DuPont’s Role in Capital Projects
James B. Porter, Jr., Vice President, Engineering and Operations E.I. du Pont de Nemours and Company
In the DuPont organization, the owner/operator has four basic accountabilities in the realization of a capital project: (1) select the right projects, (2) lead the front-end loading process, (3) manage project execution, and (4) ensure competency renewal.
Selecting the Right Project
In order to ensure the right projects are selected, the company has developed an authorization flag process that requires the owner/operator to demonstrate that the project is supported by (1) DuPont’s business strategy, (2) price forecasts, and (3) volume forecasts. It must also (4) show that the best technology has been selected and (5) have a sound plan in place to ensure project execution. The first four are clearly business issues about the “what.” The last one is very much a “how.” In our company your project does not advance if you can’t express these in a way that makes business sense and at the same time can’t convince people you are going to do this job in a very disciplined way.
Leading Front-End Loading
Front-end loading (FEL) is a term coined by the DuPont company some 15 years ago. It is a model that we have used over the years to help focus the people and develop the processes and the discipline. In essence, it means you define what it is that you want to do in such a way that the people who are going to do it can carry it out in the most business-effective way.
Figure 5-1 describes FEL’s key elements and how they fit into DuPont’s overall facilities engineering process.
Managing Project Execution
There are seven critical success factors in the DuPont project system. They are listed below, along with suggestions on how best to accomplish these ends.
Set up teams for success. If you don’t have an integrated project team, you are not going to get the best out the other end. The teams have to be managed in a way that allows them to deliver their value to the process. Other suggestions: identify a project sponsor, develop business/project objectives, and assign experienced project and functional leaders to the teams.
Manage the teams for success. Use a steering committee. Reduce turnover in personnel, especially project managers. Define roles and responsibilities of team members clearly. Leverage core resources with contractors.
Front-end load opposite business goals. You can’t put a bunch of engineers in the room and let them decide what it is that’s going to be done. The business goals have to be the underpinning. In DOE’s case, what the department’s goals are have to be the underpinning. And, if you start to do things that are not consistent with that, you’ve got to stop. Also recommended: Have a consistent and documented front-end loading process. Follow the FEL process. Use gatekeeping between phases. And finally, don’t authorize until FEL is complete.
Use competitively superior technology. Most projects take 1, 2, or 3 years to build. By the time you have it built, somebody else has a technology that is superior to yours. You’ve spent money on something that won’t create value. Recommended steps: Benchmark others, especially principal competitors. Utilize disciplined technology selection methodology. Document basic data.
Minimize the non-value-adding investment. Use process simplification/ value engineering and all applicable value engineering practices. Benchmark against industry averages. There is a lot of project management technology that can be used very effectively. But you have to get people knowledgeable about these practices—they have to have the authority to make them happen, and they’ve got to be disciplined in terms of how they apply them. Value-improving practices (see Figure 5-2) make a big, big difference.
Ensure safety excellence. You can’t build something where people or the environment is going to get hurt. Consider process safety management, responsible care, process hazard analysis, and environmental assessments.
Execute the project with no changes. Once you start to change after your project is started, you are in trouble. You know what happens. Make a little change over here, somebody else has to change, before long the whole thing changes.
DuPont built a project in Texas with less than 0.2 percent change in the steel and less than 0.1 percent in piping; it was a $100 million dollar job that came in for $65 million. It had 20 percent engineering design costs. If we had tried to authorize it at 20 percent engineering design cost, they would have said no and the job would have cost $100 million, because nobody likes to spend that money on the front end. But the reality is, if you do the work right on the front end, you can save yourself a lot of money because there won’t be any changes.
Best-practice tools in this area are authorization sign-offs, flag process, making sure FEL is complete, and cost management/cost control. Disciplined behavior is required to hold changes to an absolute minimum.
Ensuring Competency Renewal
You must take steps to ensure competency renewal. In my organization, the average age is 49 and last year it was 48 and next year it is going to be 50 if we don’t change things. And at some point we won’t have the competency that is required, so the owner really has an accountability to ensure that the competency survives.
The way we are working on that in our company is by setting up a position in every business unit that we call “business engineering manager.” These people are proactive members of the strategic business units, and their job is within the business unit to make certain that the business gets what it needs in terms of competency to make the business competitive, and at the corporate level, to work as a part of a council or a network to make certain that the company has what it needs, because you can’t renew a competency in a company like DuPont from the top. You can only do that within the business units.
DuPont faces a number of challenges in deploying capital in the most effective way. One is sustaining and renewing the engineering competency in a costconstrained, changing business environment. Another is increasing the value added by leveraging technology and best practices in a decentralized managing model. I would suggest if you have learned how to do it well, that you can share it across other branches and other departments, so that everybody doesn’t have to learn the same thing the hard way each time.
The cost trust portion of the curve in Figure 5-3 came from a Construction Industry Institute study, some years back, that actually took a number of projects
and developed some empirical relationships. It said that where trust increases, as particularly in project management, the total cost goes down. Now I did a little turn-up on the end, because I tend to believe that you can trust me a little too far. If you trust me outside my competency range, it is going to cost you a little something.
The reality is that if you can improve the process and put in place ways for people to work together where trust is fostered, you are going to get less cost. What we are finding in the business environment is also true on the value curve. You create greater value where people learn better, learn how to work better together, don’t duplicate work, and don’t spend all their time trying to catch people doing wrong things, but spend a lot more time trying to catch them doing right things.
Engineering has got to see business processes holistically, so the engineering organizations that we have in place are able to see the big picture. They can’t just work in a narrow frame of reference. They have got to see engineering as a key component of their financial success. Best practices define the pathway, and to paraphrase DOE’s CFO and undersecretary, the owner/operator leadership cannot be delegated. You’ve got to lead and you’ve got to stay focused on the what.
James B. Porter, Jr., was elected vice president of engineering and operations for E.I. du Pont de Nemours in early 1999.
He joined the company in 1966 as a chemical engineer at its Engineering Test Center in Newark, Delaware, and has held a number of positions in design and operations.
In 1990, he became director of engineering operations. In 1992, he was named director of operations for the company’s fluoroproducts business. Three years later, Mr. Porter was appointed corporate director of operations. He also assumed the position of vice chairman of the DuPont Corporate Operations Network. He was named vice president of engineering in 1996.
In 2000, Mr. Porter served as chair for the Construction Industry Institute. Born August 21, 1943, in Knoxville, Tennessee, he received a bachelor of science degree in chemical engineering from the University of Tennessee in 1965.