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Case Abstract: Company ABC, an AE, constructor and construction management firm, recently assigned Bob Ironside to turn a major coal fired generating station project around. Currently at 36 percent construction completion, the project is shifting from an emphasis on civil and structural work to bulk production. Cooperation of the owner, the multi-prime contractors, and strong labor unions is cach vital for performance improvement. The analysis of this project involves: 1) identification of significant external influences on the project organization, 2) probing the work operations and coordination requirements, 3) determining the organization problems, 4) recommending a revised structure, and 5) setting priorities for action. Plant description: The Blue River Project consists of two coal fired generating stations, each with a capacity of 600 MW (e). The identical units occupy a new site in western state. The remote location makes access for both men and materials very difficult; wet weather during five months of the year further increases this difficulty. The unit includes the latest equipment, instrumentation and air quality control technology. Major features making up the plot plan include: the coal handling facilities, the water treatment building, the cooling towers, the waste disposal area, the switchyard, the power block, and the air quality control system equipment. Construction facilities erected by Company ABC include construction offices and warehouses, change houses, laydown areas, and fabrication shops for each of the crafts. The topography of the area required large quantities of earthwork to develop the site of approximately 150 acres. This limits the area available for construction material staging, fabrication, and preassembly. The general arrangement concentrates mechanical equipment on the ground and mezzanine floors of the turbine building. The turbine generator and the control room occupy the top floor of this totally enclosed building. Major mechanical equipment includes pumps, heat exchangers, and compressors. The owner and regularity requirements have increased quantities in the piping and electrical systems to approximately 1.25 times normal values. The instrumentation systems involve advanced solid state technology which requires specialized installation techniques and a controlled storage environment. uilding. The turbine generator and pumpsheat exchangers, and comp r building Chanical equipment includes imately 1.25 times normal the piping and clectrical sys. c hnology which requires sp Yard features at the Blue River project make up a substantial work scope. This includes the automated coal handling system, the switchyard, water treatment buildings, limestone processing and storage facilities, and a series of ponds for soil waste disposal Owner Background: The owner of Blue River, an investor-owned electric utility, is growing rapidly because of a steady eight percent load growth in its service area. Company policy directs active owner involvement in engineering, procurement, and construction for major projects such as Blue River. This results in owner assignment of a large project staff, including both engineering and construction personnel. The owner's engineering group reviews all specifications and drawings for the project and frequently requires extensive changes to Company ABC's standard design practices. The owner's team also includes a project control group which imposes its facilities- based system for project monitoring and reporting on Company ABC. Another plant in the state recently experienced a failure in one of the high pressure piping systems. This has increased state inspection activities. As a result of concerns that the state licensing agency and the boiler insurance company might not approve the plant, the owner recently expanded its quality assurance group and revised the project QA manual to substantially increase inspection, testing, and documentation requirements. The aggressive public utility commission in the state encourages a high level of owner involvement. Recently this regularity agency has excluded portions of the new plan costs from an electric utility's rate base because it concluded that these costs resulted from mismanagement of the project. This has a severe impact on the utility's financial performance and cost of the capital. The state is also known for very stringent environmental protection. The responsible regularity agency forces electric utilities to immediately adopt advances in air and water pollution control equipment, regardless of the impact on engineering or construction activities currently underway. Company ABC Background: years old. The Engineering Dively from the engineoort groups are one manage Company ABC enjoys a national reputation as highly qualified engineer and constructor, based on over 50 years of experience. Coal fired units, such as Blue River project, make up a large portion of Company ABC'S workload. The Engineering Department dominates Company ABC, a newly implemented project management group draws managers exclusively from the engineering departments. In conjunction with the implementation of project management, several home office support groups are energetically attempting to extend their influence over site activities. Project control, accounting, and materials management are examples. Company ABC specializes in force account construction of power plants, a large majority of the field supervisors and managers came up through the craft ranks. The construction department includes regional construction managers, responsible for numerous projects within a geographic area. Blue River Project Background: The owner engaged Company ABC as Architect Engineer and Construction Manager for the project. Company ABC planned to use a standard design for the Blue River units. Although specific equipment details and owner preferences always require some change, the Project Engineer was confident that the basic design, used successfully on several prior units, would meet project requirements. However, during both the conceptual and the detailed engineering, two impacts prevented this. First the new requirements of the environmental regulatory agency added major equipment components and systems to the project. Second the owner's engineering and operations personnel insisted on implementing their own design preferences. Examples included instrumentation systems, air quality control systems, and solid waste disposal systems. Many of these changes upgraded manufacturing and installation requirements substantially from industry practice. These impacts resulted in a substantial addition to both the design engineering staff in the home office and the resident engineering staff at the site. All specification and drawing releases are late. Experience of the utility President in transmission line and substation construction resulted in an insistence on fixed-price contracts. Company ABC manages the work of the 12 major contractors on the site and approximately 30 smaller contractors. Most of the contractors are structured to correspond with industry specialty contractor organization, such as boiler erection, mechanical equipment, and installation. The piping and the electrical contractors work over all plant areas, others concentrate on specific regions of the project. Low production and productivity during the first 12 months of construction led to a substantial revision of the budget just before Bob arrived. The cost estimate increased over $50 million and the schedule extended over 4 months. The unit rates and installation rates in the current budget are approximately 25 percent higher and 20 percent higher, respectively, than industry norms. Based on experience during the civil and structural work, Company ABC and the owner are monitoring the project on a major milestone basis. Changes in design requirements and site conditions have resulted in a large backlog of change orders for each of the contractors. Processing and execution of these changes require an average of 12 weeks cach because of the low delegation of authority in the owner's organization. The owner awarded the contracts in its name, with Company ABC designated as Construction Manager. Several of the contractors now claim that, at minimum, the large volume of changes and the refusal to extend the schedule have developed a condition of constructive acceleration. Several major suppliers of materials and equipment for the project are unable to meet schedules for engineering information and material delivery. Materials pace several segments of the job, this has required intense expediting and work around schedules. Organization and Operations The site uses an area organization, with separate Construction Superintendents assigned for the boiler area, the turbine building, and the yard. Within each area, contractor teams manage the work of individual contractors Each team consists of a contract manager, construction supervisors, engineers, planners, and contract administrators. The business management, project control, and engineering segments located in Owner's Head Office strongly influence the contract management platform. The dual reporting in the matrix segments of the organization causes biased decisions. The Company ABC site organization consists of 200 non-manual personnel. Bob has never seen greater than 100 for a project of this type. Contractor organizations total 250 non-manual and 600 craft. The Company ABC staff resulted from unfettered growth in an effort to solve the problems in supporting and managing the construction. Each functional group manager sincerely believes that his segment is understaffed to perform the assigned tasks. The three Area Superintendents (the boiler area, the turbine building, and the yard) cach conduct weekly coordination meetings. They attempt to plan and monitor construction activities on an area basis, but experience difficulty in obtaining adequate data from the control group. Also, the functional managers responsible for engineering and materials, citing excessive workload, are reluctant to allow their representatives to attend these meetings Although Company ABC provides major shared construction facilities, such as construction air and water, many duplicated facilities now crowd the Blue River site. Access to the structures is severely restricted by the extensive site work underway. Cranes from the multiple contractors crowd the limited staging areas available to the structures. Contractors frequently complain regarding restrictions to material flow both within and between the various areas of the project. Morale is very low. The contract management teams and the contractors are extremely frustrated by their inability to solve the problems restraining construction. Because of prior problems with quality, safety, and contract administration, along with severe owner criticism, line managers have adopted a "zero risk" approach to construction. No one makes a decision without "touching bases" with all managers whose area of responsibility may be affected. The owner insists on involvement in detailed decisions and retains approval for all changes influencing cost, schedule, quality, or safety. Several good construction supervisors have left; others are very frustrated. The piping, electrical and HVAC contractors have each encountered serious quality problems, resulting in substantial rework requirements. The owner's QA(Quality Assurance) group maintains that this indicates a strong need for greater involvement by both the owner and Company ABC in the contactor's quality programs. Recently implemented quality requirements establish additional inspection hold points for all welding operations. Project Status Serious cost and schedule problems jeopardize completion of the project. The current transition from civil and structural work to mechanical and electrical installation is proving extremely difficult. The mobilization of each new contractor highlights engineering and materials problems, along with contractor difficulties. Both Company ABC and owner inspectors continue to identify frequent quality problems with the work of the new contractors. Bob's Experience and Approach: Bob has never had a bad job. A graduate engineer, he worked his way up through the ranks of construction supervision, with extensive experiences with each of the major construction crafts. He is big, blunt, and very bright. He insists on performance and places high demands on both himself and his subordinates. His prior two projects, similar to Blue River, each faced severe problems but finished within schedules and budgets. On these jobs, Bob gained respect of all organization involved because he was uniformly tough and demanding, and he always placed project priorities first. Other managers in Company ABC attribute Bob's success to his forceful style and question the long term consequences of his extreme short term demands on subordinates.

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