Industry Specific Construction Case Study
Many project management situations or problems are somewhat complex and involve many interacting factors, all contributing to a common situation. For example, poor planning on a project may appear on the surface to be a planning issue, whereas the real problem may be the corporate culture, lack of line management support, or poor employee morale. The case studies in this chapter involve interacting factors.
Robert L. Frank Construction Company
It was Friday afternoon, a late November day in 2003, and Ron Katz, a purchasing agent for Robert L. Frank Construction, poured over the latest earned value measurement reports. The results kept pointing out the same fact; the Lewis project was seriously over budget. Man-hours expended to date were running 30 percent over the projection and, despite this fact, the project was not progressing sufficiently to satisfy the customer. Material deliveries had experienced several slippages, and the unofficial indication from the project scheduler was that, due to delivery delays on several of the project’s key items, the completion date of the coal liquefaction pilot plant was no longer possible.
Katz was completely baffled. Each day for the past few months as he reviewed the daily printout of project time charges, he would note that the purchasing and expediting departments were working on the Lewis project, even though it was not an unusually large project, dollarwise, for Frank. Two years earlier, Frank was working on a $300 million contract, a $100 million contract and a $50 million contract concurrently with the Frank Chicago purchasing department responsible for all the purchasing, inspection, and expediting on all three contracts. The Lewis project was the largest project in house and was valued at only $90 million. What made this project so different from previous contracts and caused such problems? There was little Katz felt that he could do to correct the situation. All that could be done was to understand what had occurred in an effort to prevent a recurrence. He began to write his man-hour report for requested by the project manager the next day.
Robert L. Frank Construction Company was an engineering and construction firm serving the petroleum, petrochemical, chemical, iron and steel, mining, pharmaceutical, and food-processing industries from its corporate headquarters in Chicago, Illinois, and its worldwide offices. Its services include engineering, purchasing, inspection, expediting, construction, and consultation.
Frank’s history began in 1947 when Robert L. Frank opened his office. In 1955, a corporation was formed, and by 1960 the company had completed contracts for the majority of the American producers of iron and steel. In 1962, an event occurred that was to have a large impact on Frank’s future. This was the merger of Wilson Engineering Company, a successful refinery concern, with Robert L. Frank, now a highly successful iron and steel concern. This merger greatly expanded Frank’s scope of operations and brought with it a strong period of growth. Several offices were opened in the United States in an effort to better handle the increase in business. Future expansions and mergers enlarged the Frank organization to the point where it had fifteen offices or subsidiaries located throughout the United States and twenty offices worldwide. Through its first twenty years of operations, Frank had more than 2,500 contracts for projects having an erected value of over $1 billion.
Frank’s organizational structure has been well suited to the type of work undertaken. The projects Frank contracted for typically had a time constraint, a budget constraint, and a performance constraint. They all involved an outside customer such as a major petroleum company or a steel manufacturer. Upon acceptance of a project, a project manager was chosen (and usually identified in the proposal). The project manager would head up the project office, typically consisting of the project manager, one to three project engineers, a project control manager, and the project secretaries. The project team also included the necessary functional personnel from the engineering, purchasing, estimating, cost control, and scheduling areas. Exhibit I is a simplified depiction. Of the functional areas, the purchasing department is somewhat unique in its organizational structure. The
purchasing department is organized on a project management
basis much as the project as a whole would be organized. Within the purchasing department, each project had a project office that included a project purchasing agent, one or more project expeditors and a project purchasing secretary. Within the purchasing department the project purchasing agent had line authority over only the project expeditor(s) and project secretary. However, for the project purchasing agent to accomplish his goals, the various functions within the purchasing
Exhibit I. Frank organization
Exhibit II. Frank purchasing organization
department had to commit sufficient resources. Exhibit II illustrates the organization within the purchasing department.
HISTORY OF THE LEWIS PROJECT
Since 1998, the work backlog at Frank has been steadily declining. The Rovery Project, valued at $600 million, had increased company employment sharply since its inception in 1997. In fact, the engineering on the Rovery project was such a large undertaking that in addition to the Chicago office’s participation, two other U.S. offices, the Canadian office, and the Italian subsidiary were heavily involved. However, since the Rovery project completion in 2001, not enough new work was received to support the work force thus necessitating recent lay-offs of engineers, including a few project engineers.
Company officials were very disturbed with the situation. Frank’s company policy was to “maintain an efficient organization of sufficient size and resources, and staffed by people with the necessary qualifications, to execute projects in any location for the industries served by Frank.” However, the recent downturn in business meant that there was not enough work even with the reduction in employees. Further cutbacks would jeopardize Frank’s prospects of obtaining future large projects as prospective clients look to contractors with a sufficient staff of qualified people to accomplish their work. By contrast, supporting employees out of overhead was not the way to do business, either. It became increasingly important to “cut the fat out” of the proposals being submitted for possible projects. Despite this, new projects were few and far between, and the projects that were received were small in scope and dollar value and therefore did not provide work for very many employees.
When rumors of a possible construction project for a new coal liquefaction pilot plant started circulating, Frank officials were extremely interested in bidding for the work. It was an excellent prospect for two reasons. Besides Frank’s desperate need for work, the Lewis chemical process used in the pilot plant would benefit Frank in the long run by the development of state-of-the-art technology. If the pilot plant project could be successfully executed, when it came time to construct the full-scale facility, Frank would have the inside track as they had already worked with the technology. The full-scale facility offered prospects exceeding the Rovery project, Frank’s largest project to date. Top priority was therefore put on obtaining the Lewis project. It was felt that Frank had a slight edge due to successful completion of a Lewis project six years ago. The proposal submitted to Lewis contained estimates for material costs, man-hours, and the fee. Any changes in scope after contract award would be handled by change order to the contract. Both Lewis and Frank had excellent scope change control processes as part of their configuration management plans. The functional department affected would submit an estimate of extra man-hours involved to the project manager, who would review the request and submit it to the client for approval. Frank’s preference was for cost-plus-fixed-fee contracts.
One of the unique aspects stated in the Lewis proposal was the requirement for participation by both of Frank Chicago’s operating divisions. Previous Frank contracts were well suited to either Frank’s Petroleum and Chemical Division (P & C) or the Iron and Steel Division (I & S). However, due to the unusual chemical process, one that starts with coal and ends up with a liquid energy form, one of the plant’s three units was well suited to the P & C Division and one was well suited to the I & S Division. The third unit was an off-site unit and was not of particular engineering significance.
The award of the contract six weeks later led to expectations by most Frank personnel that the company’s future was back on track again. The project began inauspiciously. The project manager was a well-liked, easy-going sort who had been manager of several Frank projects. The project office included three of Frank’s most qualified project engineers.
In the purchasing department, the project purchasing agent (PPA) assigned to the project was Frank’s most experienced PPA. Bill Hall had just completed his assignment on the Rovery Project and had done well, considering the magnitude of the job. The project had its problems, but they were small in comparison to the achievements. He had alienated some of the departments slightly but that was to be expected. Purchasing upper management was somewhat dissatisfied with him in that, due to the size of the project, he didn’t always use the normal Frank purchasing methods; rather, he used whatever method he felt was in the best interest of the project. Also, after the Rovery project, a purchasing upper management reshuffling left him in the same position but with less power and authority rather than receiving a promotion he had felt he had earned. As a result, he began to subtly criticize the purchasing management. This action caused upper management to hold him in less than high regard but, at the time of the Lewis Project, Hall was the best person available.
Due to the lack of float in the schedule and the early field start date, it was necessary to fast start the Lewis Project. All major equipment was to be purchased within the first three months. This, with few exceptions, was accomplished. The usual problems occurred such as late receipt of requisition from engineering and late receipt of bids from suppliers.
One of the unique aspects of the Lewis project was the requirement for purchase order award meetings with vendors. Typically, Frank would hold award meetings with vendors of major equipment such as reactors, compressors, large process towers, or large pumps. However, almost each time Lewis approved purchase of a mechanical item or vessel, it requested that the vendor come in for a meeting. Even if the order was for an on-the-shelf stock pump or small drum or tank, a meeting was held. Initially, the purchasing department meeting attendees included the project purchasing agent, the buyer, the manager of the traffic department, the chief expeditor, and the chief Inspector. Engineering representatives included the responsible engineer and one or two of the project engineers. Other Frank attendees were the project control manager and the scheduler. Quite often, these meetings would accomplish nothing except the reiteration of what had been included in the proposal or what could have been resolved with a phone call or even e-mail. The project purchasing agent was responsible for issuing meeting notes after each meeting.
One day at the end of the first three-month period, the top-ranking Lewis representative met with Larry Broyles, the Frank project manager.
Lewis rep: Larry, the project is progressing but I’m a little concerned. We don't feel like we have our finger on the pulse of the project. The information we are getting is sketchy and untimely. What we would like to do is meet with Frank every Wednesday to review progress and resolve problems.
Larry: I’d be more than happy to meet with any of the Lewis people because I think your request has a lot of merit.
Lewis rep: Well, Larry, what I had in mind was a meeting between all the Lewis people, yourself, your project office, the project purchasing agent, his assistant, and your scheduling and cost control people.
Larry: This sounds like a pretty involved meeting. We’re going to tie up a lot of our people for one full day a week. I’d like to scale this thing down. Our proposal took into consideration meetings, but not to the magnitude we’re talking about.
Lewis rep: Larry, I’m sorry but we’re footing the bill on this project and we’ve got to know what’s going on.
Larry: I’ll set it up for this coming Wednesday. Lewis rep: Good.
The required personnel were informed by the project manager that effective immediately, meetings with the client would be held weekly. However, Lewis was dissatisfied with the results of the meetings, so the Frank project manager informed his people that a premeeting would be held each Tuesday to prepare the Frank portion of the Wednesday meeting. All of the Wednesday participants attended the Tuesday premeetings.
Lewis requests for additional special reports from the purchasing department were given into without comment. The project purchasing agent and his assistants (project started with one and expanded to four) were devoting a great majority of their time to special reports and putting out fires instead of being able to track progress and prevent problems. For example, recommended spare parts lists were normally required from vendors on all Frank projects. Lewis was no exception. However, after the project began, Lewis decided it wanted the spare parts recommendations early into the job. Usually, spare parts lists are left for the end of an order. For example, on a pump with fifteen-week delivery, normally Frank would pursue the recommended spare parts list three to four weeks prior to shipment, as it would tend to be more accurate. This improved accuracy was due to the fact that at this point in the order, all changes probably had been made. In the case of the Lewis project, spare parts recommendations had to be expedited from the day the material was released for fabrication. Changes could still be made that could dramatically affect the design of the pump. Thus, a change in the pump after receipt of the spare parts list would necessitate a new spare parts list. The time involved in this method of expediting the spare parts list was much greater than the time involved in the normal Frank method. Added to this situation was Lewis’s request for a fairly involved biweekly report on the status of spare parts lists on all the orders. In addition, a full time spare parts coordinator was assigned to the project.
The initial lines of communication between Frank and Lewis were initially well defined. The seven in-house Lewis representatives occupied the area adjacent to the Frank project office (see Exhibit III). Initially, all communications from Lewis were channeled through the Frank project office to the applicable functional employee. In the case of the purchasing department, the Frank project office would channel Lewis requests through the purchasing project office. Responses or return communications followed the reverse route. Soon the volume of communications increased to the point where response time was becoming unacceptable. In several special cases, an effort was made to cut this response time. Larry Broyles told the Lewis team members to call or go see the functional person (i.e., buyer or engineer) for the answer. However, this practice soon became the rule rather than the exception. Initially, the project office was kept informed
Exhibit III. Floor plan—Lewis project teams
of these conversations, but this soon stopped. The Lewis personnel had integrated themselves into the Frank organization to the point where they became part of the organization.
The project continued on, and numerous problems cropped up. Vendors’ material delays occurred, companies with Frank purchase orders went bankrupt, and progress was not to Lewis’s satisfaction. Upper management soon became aware the problems on this project due to its sensitive nature, and the Lewis project was now receiving much more intense involvement by senior management than it had previously. Upper management sat in on the weekly meetings in an attempt to pacify Lewis. Further problems plagued the project. Purchasing management, in an attempt to placate Lewis, replaced the project purchasing agent. Ron Katz, a promising young MBA graduate, had five years of experience as an assistant to several of the project purchasing agents. He was most recently a project purchasing agent on a fairly small project that had been very successful. It was thought by purchasing upper management that this move was a good one, for two reasons. First, it would remove Bill Hall from the project as PPA. Second, by appointing Ron Katz, Lewis would be pacified, as Katz was a promising talent with a successful project under his belt.
However, the project under direction of Katz still experienced problems in the purchasing area. Revisions by engineering to material already on order caused serious delivery delays. Recently requisitioned material could not be located with an acceptable delivery promise. Katz and purchasing upper management, in an attempt to improve the situation, assigned more personnel to the project, personnel that were more qualified than the positions dictated. Buyers and upper-level purchasing officials were sent on trips to vendors’ facilities that were normally handled by traveling expediters. In the last week the Lewis representative met with the project manager, Broyles:
Lewis rep: Larry, I’ve been reviewing these man-hour expenditures, and I’m disturbed by them.
Larry: Why’s that?
Lewis rep: The man-hour expenditures are far outrunning project progress. Three months ago, you reported that the project completion percentage was 30 percent, but according to my calculations, we’ve used 47 percent of the man hours. Last month you reported 40 percent project completion and I show a 60 percent expenditure of man-hours.
Larry: Well, as you know, due to problems with vendors’ deliveries, we’ve really had to expedite intensively to try to bring them back in line.
Lewis rep: Larry, I’m being closely watched by my people on this project, and a cost or schedule overrun not only makes Frank look bad, it makes me look bad.
Larry: Where do we go from here?
Lewis rep: What I want is an estimate from your people on what is left, manhour wise. Then I can sit down with my people and see where we are.
Larry: I’ll have something for you the day after tomorrow. Lewis rep: Good.
The functional areas were requested to provide this information, which was reviewed and combined by the project manager and submitted to Lewis for approval. Lewis’s reaction was unpleasant, to say the least. The estimated manhours in the proposal were now insufficient. The revised estimate was for almost 40 percent over the proposal. The Lewis representative immediately demanded an extensive report on the requested increase. In response to this, the project manager requested man-hour breakdowns from the functional areas. Purchasing was told to do a purchase order by purchase order breakdown of expediting and inspection man-hours. The buying section had to break down the estimate of the man-hours needed to purchase each requisition, many of which were not even issued. Things appeared to have gone from bad to worse.
The Lyle Construction Project
At 6:00 P.M. on Thursday in late October 1998, Don Jung, an Atlay Company project manager (assigned to the Lyle contract) sat in his office thinking about the comments brought up during a meeting with his immediate superior earlier that afternoon. During that meeting Fred Franks, the supervisor of project managers, criticized Don for not promoting a cooperative attitude between him and the functional managers. Fred Franks had a high-level meeting with the vice presidents in charge of the various functional departments (i.e., engineering, construction, cost control, scheduling, and purchasing) earlier that day. One of these vice presidents, John Mabby (head of the purchasing department) had indicated that his department, according to his latest projections, would overrun their man-hour allocation by 6,000 hours. This fact had been relayed to Don by Bob Stewart (the project purchasing agent assigned to the Lyle Project) twice in the past, but Don had not seriously considered the request because some of the purchasing was now going to be done by the subcontractor at the job site (who had enough man-hours to cover this additional work). John Mabby complained that, even though the subcontractor was doing some of the purchasing in the field, his department still would overrun its man-hour allocation. He also indicated to Fred Franks that Don Jung had better do something about this man-hour problem now. At this point in the meeting, the vice president of engineering, Harold Mont, stated that he had experienced the same problem in that Don Jung seemed to ignore their requests for additional man-hours. Also at this meeting the various vice presidents indicated that Don Jung had not been operating within the established standard company procedures. In an effort to make up for time lost due to initial delays that occurred in the process development stage of this project, Don and his project team had been getting the various functional people working on the contract to “cut corners” and in many cases to buck the standard operating procedures of their respective functional departments in an effort to save time. His actions and the actions of his project team were alienating the vice presidents in charge of the functional departments. During this meeting, Fred Franks received a good deal of criticism due to this fact. He was also told that Don Jung had better shape up, because it was the consensus opinion of these vice presidents that his method of operating might seriously hamper the project’s ability to finish on time and within budget. It was very important that this job be completed in accordance with the Lyle requirements since they would be building two more similar plants within the next ten years. A good effort on this job could further enhance Atlay’s chances for being awarded the next two jobs.
Fred Franks related these comments and a few of his own to Don Jung. Fred seriously questioned Don’s ability to manage the project effectively and told him so. However, Fred was willing to allow Don to remain on the job if he would begin to operate in accordance with the various functional departments’ standard operating procedures and if he would listen and be more attentive to the comments from the various functional departments and do his best to cooperate with them in the best interests of the company and the project itself.
INCEPTION OF THE LYLE PROJECT
In April of 1978, Bob Briggs, Atlay’s vice president of sales, was notified by Lyle’s vice president of operations (Fred Wilson) that Atlay had been awarded the $600 million contract to design, engineer, and construct a polypropylene plant in Louisiana. Bob Briggs immediately notified Atlay’s president and other highlevel officials in the organization (see Exhibit I). He then contacted Fred Franks in order to finalize the members of the project team. Briggs wanted George Fitz, who was involved in developing the initial proposal, to be the project manager. However, Fitz was in the hospital and would be essentially out of action for another three months. Atlay then had to scramble to appoint a project manager, since Lyle wanted to conduct a kickoff meeting in a week with all the principals present.
One of the persons most available for the position of project manager was Don Jung. Don had been with the company for about fifteen years. He had started with the company as a project engineer, and then was promoted to the position of manager of computer services. He was in charge of computer services for six months until he had a confrontation with Atlay’s upper management regarding the
Exhibit I. Atlay and Company organization chart
policies under which the computer department was operating. He had served the company in two other functions since—the most recent position, that of being a senior project engineer on a small project that was handled out of the Houston office. One big plus was the fact that Don knew Lyle’s Fred Wilson personally since they belonged to many of the same community organizations. It was decided that Don Jung would be the project manager and John Neber (an experienced project engineer) would be assigned as the senior project engineer. The next week was spent advising Don Jung regarding the contents of the proposal and determining the rest of the members to be assigned to the project team.
A week later, Lyle’s contingent arrived at Atlay’s headquarters (see Exhibit II). Atlay was informed that Steve Zorn would be the assistant project manager on this job for Lyle. The position of project manager would be left vacant for the time being. The rest of Lyle’s project team was then introduced. Lyle’s project team consisted of individuals from various Lyle divisions around the country, including Texas, West Virginia, and Philadelphia. Many of the Lyle project team members had met each other for the first time only two weeks ago.
During this initial meeting, Fred Wilson emphasized that it was essential that this plant be completed on time since their competitor was also in the process of preparing to build a similar facility in the same general location. The first plant finished would most likely be the one that would establish control over the southwestern United States market for polypropylene material. Mr. Wilson felt that Lyle had a six-week head start over its competitor at the moment and would like
Exhibit II. Lyle project team organizational chart
to increase that difference, if at all possible. He then introduced Lyle’s assistant project manager who completed the rest of the presentation.
At this initial meeting the design package was handed over to Atlay’s Don Jung so that the process engineering stage of this project could begin. This package was, according to their inquiry letter, so complete that all material requirements for this job could be placed within three months after project award (since very little additional design work was required by Atlay on this project). Two weeks later, Don contacted the lead process engineer on the project, Raphael Begen. He wanted to get Raphael’s opinion regarding the condition of the design package.
Begen: Don, I think you have been sold a bill of goods. This package is in bad shape.
Jung: What do you mean this package is in bad shape? Lyle told us that we would be able to have all the material on order within three months since this package was in such good shape.
Begen: Well in my opinion, it will take at least six weeks to straighten out the design package. Within three months from that point you will be able to have all the material on order.
Jung: What you are telling me then is that I am faced with a six-week schedule delay right off the bat due to the condition of the package. Begen: Exactly.
Don Jung went back to his office after his conversation with the lead process engineer. He thought about the status of his project. He felt that Begen was being overly pessimistic and that the package wasn’t really all that bad. Besides, a month shouldn’t be too hard to make up if the engineering section would do its work quicker than normal and if purchasing would cut down on the amount of time it takes to purchase materials and equipment needed for this plant.
CONDUCT OF THE PROJECT
The project began on a high note. Two months after contract award, Lyle sent in a contingent of their representatives. These representatives would be located at Atlay’s headquarters for the next eight to ten months. Don Jung had arranged to have the Lyle offices set up on the other side of the building away from his project team. At first there were complaints from Lyle’s assistant project manager regarding the physical distance that separated Lyle’s project team and Atlay’s project team. However, Don Jung assured him that there just wasn’t any available space that was closer to the Atlay project team other than the one they were now occupying.
The Atlay project team operating within a matrix organizational structure plunged right into the project (see Exhibit III). They were made aware of the delay that was incurred at the onset of the job (due to the poor design package) by Don Jung. His instructions to them were to cut corners whenever doing so might result in time savings. They were also to suggest to members of the functional departments that were working on this project methods that could possibly result in quicker turnaround of the work required of them. The project team coerced the various engineering departments into operating outside of their normal procedures due to the special circumstances surrounding this job. For example, the civil engineering section prepared a special preliminary structural steel package, and the piping engineering section prepared preliminary piping packages so that the purchasing department could go out on inquiry immediately. Normally, the purchasing department would have to wait for formal take-offs from both of these departments before they could send out inquiries to potential vendors. Operating in
Exhibit III. Atlay Company procurement department organizational chart
this manner could result in some problems, however. For example, the purchasing department might arrange for discounts from the vendors based on the quantity of structural steel estimated during the preliminary take-off. After the formal take-off has been done by the civil engineering section (which would take about a month), they might find out that they underestimated the quantity of structural steel required on the project by 50 tons. This was damaging, because knowing that there was an additional 50 tons of structural steel might have aided the purchasing department in securing an additional discount of $.20 per pound (or $160,000 discount for 400 tons of steel).
In an effort to make up for lost time, the project team convinced the functional engineering departments to use catalog drawings or quotation information whenever they lacked engineering data on a particular piece of equipment. The engineering section leaders pointed out that this procedure could be very dangerous and could result in additional work and further delays to the project. If, for example, the dimensions for the scale model being built are based on this project on preliminary information without the benefit of having certified vendor drawings in house, then the scale for that section of the model might be off. When the certified data prints are later received and it is apparent that the dimensions are incorrect, that portion of the model might have to be rebuilt entirely. This would further delay the project. However, if the information does not change substantially, the company could save approximately a month in engineering time. Lyle was advised in regards to the risks and potential benefits involved when Atlay operates outside of their normal operating procedure. Steve Zorn informed Don Jung that Lyle was willing to take these risks in an effort to make up for lost time. The Atlay project team then proceeded accordingly.
The method that the project team was utilizing appeared to be working. It seemed as if the work was being accomplished at a much quicker rate than what was initially anticipated. The only snag in this operation occurred when Lyle had to review/approve something. Drawings, engineering requisitions, and purchase orders would sit in the Lyle area for about two weeks before Lyle personnel would review them. Half of the time these documents were returned two weeks later with a request for additional information or with changes noted by some of Lyle’s engineers. Then the Atlay project team would have to review the comments/ changes, incorporate them into the documents, and resubmit them to Lyle for review/approval. They would then sit for another week in that area before finally being reviewed and eventually returned to Atlay with final approval. It should be pointed out that the contract procedures stated that Lyle would have only five days to review/approve the various documents being submitted to it. Don Jung felt that part of the reason for this delay had to do with the fact that all the Lyle team members went back to their homes for the weekends. Their routine was to leave around 10:00 A.M. on Friday and return around 3:00 P.M. on the following Monday. Therefore, essentially two days of work by the Lyle project team out of the week were lost. Don reminded Steve Zorn that according to the contract, Lyle was to return documents that needed approval within five days after receiving them. He also suggested that if the Lyle project team would work a full day on Monday and Friday, it would probably increase the speed at which documents were being returned. However, neither corrective action was undertaken by Lyle’s assistant project manager, and the situation failed to improve. All the time the project team had saved by cutting corners was now being wasted, and further project delays seemed inevitable. In addition, other problems were being encountered during the interface process between the Lyle and Atlay project team members. It seems that the Lyle project team members (who were on temporary loan to Steve Zorn from various functional departments within the Lyle organization) were more concerned with producing a perfect end product. They did not seem to realize that their actions, as well as the actions of the Atlay project team, had a significant impact on this particular project. They did not seem to be aware of the fact that they were also constrained by time and cost, as well as performance. Instead, they had a very relaxed and informal operating procedure. Many of the changes made by Lyle were given to Atlay verbally. They explained to the Atlay project team members that written confirmation of the changes were unnecessary because “we are all working on the same team.” Many significant changes in the project were made when a Lyle engineer was talking directly to an Atlay engineer. The Atlay engineer would then incorporate the changes into the drawings he was working on, and sometimes failed to inform his project engineer about the changes. Because of this informal way of operating, there were instances in which Lyle was dissatisfied with Atlay because changes were not being incorporated or were not made in strict accordance with their requests. Steve Zorn called Don Jung into his office to discuss this problem:
Steve: Don, I’ve received complaints from my personnel regarding your teams inability to follow through and incorporate Lyle’s comments/changes accurately into the P & ID drawings.
Don: Steve, I think my staff has been doing a fairly good job of incorporating your team’s comments/changes. You know the whole process would work a lot better, however, if you would send us a letter detailing each change. Sometimes my engineers are given two different instructions regarding the scope of the change recommended by your people. For example, one of your people will tell our process engineer to add a check valve to a specific process line and another would tell him that check valves are not required in that service.
Steve: Don, you know that if we documented everything that was discussed between our two project teams we would be buried in paperwork. Nothing would ever get accomplished. Now, if you get two different instructions from my project team, you should advise me accordingly so that I can resolve the discrepancy. I’ve decided that since we seem to have a communication problem regarding Jung’s Confrontation
engineering changes, I want to set up a weekly engineering meeting for every Thursday. These meetings should help to cut down on the misunderstandings, as well as keeping us advised of your progress in the engineering area of this contract without the need of a formal status report. I would like all members of your project staff present at these meetings.
Don: Will this meeting be in addition to our overall progress meetings that are held on Wednesdays?
Steve: Yes. We will now have two joint Atlay/Lyle meetings a week—one discussing overall progress on the job and one specifically aimed at engineering.
On the way back to his office Don thought about the request for an additional meeting. That meeting will be a waste of time, he thought, just as the Wednesday meeting currently is. It will just take away another day from the Lyle project team’s available time for approving drawings, engineering, requisitions, and purchase orders. Now there are three days during the week where at least a good part of the day is taken up by meetings, in addition to a meeting with his project team on Mondays in order to freely discuss the progress and problems of the job without intervention by Lyle personnel. A good part of his project team’s time, therefore, was now being spent preparing for and attending meetings during the course of the week. “Well,” Don rationalized, “they are the client, and if they desire a meeting, then I have no alternative but to accommodate them.”
When Don returned to his desk he saw a message stating that John Mabby (vicepresident of procurement) had called. Don returned his call and found out that John requested a meeting. A meeting was set up for the following day. At 9:00 A.M. the next day Don was in Mabby’s office. Mabby was concerned about the unusual procedures that were being utilized on this project. It seems as though he had a rather lengthy discussion with Bob Stewart, the project purchasing agent assigned to the Lyle project. During the course of that conversation it became very apparent that this particular project was not operating within the normal procedures established for the purchasing department. This deviation from normal procedures was the result of instructions given by Don Jung to Bob Stewart. This upset John Mabby, since he felt that Don Jung should have discussed these deviations with him prior to his instructing Bob Stewart to proceed in this manner:
Mabby: Don, I understand that you advised my project purchasing agent to work around the procedures that I established for this department so that you could possibly save time on your project.
Jung: That’s right, John. We ran into a little trouble early in the project and started running behind schedule, but by cutting corners here and there we’ve been able to make up some of the time.
Mabby: Well I wish you had contacted me first regarding this situation. I have to tell you, however, that if I had known about some of these actions I would never have allowed Bob Stewart to proceed. I’ve instructed Stewart that from now on he is to check with me prior to going against our standard operating procedure.
Jung: But John Stewart has been assigned to me for this project. Therefore, I feel that he should operate in accordance with my requests, whether they are within your procedures or not.
Mabby: That’s not true. Stewart is in my department and works for me. I am the one who reviews him, approves the size of his raise, and decides if and when he gets a promotion. I have made that fact very clear to Stewart, and I hope I’ve made it very clear to you, also. In addition, I hear that Stewart has been predicting a 6,000 man-hour overrun for the purchasing department on your project. Why haven’t you submitted an additional change request to the client?
Jung: Well, if what Stewart tells me is true the main reason that your department is short man-hours is because the project manager who was handling the initial proposal (George Fitz) underestimated your requirements by 7,000 manhours. Therefore, from the very beginning you were short man-hours. Why should I be the one that goes to the client and tells him that we blew our estimate when I wasn’t even involved in the proposal stage of this contract? Besides, we are taking away some of your duties on this job, and I personally feel that you won’t even need those additional 6,000 man-hours.
Mabby: Well, I have to attend a meeting with your boss Fred Franks tomorrow, and I think I’ll talk to him about these matters.
Jung: Go right ahead. I’m sure you’ll find out that Fred stands behind me 100 percent.
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