The encyclopedia · Engineering & Operations · Operational decision · 2005–2011
Fluor modelled the ripple of a project change before anyone made it, saving $800M
Every change on a megaproject has delayed knock-on costs; Fluor built a system-dynamics model to forecast and dodge them.
Fluor Corporation
the move
Fluor Corporation designs and builds many of the world's most complex projects, and change orders on those projects are where budgets and deadlines go to die. The conventional response is to litigate responsibility after the fact.
The company implemented a system-dynamics model that can be set up and tailored quickly to each major engineering and construction project. It predicts the future cost and schedule impact of a proposed change, and lets managers test mitigation strategies before they commit.
Since 2005 the system has been used on over 100 Fluor projects, and hundreds of project managers and planners have been trained in its ongoing internal use.
why it works
- It models the causal chain — the rework, churn and delay a change triggers — rather than a snapshot cost.
- It flipped the company from a retrospective, dispute-driven view to a proactive, win-win one.
- It was tailored per project fast enough to be used in real time, not as an annual study.
- It tested ways to avoid an impact, not just to price it.
what transfers
For complex projects, don't fight each other about who caused a delay after it happens — model the causal chain forward and find the mitigation before the change lands.
what came after
Quantitative business benefits exceeded $800 million to date for Fluor and its clients, and the mindset shift away from disputes toward early mitigation was itself a major change. The work was a finalist for the 2011 INFORMS Franz Edelman Award, and the paper was published in Interfaces.
references
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