1 st PMI AGC ENERGY FORUM: DMS DEBATES June 2, 2010 EPCs Should be on a Bonus Incentive Scheme to Exceed Contract Expectations Dependability, Expertise,

®

1st PMI AGC ENERGY FORUM: DMS DEBATES

June 2, 2010EPCs Should be on a Bonus Incentive Scheme to Exceed Contract Expectations

Dependability, Expertise, and Safety

Jose Luis BustamanteVice President & General Manager – MENA RegionFluor Mideast Limited

© 2009 Fluor Corporation. All rights reserved.® HO20090617.ppt 2

EPCs Should be on a Bonus Incentive Scheme to Exceed Contract Expectations

Table of Contents

• Type of Incentives

• Outcome of Incentives

• Considerations on LSTK Projects

• Potential Indicators

• Safety Incentives

• Case Example, Ras Laffan Common Offplot


Type of Incentives

Cost Incentives

Performance Incentives (SAFETY)

Schedule / Delivery Incentives

Combination Multiple Incentives


Outcome of Incentives

Induce Actions or Motivate Efforts

Discourage Inefficiency and Waste

Promote Partnering Approach to resolve issues

Creates Expectation of Reward / Punishment

© 2009 Fluor Corporation. All rights reserved.®

Traditionally, lump sum contracts may create an Traditionally, lump sum contracts may create an adversary relation between contractors and clients.adversary relation between contractors and clients.

An alignment on certain project objectives can be An alignment on certain project objectives can be reached by establishing incentive programs.reached by establishing incentive programs.

Since price is fixed, other areas available are safety, Since price is fixed, other areas available are safety, schedule and quality.schedule and quality.

Considerations on LSTK Projects


ScheduleSchedule• Agreed upon milestones with gain/pain programs (i.e. Agreed upon milestones with gain/pain programs (i.e.

mechanical completion, meet specific milestones)mechanical completion, meet specific milestones)

QualityQuality• Based on audit reports monetized as per an agreed up front Based on audit reports monetized as per an agreed up front

scheme or a combination with Schedule (i.e. time to ramp scheme or a combination with Schedule (i.e. time to ramp up production)up production)

SafetySafety• Fluor is an industry leader and with significant experience Fluor is an industry leader and with significant experience

on these programs.on these programs.

Considerations on LSTK Projects (cont)


Fluor Safety Performance versus Industry

Fluor

Fluor – Total Case Incidence Rate (recordables)

No

. of

Cas

es (

per

200,

000

hour

s)

Fluor

CII *

0.570.570.680.58

0.72

1.161.231.021.03

1.67

0.88

0.290.330.400.450.470.450.580.63

0.740.780.94

0.0

0.5

1.0

1.5

2.0

99 00 01 02 03 04 05 06 07 08 09

0.29

Sources:*Construction Industry Institute (CII). Latest data available

Fluor Objective: Zero Incidents

Fluor


Contractor IncentiveContractor Incentive•Part of the Fee at riskPart of the Fee at risk

Project Team IncentivesProject Team Incentives•Shared by all project parties (client, Shared by all project parties (client, contractors and subcontractors)contractors and subcontractors)

•Could be monetary or not monetaryCould be monetary or not monetaryProject FundedProject Funded

• Ideally site wideIdeally site wide

Safety Incentives


Client: RasGas (QP/ExxonMobil and partners)Name: Ras Laffan 3 Common Offplot ProjectsContract: EPCMTIC : 1.5 billion USDSchedule: 4Q05 to 3Q09Lost time Incidence Rate: 0.06

460 million hours and 950 days WITHOUT A LOST TIME INCIDENT

Safety Incentives at Work


Schedule

• The industry was extremely busy and the volume of ongoing work in Ras Laffan was very large

–RasGas LNG Trains–QatarGas LNG Trains–Laffan Condensate Refinery–Shell Pearl GTL

• Pressure on schedule was high.

Ras Laffan 3 Common Offplot


Ras Laffan 3 Common Offplot (continued)

Site Conditions

• Busiest time in Ras Laffan City.

• Manpower peak: 9,000 workers with tens of thousands trained

Resources

• Lots of growth in EPC industry forced the sourcing of labor and supervision with limited experience and skills, from new places, with limited safety culture.

• 40 nationalities under Fluor supervision in the project



Zero Accidents Program in Place

•All Fluor employees are assessed on annual basis on safety performance.

•Fluor believes that all accidents are predictable and preventable.

•Fluor follows a proprietary Safety Program called Zero Accidents Program


Program Includes:• Orientation / Education• Pre Task/ Pre Job Planning • Assessment / Audit • Recognition / Incentives• Incidence Investigation• Substance Abuse prevention

Program indicators:• Training (excluding orientation) – amount on weekly basis.• Hazard elimination – number of hazards eliminated on daily basis

(Over 982,000 over the Ras Gas project life)• Management-attended walk abouts – number on weekly basis• Adopt a Crew meetings – number held on weekly basis• Safety meetings – number held on weekly basis• Weekly self-assessments – number performed on weekly basis• Near misses – number of near misses recorded on weekly basis



Ras Laffan 3 Common Offplot

In addition to the daily and weekly activities the project had a Quarterly Safety Celebration.

• Participation of all employees, Client and Fluor project teams and senior management

• Recognition of individuals and team performance

• Rewards to significance contributors

• Lunch / Dinner Celebration



Bottom Line

“The Common Offplot Projects have set new benchmarks for project execution excellence particularly in the area of safety performance,”

Dave Marchak, RasGas Venture Group Manager.


Thank YouThank YouFLUOR MIDEAST LTD

P.O. Box 46858, Abu Dhabi, UAE

Tel. +971-2-6172700

Documents

1 st PMI AGC ENERGY FORUM: DMS DEBATES June 2, 2010 EPCs Should be on a Bonus Incentive Scheme to Exceed Contract Expectations Dependability, Expertise,