Keynote Speaker
“Crisis in Construction” “Crisis in Construction” A User’s PerspectiveA User’s Perspective
Jim PorterVice President and Chief Engineer
DuPont
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Our DuPont Vision is…Our DuPont Vision is…To be the world’s most dynamic science company, creating sustainable solutions essential to a better, safer, healthier life for people everywhere.
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Birth
Growth
Maturity
Birth
Growth
Maturity
Birth
Growth
Explosives
Chemistry,Energy
Put Science to Work
Go Where the Growth is
Power of One DuPont
Six Sigma
January 2007
Transforming For Our Third CenturyTransforming For Our Third Century
1802 1830 1850 1900 1925 1945 1990 2000 2050 2090
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Our DuPont Core Values are…Our DuPont Core Values are…
Safety and Health
Environmental Stewardship
Highest Ethical Standards
Respect for PeopleOur G
oal is ZERO
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My Beliefs…Construction Industry is
critical to future business
success.
Construction Industry must
help users understand how to
capture value.
Users must operate in ways
that ensure Construction
Industry sustainability.
Value
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So, what is our crisis?So, what is our crisis?• Unprecedented demand• Shrinking owner capabilities• Limited contractor resources• Sold-out fabricators• Spot material shortages
Has led to……• Higher costs• Longer schedules• Lower quality• Lower ROIC
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ROIC and P/E Multiples
Return on Invested Capital
8% 10% 15% 20%
5% 8.5 10.0 12.0 12.9
10% 5.7 10.0 15.8 18.6
15% 0.1 10.0 23.4 29.9
20% NM 10.0 38.2 52.2
Assume all equity financed; 10% WACC; 20-year forecast.
Ear
nin
gs
Gro
wth
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Look at our Safety accomplishments.Look at our Safety accomplishments.We can do the same for workforce development.We can do the same for workforce development.
But, we all must do our part! But, we all must do our part!CII/BLS Benchmark Data
TRR 1989 - 2005
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002* 2003 2004 2005
CII Companies
BLS Constr. Industry
*2002 Data Forw ard: Reflects OSHA Reporting Change.CII data used with permission
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What can we do about it?????
Work together to………
Eliminate Waste
Increase Work Process Effectiveness
Accelerate FIAPP
Improve Human Resource Management
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Value From AlliancesIf you have:
• Good Project Processes• Value Improving Practices (VE/PS)• Integrated Teams
Then:• Alliances provide access to the best people at a
competitive cost (not necessarily the lowest cost).• Alliances reduce cycle times.• Alliances allow reasonable flexibility at lowest cost.• Alliances allow life cycle data for full
facilities/programs rather than project by project.• Alliances reduce administrative costs.• Alliances promote mutual competitiveness.
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The Hidden Costs Of Poor Quality
Six Sigma attacks the entire “Iceberg” resulting in:Higher quality, lower cost, timeliness - Increasing value creationSix Sigma attacks the entire “Iceberg” resulting in::
Higher quality, lower cost, timeliness Higher quality, lower cost, timeliness -- IncreasingIncreasing value creationvalue creation
Scrap
Rework
Inspection
Warranty
Rejects
Lost Sales
Late Delivery
Engineering Change Orders
Long Cycle Times
Expediting Costs Excess Inventory
Hidden Quality Costs
(Easily Identified)
(Difficult to measure)
Lost Customer Loyalty
Customer Satisfaction
Productivity Loss Lengthy Installs
Employee Morale, Productivity, Turnover
Overtime
Late Product Introduction
Lost
Opportunity
Traditional Quality Costs
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Front-end load vs. business goals
Install competitively superior technology
Minimize non-value adding investment
Execute projects with no changes
Capital Productivity Best PracticesCapital Productivity Best Practices
The four CORPORATE BEST PRACTICES FOR CAPITAL PRODUCTIVITY provide a value-based approach to capital management for DuPont. They align the day-to-day behavior and mindset of employees who plan and execute capital projects with the overall value objectives to the entire organization. They provide the foundation for making value-based decisions in alignment with the greater objectives of the business.
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The Vision of an Integrated and The Vision of an Integrated and Automated Capital Projects IndustryAutomated Capital Projects Industry
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• Fewer resources + unprecedented demand
• Economic impacts: - energy
- disasters
- terrorism
• Flat productivity
• Vocational training decline
Globally Converging Mega TrendsGlobally Converging Mega Trends
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A Perfect Storm Has FormedA Perfect Storm Has Formed• Construction Labor Research Council reports
Industry needs 95,000 new craft persons per year for the next ten years to replace those leaving.
• Pre-Katrina growth estimates were 90,000 and today’s estimates range as high as 180,000 each year for the next ten years.
• This unprecedented demand could cause inadequately skilled people to enter the work force increasing injury rates, installation costs, schedules and overtime while quality suffers.
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A “Perfect Storm” of Converged Mega TrendsA “Perfect Storm” of Converged Mega Trends
IPA data used with permission
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A “Perfect Storm” of Converged Mega TrendsA “Perfect Storm” of Converged Mega Trends
IPA data used with permission
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We all recognize ( I hope) ….We all recognize ( I hope) ….
• There are no quick fixes
• Contractors can’t solve issues alone
• Owner investment is required
• Resolution will benefit everyone
• The time for action is NOW!!
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We’ve made a good start…..We’ve made a good start…..
• Injury & incident reduction • NCCER• CII; CURT; FIATECH• “Helmets to Hardhats” • CTI – CURT Tripartite Initiative• BRT “I’M GREAT” Initiative• SEMTA • This meeting!
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Needed actions ( A partial list) … Users1. Develop equitable contracting approaches
2. Establish contractor selection criteria which consider training, recruitment, and retention
3. Support contractor training programs
4. Require craft certification
5. Support contractors, associations, and labor organizations in enhancing industry image
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Needed actions ( A partial list) … Contractors, Associations, Labor
1. Provide career paths and development programs to improve retention
2. Continue to lead and invest in training curriculum development
3. Support standardized and national certifications in the open shop sector
4. Develop industry programs which enhance image
5. Manage the “catch up” factor
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• Supporting industry improvement efforts:
• BRT - CEO and Engineering involvement
• CII; CURT; FIATECH - Sustained leadership
• LUC’s - Leadership in existing and new
• Active in industry organizations, e.g. NPRA
• NCCER or equivalent training on alliance contracts
• Sustaining our charge• Staying at the table
What are DuPont’s What are DuPont’s commitmentscommitments??
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We’ve done it before… We’ve done it before…
We must do it again!!!!!We must do it again!!!!!CII/BLS Benchmark Data
TRR 1989 - 2005
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002* 2003 2004 2005
CII Companies
BLS Constr. Industry
*2002 Data Forw ard: Reflects OSHA Reporting Change.
CII data used with permission
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Competitive/Trust Relationships
Cost
Trust
Value
Trust = f Intimacy X Competency Risk
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What you do speaks so loudly that I cannot hear what you say. Ralph Waldo Emerson
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