Keynote Speaker “Crisis in Construction” A User’s Perspective

transcript

Keynote Speaker

“Crisis in Construction” “Crisis in Construction” A User’s PerspectiveA User’s Perspective

Jim PorterVice President and Chief Engineer

DuPont

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.

Growth

Maturity

Growth

Maturity

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

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

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.

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

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.

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

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

What can we do about it?????

Work together to………

Eliminate Waste

Increase Work Process Effectiveness

Accelerate FIAPP

Improve Human Resource Management

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.

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

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

Opportunity

Traditional Quality Costs

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.

The Vision of an Integrated and The Vision of an Integrated and Automated Capital Projects IndustryAutomated Capital Projects Industry

• Fewer resources + unprecedented demand

• Economic impacts: - energy

- disasters

- terrorism

• Flat productivity

• Vocational training decline

Globally Converging Mega TrendsGlobally Converging Mega Trends

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.

A “Perfect Storm” of Converged Mega TrendsA “Perfect Storm” of Converged Mega Trends

IPA data used with permission

A “Perfect Storm” of Converged Mega TrendsA “Perfect Storm” of Converged Mega Trends

IPA data used with permission

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!!

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!

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

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

• 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??

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

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

Competitive/Trust Relationships

Trust = f Intimacy X Competency Risk

What you do speaks so loudly that I cannot hear what you say. Ralph Waldo Emerson

Keynote Speaker “Crisis in Construction” A User’s Perspective

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