TURNER INDUSTRIES GROUP, LLC
LESSONS LEARNED
POST-HURRICANE TURNAROUNDS
Houston Business Roundtable
May 10th, 2006
REPRESENTATIVE TURNAROUNDS
Case 1 - 90,000 BPD refinery in Colorado
•Full plant outage 1st qtr 06’ - planned 42 days oil-to-oil
•350,000 direct man-hours (all contractors)
•Peak loading of approximately 1,000 directs
 Case 2 - 200,000 BPD refinery in Louisiana
•FCCU, Alky, HDS & Sulfur Block 1st qtr 06’ - planned 32 days
oil-to-oil
•100,000 direct man-hours (Turner only)
•Peak loading of approximately 350 directs
CASE 1
350,000 direct man-hours with a total installed cost of
approximately $80MM (including Capital Projects)
Planned peak manpower loading of approximately 1,000
directs
Planned for 4th qtr 2005 (subsequently deferred to 1st qtr
2006)
HDS, Crude & SRU 3-year run-life to Spring 2008
AU, FCC, Cat-Poly, VRU & Amine 5-year run-life to Spring
2010
1,200 expense work items
ULSD project ($450MM)
FCC revamp adding a 3rd stage separator ($4MM)
CAPEX scope ($2MM)
The turnaround presented specific issues not representative of a
"typical" turnaround
(2) large capital projects with an anticipated peak manpower
at or around the turnaround time frame
TA hampered by a lack of availability with regard to plant
access, lay down areas, office locations, contractor trailers,
Owner personnel, contractors and craftsman
Local market is not conducive to heavy industrial
construction
The turnaround timing was during winter conditions
TA would reach an over maximum manpower density
To account for these factors, the estimated productivity factors
were increased over typical industry standards
50% productivity loss (30% outage factor and 20% nontypical outage factor)
10% contingency
15% allowance for scope growth
Concerned with ability to attract and retain craft labor
Instituted plan to over-man the turnaround in the initial stages
in order to assure retention for;
 Scope growth
 Contingency
 Unanticipated productivity losses
 Absenteeism & attrition
 Recruiting issues
 P3 schedule developed to account for resource loading
contingency
 Developed schedule under normalized conditions (no
allowances or contingency)
 Leveling techniques used to optimize the schedule to
front-end load resources (direct labor)
 Added productivity factors to allow for reconciliation to
the final budgeted man-hours
 Developed external Excel based spreadsheet used to
adjust to additional 25% man-power allowance
 Re-allocated manpower in P3 via hard logic
Design craft wage rates to attract quality craft & supervision
Original wages were set for 4th qtr 05’ execution
TA execution window was deferred to 1st qtr 06’
Conducted an analysis of current, prevailing and anticipated
wage rates that would be required for the new TA timeframe
TA, originally targeted for 4th qtr 05’, was on the downward
side of the 4th qtr 05’ peak
New TA window would be in the midst of peak manpower
requirements in the Gulf South
This presented several critical (high risk) factors with regard to
contracting and labor
Description of Threat
Severity Probability
Lack of resources (general)
HIGH
MEDIUM
Lack of qualified crafts and their availability
HIGH
HIGH
Lack of resources in view of Colorado
HIGH
MEDIUM
Continual decline of qualified work force
HIGH
HIGH
Workforce attracted away from industrial
sector
Lack of specialty welders
HIGH
HIGH
MEDIUM MEDIUM
Impact of Threats
•Unable to attract craft
•Unable to adequately
staff
•Safety concerns
•Potential QA issues
•Increased personnel
turnover
•Schedule slippage
•Increased LPO
Additional risk to TA due to industry manpower requirements
Would need to implement new wage & compensation structure
Allow for “market-plus” condition w/ “Market” = Gulf
South
Ensures wage rates would be sufficiently higher than those
in the Gulf-South
Coupled with other incentives and completion bonuses
would allow us to attract and maintain quality craft &
supervision
However, Hurricane’s Katrina & Rita shifted the industry and
further exposed the TA
Projects & TA’s were shifting to 1st qtr 06’, already the predicted
peak
Increased industry peak manpower requirements above those
previously forecasted
Re-build effort attracted craftsman away from the industrial
sector
Developed risk model for three different wage rate / incentive
structures
Based on HBR data and contractor surveys
Survey contractors for current / relevant experiences with
post-hurricane wages
Optimize wage structure to remove profit motive
Ensure increase goes to craft
Develop flexible attractive wage & incentive structure for
current environment
Offer contingency for RLT approval
OPTION “0” - Maintain current wage & compensations structure
at pre-hurricane structure
Description of Threat
Probability
Consequence
Forces contractors to recruit non-familiar craftsman
HIGH
Safety, QA, productivity
Forces contractors to recruit less skilled craftsman to
match wage rates
Lower skill set equals decreased safety performance
Lower skill set equals decreased productivity
HIGH
Safety, QA, productivity
Will increased attrition and turnover (less dedicated
craftsman)
Increases recruiting time frame
HIGH LTI, Recordable, Fatality
MEDIUM Cost & schedule creep
(LPO)
MEDIUM Safety, QA, productivity
HIGH
Cost & schedule creep
(LPO)
OPTION “1” - Modify wage & compensation to “level 1”
Added approximately 10% to wages w/ an added safety &
completion bonus equivalent to 10% of base wage rate
Description of Threat
Increases TA cost
Probability
HIGH
Consequence
Approximate $1MM
Forces contractors to recruit non-familiar craftsman
MEDIUM Safety, QA, productivity
Forces contractors to recruit less skilled craftsman to
match wage rates
Lower skill set equals decreased safety performance
MEDIUM Safety, QA, productivity
Lower skill set equals decreased productivity
Will increased attrition and turnover (less dedicated
craftsman)
Increases recruiting time frame
LOW
LTI, Recordable, Fatality
LOW
Cost & schedule creep
(LPO)
MEDIUM Safety, QA, productivity
MEDIUM Cost & schedule creep
(LPO)
OPTION “2” - Modify wage & compensation to “level 2”
Added approximately 25% to wages w/ an added safety &
completion bonus equivalent to 25% of base wage rate
Recommended structure to drive risk profile to “low”
(schedule driven TA)
Description of Threat
Probability
Consequence
Increases TA cost
HIGH
Approximate $5MM
Forces contractors to recruit non-familiar craftsman
LOW
Safety, QA, productivity
Forces contractors to recruit less skilled craftsman to
match wage rates
Lower skill set equals decreased safety performance
Lower skill set equals decreased productivity
LOW
Safety, QA, productivity
LOW
LOW
Will increased attrition and turnover (less dedicated
craftsman)
Increases recruiting time frame
LOW
LTI, Recordable, Fatality
Cost & schedule creep
(LPO)
Safety, QA, productivity
LOW
Cost & schedule creep
(LPO)
Turnaround Results
Wages: The wage structure ended up below current Gulf Coast
norm as competition grew from other turnarounds and posthurricane rebuilding efforts
Wage rates were set at option “1” with safety &
completion bonus to be earned separate from wages
The execution team did not implement contingency for
raising wages to option “2”
Per diem and travel were paid
 The safety & completion bonus were separated from wage
rates instead of earned in real time
Wages affected recruiting but did not affect retention
Manpower: The turnaround was 10-15% under-manned and 2025% under managed.
Contingency factor too low (10%)
Used incorrect resource profile as the basis for recruiting
Manpower profile based on estimated man-hours per logic
driven P3 schedule
No allowance for over-manning
No allowance for contingency or scope growth
Relaxed English speaking requirement to attract craft of
Hispanic decent and from Puerto Rico
Absenteeism: was report to be at approximately 10%
Although securing manpower was an issue, absenteeism &
attrition appeared to be a non-issue
Safety, Quality & Productivity: poor performance by all
standards
(4) recordable injuries on 500,000 direct man-hours
(including capital projects)
Weld rejection rate was high, especially on alloy piping
Leaks on start-up
Start-up delayed due to Capital Projects, expense work
completed on time
Contributing factors:
Competing turnarounds in Gulf Coast paying higher wages
than anticipated
Per diem for working locally (per diem never adjusted)
Contractors were stretched beyond their ability to provide
a “known” work force. Recruiting non-familiar craftsman or
craft from non-Gulf Coast regions
Inadequate allocation of QC resources (Owner driven)
Inordinate amount of late scope additions & discovery
items (added 150,000 man-hours)
Increased unit congestion above 1,500 directs vs. 1,000
planned
CASE 2
100,000 Turner direct man-hours with a total installed cost
of approximately $125MM (including Capital Projects)
Planned peak manpower loading of approximately 1,000
directs
TA premises set by Owner for a sequential unit turnaround
of the FCC, Alky, HDS and Sulfur units
FCC revamp executed by Cat Specialist
HDS & Sulfur units executed by GC
Turner-Industries expense and CAPEX related scope of
work in the FCC and Alky units.
The Owners planning premises made some allowances for typical
turnaround inefficiencies
Owner Alliance estimating manual plus 20% or Page &
Nations plus 40%
Expected significant scope growth through discovery
Mobilized contractor supervision and some craft early
To account for these factors, the Owner made allowance over their
typical standards
Allowance for discovery, analysis, recommendation & repair
in TA timeline
Concerned with ability to attract and retain craft labor
Manpower / resource profiles
Resource loading the P3 schedule with the total
estimated man-hours
Inclusive of productivity factors
Included indirects on an individual task basis
Levelized using a systems turnover based priority
Craft labor rates were estimated pre-hurricanes
Adjusted 1st qtr 06’
Subsequent analysis of the prevailing wages rates and
compensation structures for competing projects and
turnarounds forced several revisions to the compensation
structure
Initially the wages were set for the Gulf-Coast standard
plus $3.50 per hour with an additional $3.50 per hour
completion bonus
The final rate structure was set (2) weeks prior to the oilout date to include the total $7.00 per hour as part of the
base wage with an additional $3.50 per hour completion
bonus.
Turnaround Results
Wages: Owner set the wage rates at post-hurricane rates plus
additional incentives
Per diem was paid but no reimbursement was allowed for
travel
Wages proved to be sufficient to attract craft labor
Attrition was not due to wages
Per diem was not adequate to cover the lodging costs posthurricane($60 per day per diem versus $90 per day hotel costs)
Manpower: Turner was 10-12% under-manned in the initial
stages of the TA
Turner’s was able to satisfy their manpower needs pre-TA
Previously committed craftsman were either not showing up
or left while in process
Several factors contributed to the depletion of the recruited work
force;
The accelerated start of competing projects / turnarounds
plus escalating wages by competing projects
(3) day orientation cycle (unpaid)
Per diem proved to be inadequate for local housing market
post-hurricanes
Estimating standards used in 2004 and proved to be inaccurate for a 2006 TA
TA Execution was during peak manpower requirements in
the industry
No allowances for scope growth or discovery in resource
profile
Resource profile in P3 proved to be inaccurate;
Pipe resources (fitters & welders) were identified in the P3
schedule for only those activities that involved pipe welding
Other activities normally classified as piping activities were
classified as boilermaker activities
Gives a false measurement of the actual pipe fitters required
for the scheduled work.
Manpower concerns were alleviated by several factors:
Late turnover of systems from decommissioning pushed
schedule activities
Recruiting effort continued with provisions made for
securing non-traditional labor sources
Gained peak manpower earlier than scheduled
Turner was successful in achieving peak manpower within
their scheduled window (adjusted for late turnover)
Owner late in turning over discovery work items
Absenteeism: Estimated at 10-12%
Virus attack on TA (craft, staff & supervision)
An issue with the critical craft such as pipe fitters and
welders
For example: Resource profile calls for (4) welders, the
absence of (1) represents a 25% absent rate
Completion bonus not a factor at beginning of TA
Criteria helped as craft banked several weeks of bonus (no
more than 2 absences allowed)
Attrition was not due to wages
General malaise in industry
Safety, Quality & Productivity: acceptable performance
(1) recordable injury
High weld reject rate. Fit-up issues due to lack of qualified
pipe fitters lead to weld reject rates
Mechanical craft with productivity ranging from a low of .85
to a high approaching 1.00 (<1.00 poor)
Piping craft productivity is forecasted at a .65
No leaks delaying systems start-up
Instituted strict QC program to follow flange make-up
Increased QC staff above previous “normal”
Other contributing factors;
Productivity factor used for estimating and resource loading
was too low for current condition of labor market
Added requirements of post-BP environment increases travel
time and complicates logistics
A factor of 40% is to low for a turnaround of this magnitude
and complexity
Crew mixture of foreman to craft was set by Owner on a 121 basis, revised to a 10-1 ratio but this still proves to be too
high in a turnaround environment
Owner late in turning over discovery work items
Improper interpretation of Page unit rates
Page is base rate “plus” inefficiencies for non-TA
construction activities
No account made for 2-year difference in labor market and
post-hurricane environment
Lessons Learned
Wages & incentives;
Proved to be insufficient for recruiting in a labor market not
in view of the Gulf-South, proved effective in recruiting for
Gulf-South work
Wages had limited impact on retention as competition
increased
Incentives proved effective in retaining craft toward end of
TA as they start seeking ROF
Recognize the market & set attractive per diem
Possibly include incentives in bare wages
Estimating
Revise estimating standards to account for current
environment. History does not apply.
Plan for contingency wage increases
Historical issue of under-estimating contingency & scope
growth
Anticipate the added requirements of the post-BP
environment (increase in travel time and complicated logistics)
Increase indirect staffing required to plan, monitor and
coordinate craft (supervision, QC, etc.)
Planning
Develop discovery work within first TA 30% of duration
Front-end load manpower, back-end load scope to first 50%
duration
Develop TA schedule to allow for over-manning in first 50%
of duration
Include allowances in resource profile as well as timeline
Management:
Craft supervision has increased responsibility for planning,
productivity & QA/QC. Decrease ratio of craft to foreman to
6-8:1
Anticipate additional QC staffing to assure tightness