporate management. With this confidence, management becomes more comfortable in delegating maximum responsibility. This is essential when projects are being executed under a strong project management/task force concept.
In summary, the state-of-the-art of project management at Fluor Utah is a commitment to the task force approach to project execution.
Strong project management, with clearly defined authority to direct all project activities within a matrix organization, is basic to our approach. The roles of functional departments in supporting project execution are clearly defined to provide the checks and balances necessary to keep the project manager and corporate management advised of project progress.
Strong emphasis is given to Client communications and early project planning, facilitated by project execution by phase control.
Finally, we have built into our approach the flexibility to respond to the many restraints and special Client requirements that influence each project in a different way.