The Pegasus-Global® October 2009 Newsletter

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Industry Sector News

Wayne Crew Responds

Although the report is based on the oft-cited Teicholz study which, in 2004, found construction industry productivity to lag dramatically behind other industries' advances, the report's authors acknowledge the difficulty of measuring such a segmented industry. While Patricia Galloway's response to the report--also cited in the ENR article--was to note the industry's general resistance to emerging approaches, the Construction Industry Institute (CII) deserves special recognition for its sustained work to improve construction efficiency and productivity within the last decade.

As a consortium of construction industry owners and contractors working in partnership with academia, CII funds and implements in-depth research on topics ranging from project team alignment to engineering and construction productivity. The organization devotes millions of dollars every year to improving construction efficiency. CII's research is applicable to all industry sectors and its recent work on productivity includes the following projects:

• Productivity Benchmarking & Metrics (BM&M) - Begun in 2004 to address the lack of standard industry definitions, CII BM &M calculates industry productivity metrics and benchmarks. Member companies benefit from tracking project-level, discipline-level, and task-level measurements (e.g., work hours and quantities). Over time, the program will deliver increasingly useful productivity data.
• Workforce View of Construction Productivity - 2004-2006. This study investigates how crafts can identify productivity problems and offer solutions. By using a companion software tool, Voice of the Craft Worker (VOW), workers can assess productivity factors and make suggestions for improving project productivity.
• Leveraging Technology to Improve Construction Productivity - 2006-2008. This study's statistical model shows the relationship between technology and productivity. It also emphasizes how technology often demands changes in work processes before it can improve productivity. A companion software tool assesses a technology's project improvement potential.
• Transforming Modular Construction for the Competitive Advantage - 2007-2009. This study identified projects and processes that use the Interim Project Database (IPD) approach to modularization--a method of manufacturing customized modules for different projects types and sizes. In each case, the drivers of use as well as the barriers to adoption were determined.
• Information Integration to Improve Capital Project Performance - 2007-2009. This research helps firms make a systematic assessment of their current information integration practices and plan for new investments. A maturity model and an Integration Opportunity Assessment Tool are included to aid corporate planning, education, and development of implementation plans.
• Craft Productivity Program, Phases I-V - 2007-2012. A five-year program investigating how best practice use maximizes the productivity improvement potential of innovations. Each year, the study will focus on worker productivity and innovations in one of four heavy industry construction crafts: mechanical, electrical, concrete, and structural.

By providing evidence-based recommendations and tools, CII's studies all promote the breakthrough approaches heralded in the NRC report. The direct costs of the Productivity BM&M program since 2004 total $1.6 million. The combined direct costs of the cited academic studies come to well over three quarters of a million dollars. Once the in-kind work of each research team's industry members is added in, the total rises to upwards of five million dollars. And, since, for over a quarter of a century now, most CII research has tackled problems that affect productivity, this is only a partial accounting of the substantive work the institute has done to effectively move the industry forward and to meaningfully measure its progress.

Dr. Kris R. Nielsen Discusses the Viability of the Oil and Gas Services Sector

With increasing frequency Investors and Analysts ask why they cannot get a long-term commitment from the oil and gas Service Sector firm's management regarding backlog and margin expectations. Among investors and analysts there is a perception that E&C firm management predictions and information is often vague, misleading, uninformative, or unbelievable.

E&C firm management is much better than these alleged deficiencies imply. It seems self obvious to say, however, in order to give reliable predictions of backlog, E&C firms are wholly dependent on predictions of the Owners and Operators (IOCs, NOCs, and E&P companies) - the customers of the Services Sector. In turn, the Owners and Operators must "read the tea leaves" of their ultimate customers, the users of these critical resources. When it comes to margins, Services Sector firms have more control, and thus more predictive capability, because it is what they do best - engineer, procure, and construct projects. Read Dr. Kris R. Nielsen's remarks The Oil & Gas Services Sector: Good Prospects For The Medium To Long Term.

Meet Bruno Gerard

Bruno is as energetic and passionate a person as one could ever hope to meet. His passion flows from his belief that the functional life cycle of any facility can be extended if one has the ability to capture and act on those elements and systems of a facility which are most likely to deteriorate or fail during the full life cycle of that facility. His energy comes from having successfully integrated more traditional risk management practices with life cycle historical data to create a risk based system for management of infrastructure maintenance.

Bruno originally comes from the French nuclear power industry having worked for EDF on their older nuclear power plants. It was Bruno's job to find ways to develop new on-site data treatment methodologies in order to determine their remaining practical life cycle and, if possible, find ways in which to extend the life cycles of those nuclear plants. Bruno's experience with EDF and those aging nuclear plants brought him to the realization that an "infrastructure project" such as construction of a power plant should not end with the transition from construction to operation; according to Bruno "if one wants to achieve the full life cycle potential of any infrastructure facility, the project never ends." That realization began his efforts to combine effective project risk management techniques with historical life cycle data and expertise. Ultimately he succeeded in his efforts and in 2002 he started Oxand as a business dedicated to applying state of the art risk management to total facility life cycle management. Read Introducing Bruno Gerard and Oxand Group by Jack L. Dignum.

Pegasus-Global® this Month

Pegasus-Global® Board Certification

Pressure from shareholders, the media and Congress as well as a rapidly changing economic landscape have sharply increased the need for directors - whether seasoned, new or prospective - to stay ahead of the curve on key governance issues and leading practices. Board membership in NACD is designed to help boards accelerate board education and development goals as well as sending a powerful statement to investors, management teams and the public about our firm's commitment to quality governance.

Dr. Kris R. Nielsen states, "We see the same mistakes time and time again. Oversight that is ignored, cost cutting that results in inappropriate practices. I know it's difficult in a rapidly transitioning field to remember that the basics never change, but it's true. Technology can not relieve us from the responsibility to just do the job right. If that seems like an oversimplification, it's because the principle is really pretty simple."

Dr. Patricia D. Galloway to be 2009 NSF ADVANCE keynote speaker

ADVANCE encourages institutions of higher education and the broader science, technology, engineering and mathematics (STEM) community, including professional societies and other STEM-related not-for-profit organizations, to address various aspects of STEM academic culture and institutional structure that may differentially affect women faculty and academic administrators. As such, ADVANCE is an integral part of the NSF's multifaceted strategy to broaden participation in the STEM workforce, and supports the critical role of the Foundation in advancing the status of women in academic science and engineering.

Since 2001, the NSF has invested over $130M to support ADVANCE projects at more than one-hundred institutions of higher education and STEM-related not-for-profit organizations in forty-one states, the District of Columbia, and Puerto Rico, including twenty-four EPSCoR jurisdictions.

The National Science Foundation has awarded four rounds of ADVANCE grants to different academic institutions across America. The aim of an ADVANCE Grant is to recruit and retain women in science and engineering careers within universities:

"The goal of the ADVANCE program is to develop systemic approaches to increase the representation and advancement of women in academic science and engineering careers, thereby contributing to the development of a more diverse science and engineering workforce. Creative strategies to realize this goal are sought from women and men. Members of underrepresented minority groups and individuals with disabilities are especially encouraged to apply. Proposals that address the participation and advancement of women with disabilities and of women from underrepresented minority groups are encouraged."

Pegasus-Global® People

John Owen, P. Eng

Mr. Owen has presented testimony before public utility hearings regarding all types of management (project, engineering, commissioning and operations), scheduling (delay, disruption, etc.), cost damages and other issues. He holds a H.N.C. in Electrical Engineering, Salford Technical College, Salford, England.

Mr. Owen has traveled to many interesting places in his career. One of the more interesting was Peru where he relates, "While resident in Peru as the Owner's representative for the design and construction of a High Voltage transmission line I made many trips from the Lima on the coast to the interior inspecting progress of the work. It was during this time that Peru experienced severe rains, which resulted in the only major road to the interior being washed out for an extended period of time requiring we used the old, semi-abandoned rout. On the return our Peruvian driver decided he was too ill for the task. To the amazement of my fellow Peruvian engineers I took over the challenge of driving back to Lima."

Prior to joining Pegasus-Global®, Mr. Owen gained extensive experience in the design and management of electric utility generation stations and transmission systems, was the Manager of the Thermal Division at Acres Consulting Services, Ltd. (Toronto, Ontario and Buffalo and New York). Mr. Owen was as an Engineer with Atomic Power Constructors Limited (Sutton, Surrey, England), where he supervised the engineering design of the electric control systems for a nuclear power station and power system studies with the Central Electricity Board, UK. Read Mr. Owen's resume.

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