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

Keynote Speaker “Crisis in Construction” A User’s Perspective. Jim Porter Vice President and Chief Engineer DuPont. 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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Keynote Speaker “Crisis in Construction” A User’s Perspective

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  1. Keynote Speaker“Crisis in Construction” A User’s Perspective Jim Porter Vice President and Chief Engineer DuPont

  2. 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.

  3. Transforming For Our Third Century January 2007 Maturity Growth Growth Maturity Put Science to Work Go Where the Growth is Power of One DuPont Birth Growth Birth Chemistry, Energy Birth Explosives Six Sigma 1802 1830 1850 1900 1925 1945 1990 2000 2050 2090

  4. Our DuPont Core Values are… • Safety and Health • Environmental Stewardship • Highest Ethical Standards • Respect for People Our Goal is ZERO

  5. My Beliefs… Construction Industry is critical to future business success. Construction Industry musthelp users understand how to capture value. Users must operate in ways that ensure Construction Industry sustainability. Value

  6. 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

  7. 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. Earnings Growth

  8. Look at our Safety accomplishments. We can do the same for workforce development. But, we all must do our part! CII data used with permission

  9. What can we do about it?????Work together to……… • Eliminate Waste • Increase Work Process Effectiveness • Accelerate FIAPP • Improve Human Resource Management

  10. Value From Alliances • If 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.

  11. Rework Traditional Quality Costs Rejects Inspection (Easily Identified) Scrap Warranty Hidden Quality Costs Customer Satisfaction (Difficult to measure) Lost Overtime Lost Sales Opportunity Long Cycle Times Late Delivery Excess Inventory Expediting Costs Productivity Loss Lengthy Installs Engineering Change Orders Lost Customer Loyalty Employee Morale, Productivity, Turnover Late Product Introduction : Six Sigma attacks the entire “Iceberg” resulting in: Six Sigma attacks the entire “Iceberg” resulting in: Higher quality, lower cost, timeliness Higher quality, lower cost, timeliness - - Increasing Increasing value creation value creation Higher quality, lower cost, timeliness - Increasing value creation The Hidden Costs Of Poor Quality

  12. Capital Productivity Best Practices • Front-end load vs. business goals • Install competitively superior technology • Minimize non-value adding investment • Execute projects with no changes The four CORPORATE BEST PRACTICES FOR CAPITAL PRODUCTIVITYprovide 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.

  13. The Vision of an Integrated and Automated Capital Projects Industry

  14. Globally Converging Mega Trends • Fewer resources + unprecedented demand • Economic impacts: - energy • - disasters • - terrorism • Flat productivity • Vocational training decline

  15. A 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.

  16. A “Perfect Storm” of Converged Mega Trends IPA data used with permission

  17. A “Perfect Storm” of Converged Mega Trends IPA data used with permission

  18. 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!!

  19. 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!

  20. Needed actions ( A partial list) … Users • Develop equitable contracting approaches • Establish contractor selection criteria which consider training, recruitment, and retention • Support contractor training programs • Require craft certification • Support contractors, associations, and labor organizations in enhancing industry image

  21. Needed actions ( A partial list) … Contractors, Associations, Labor • Provide career paths and development programs to improve retention • Continue to lead and invest in training curriculum development • Support standardized and national certifications in the open shop sector • Develop industry programs which enhance image • Manage the “catch up” factor

  22. What are DuPont’s commitments? • 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

  23. We’ve done it before… We must do it again!!!!! CII data used with permission

  24. Competitive/Trust Relationships Cost Value Trust Intimacy X Competency Trust = f Risk

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

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