Produced by:

Cost ManagementBest Practices for STO

Christen BergerudEcoSys

• Introduction

• STO Cost Management Challenges

• Attributes of a STO Controls System

• Marathon Petroleum Turnaround Case Study

• STO Controls Systems – Other Examples and Screenshots

• Questions

Agenda

EcoSys Company Background

• Planning and Controls Software Vendoro Designers & Developers of original Primavera P6 o Current focus is EcoSys Enterprise Planning and Controls (EPC)

Software

• Consulting Practice o Focuses on Implementing Processes and Systems for Planning and

Controls of Capital Projects including Shutdowns, Turnarounds, Outages

• Partnerships with Oracle, SAP, Microsoft, & IBM

EcoSys Enterprise Planning and Controls Software

Over 200 Customers GloballyPublic & Private Sectors

STO Cost Management ChallengesShutdowns, Turnarounds and Outages can have vast cost implications on a company

• Cost of Delay can be immense

• Lost Revenue, Lost Market Share, Regulatory Impacts

•Cost tends to be a Principal Way that Management Evaluates the Success of Turnarounds

STO Cost Management Challenges

Better STO Cost Management Has Many Benefits

• Confident cost analysis justifies further investments in improvements to STO processes

• Tom Lenahan provided example in keynote - $2.5 MM estimate was actually $10 MM true cost. This led to greater management engagement.

STO Cost Management Challenges

Better STO Cost Management Has Many Benefits

• Understanding of Cost allows fine-tuning of model for future STO events

• Monitor planned and actual against past performance

• Understand directs/indirects

• Understand performance by cost type, phase, contractor…

STO Cost Management ChallengesBut Really, You Don’t Have Time to Track Cost during a Shutdown, Turnaround or Outage

• During a Turnaround it’s easy to conclude that what matters more is:

• Safety

• Regulatory Requirements

• Productivity

• Schedule

STO Cost Management ChallengesBut Really, You Don’t Have Time to Track Cost during a Shutdown, Turnaround or Outage

• And if you focus on safety, productivity and schedule, your costs should stay in line… right?

STO Cost Management Challenges

STO Status Quo:

• Big contingencies• Sometimes big enough to allow even poor cost performance to come in

under budget

• Limited accuracy of cost performance reporting by:• Direct / Indirect

• Cost Type

• Cost Breakdown Structure

• Asset

STO Cost Management Challenges

STO Status Quo:

• Lots of Manual Effort During and After a STO event to make sense out of the cost picture

STO Cost Management Challenges

Management Demanding More

• Picture of True Cost of a Shutdown, Turnaround, or Outage

•Understanding how STO costs interrelate with Capital Projects and Operations

•Planning and Budgeting based upon real understanding of Past Performance

• Better Control over Late and Emergent Work

• Schedules, ERPs, Timesheets Rarely Integrated

•If Integrated, don’t deliver easy to use, real-time tools for managing schedule, productivity and cost

• Excel = time consuming, error-prone manual entry

• Very short time windows to capture productivity between shifts

“We have people in at 4 AM racing to compile productivity data in Excel before the next shift. We type in the actuals twice daily.

Challenges for Cost Controls

Systems Fall Short during a Turnaround

“We create a bunch of change orders in SAP in advance, in anticipation of emergent work.

• Budgeting often based on blended rates

• Scheduling systems co-opted into budgeting systems

• Not a lot of controls over late work

Challenges for Cost Controls

Systems Fall Short before a Turnaround

• Lack of Integrated Systems makes visibility by KPI or cost attribute hard to achieve

• Very intensive efforts to reconcile cost reports with true cost

“Well, then we re-type the data into our Japanese parent company’s general ledger system.”

“The actuals in the schedule don’t tie out to the G/L or vendor invoices. We think maybe an activity got deleted.”

Challenges for Cost Controls

Systems Fall Short after a Turnaround

“We may not see the real costs from SAP for months.”

20%

16%

13%12%

30%

6%2%

1%Reconciling General Ledger Data

Correcting Labor Coding

Collating Internal &External ReportsManual Downloading

Monitoring & Controlling Costs

Change Management

Forecasting & Trending

Analyzing Budgets & Actuals

17

Source: Internal Study by EcoSys Customer

Current UtilizationCost Analysts Spent 61% of Time on “wasteful” activities

18

65%25%

5% 5%

Analyzing Data

Forecasting &Trending

Running ReportsTroubleshooting

Source: Internal Study by EcoSys Customer

Target UtilizationCost Analysts provide much greater value added

Attributes of a STO Controls

System

• Single, Integrated System to Track Hours, Productivity, Cost

• Consolidates Data from Multiple Systems:o Scheduling

o G/L

o Timesheets

o Estimating

Attributes of a STO Controls System

• Web-based Dashboards with Drill-down based on Role (Executive to Foreman)

• Variable Access Rights with Spreadsheets or Forms that Enforce Business Rules

Attributes of a STO Controls System

• Ability to reclassify direct/indirect

• Structured change control and scenario analysis

• Rate Tables

• Multicurrency (if needed)

• Versioning and variance analysis

Attributes of a STO Controls System

• What If Analysis

• Single Database manages STO and Capital Projects

• Visibility by Any Attribute and at Any Level

Attributes of a STO Controls System

Projects / WBSSchedule DatesResource-loading (units & costs) - Baseline - Current - RemainingActivitiesResourcesCodes (activity, resource, project)Percent CompleteTimesheets

Integrated Earned Value ManagementConsolidated Performance ReportingBudgets, Forecasts, CommitmentsActual CostsChange ManagementData TransformationsHistorical SnapshotsTransaction/Audit Repository

Projects/WBSActivity NetworksCost ElementsActual CostsTimesheetsCommitments

WBS & WBS StatusBudget / Planned Costs

Contractor & Other Timesheets

Typical Integration Scenarios - Turnarounds

Turnaround Case StudyMarathon Petroleum

• 6 Refineries in US

• Legacy Artemis reporting system integrated with P6, Time & Attendance

• Tried several tools to replace, none met functionality and performance requirements

• Successful pilot in 2010

• Advantages seen in EcoSys: o Flexibility and speed of P6 Integration

o Performance of integrations and reporting with large datasets

o Flexibility of configuration and reporting to meet advanced best practices

o Rapid software implementation

o EcoSys certified SAP integration aligns with Marathon’s future plans

Case Study: MarathonCase Study: MarathonMarathon Petroleum

• Management of Contingency/Drawdown, Forecast, Earned, Expended, Estimates

• Daily/weekly time-phasing

• Daily integration with P6 for progress

• Daily integration with time & attendance/contractor billing

Functionality HighlightsCase Study: Marathon

• Preserve daily history of earned value (S Curve data)

• Define complex transformation rules in EcoSys (i.e. Craft ABC + Vendor 123 Indirect)

• Implemented all Marathon TA KPIs

• Extensive performance reporting: direct/indirect, vendor, unit, craft, work order, phase

• Integrate Changes/Growth into Performance Baselines

Functionality HighlightsCase Study: Marathon

Any Questions?Thank you!

Produced by:

Christen BergerudEcoSys

cbergerud@ecosys.net