BOEING COMMERCIAL AIRPLANE GROUP HEADQUARTERS A
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1 BOEING COMMERCIAL AIRPLANE GROUP HEADQUARTERS A Case Study in Contract Incentives AGENDA Project Background Baugh Incentive Program Headquarters Plan Owner Issues Incentive Fee Administration Improvements Summary PROJECT BACKGROUND 309,000 sq ft Office Building 11 acres of site development 18 month duration Contractor on board at programming stage Baugh Construction is one of our Strategic Partners Cost Plus Fixed Fee contract, $60 mil. Fee negotiated for construction 1
2 REINFORCE BAUGH CULTURE Entrepreneurial Personal Accountability for Fees In the business game, you keep score with money. SOME COMMON INCENTIVES: Cost/Budget Safety Schedule Quality Teamwork/Cooperation Preconstruction Services Quality Communications Morale OBJECTIVE OR SUBJECTIVE? YES MAYBE? NO
3 BAUGH CONSTRUCTION COMPANY May/June/July Aug/Sept/Oct Nov/Dec/Jan Feb/Mar/Apr May/June/July Aug/Sept/Oc QUALITY % Value Y/N Q1 Y/N Q2 Y/N Q3 Y/N Q4 Y/N Q5 Y/N Q6 Completed installation meets Boeing expectations 3% 50% 75% 75% 75% 75% 75% Completed work meets or exceeds requirements of plans, specs and industry standards 3% 75% 75% 75% 75% 75% 75% No rework required due to poor workmanship 3% 50% 25% 75% 75% 75% 75% QCR's are not excessive and resolved in a timely manner 3% 100% 75% 100% 100% 100% 100% Subcontractor work effort properly coordinated to minimize rework 3% 50% 50% 75% 75% 75% 75% Quality issues are pro actively communicated; corrective action plans are presented 3% 75% 50% 75% 50% 100% 100% COST Changes are identified; cost and schedule impacts are provided in a timely manner 4% 75% 75% 75% 100% 100% 100% Resources are being utilized effectively 3% 100% 75% 75% 75% 75% 75% Work packages are being reported against and tracked 2% 100% 100% 100% 100% 100% 100% Best low cost alternatives are being used 3% 75% 75% 75% 50% 75% 100% Costs are within the budget on completed work elements 3% 100% 75% 75% 75% 75% 100% Monthly and earned value forecasts are informative, accurate and indicate trends 3% 100% 100% 100% 100% 100% 100% Contractor negotiates contracts and/or changes in Boeing's best interest in mind 4% 75% 25% 25% 50% 75% 75% Invoicing is accurate and complies with contract terms and conditions 3% 75% 50% 75% 75% 100% 100% 25% DELIVERY Baseline schedule dates are being maintained without sacrificing quality 2% 75% 50% 75% 50% 75% 50% Limited overtime expended to maintain schedule 2% 100% 50% 100% 100% 25% 25% Schedule meetings are being utilized to coordinate need dates and interfaces 3% 75% 50% 50% 25% 100% 100% Project schedule reports are timely and informative 4% 75% 50% 25% 25% 100% 100% Schedule slides are identified and reported in a timely fashion and recovery plan provided 3% 75% 25% 25% 25% 100% 100% Timely input of RFI's and Submittals 4% 75% 50% 50% 75% 100% 100% SAFETY Contractor enforces project Health and Safety program 2% 100% 100% 100% 75% 75% 100% Project is maintaining regular training opportunities 2% 100% 100% 100% 100% 100% 100% Monthly and incident reporting are timely 2% 75% 75% 100% 75% 100% 100% Routine safety issues are being addressed by trade workers through observation and feed 4% 75% 75% 75% 100% 100% 100% Worker attitude towards safety has improved (validated by surveys) 4% 50% 75% 100% 75% 50% 100% Communication on trends in near misses, safety violations, etc are communicated 4% 50% 100% 75% 75% 100% 100% by Baugh, subcontractors and trade workers MORALE Project Team is functioning as cohesive group 3% 75% 50% 75% 75% $0 100% 100% Communication is open and timely 3% 75% 50% 75% 75% $0 100% 100% Baugh's staff is responsive to Boeing's needs 3% 50% 25% 50% 50% $0 100% 100% Baugh's team is effectively leading the construction effort. 3% 75% 75% 75% 50% $0 100% 100% Trade workers are motivated and efficient 3% 100% 100% 100% 100% $0 100% 100% Recognition for personal or crew outstanding accomplishments to the benefit of the project 3% 75% 100% 75% 50% $0 75% 75% Sharing and incorporating best practices and lessons learned 3% 75% 100% 75% 50% $0 50% 75% 21% 1/3 Incentive Fee Base Fee 2/3 QUALITY No rework required due to poor workmanship COST Costs are within the budget on completed work elements DELIVERY Limited overtime expended to maintain schedule SAFETY Contractor enforces project health and safety program MORALE Communication is open and timely Incentive Matrix 3
4 100% INCENTIVE RESULTS BY QUARTER 90% % % % Q1 Q2 Q3 Q4 Q5 Q6 OWNERS ISSUES They are our Partner why do they need an incentive? What does Boeing gain from the incentive? Will the Project benefit? Not seeing value in other Regions Evaluate them on???? Subjective vs. objective ADMINISTRATING THE INCENTIVE Who evaluates the contractor? Have the right people evaluate All or nothing 25%. 50%. 75%. 100% Different views on what 25% means - improvements Keep personalities out of discussion Need to review the overall picture for the quarter not one issue Subject Matter Expert input Sharing of the data; need specifics both + and - 4
5 IMPROVEMENTS Clearer understanding of expectations Improve process for feedback Need to evaluate the evaluators Clarify evaluation criteria SUMMARY Excellent discussion/feedback between Boeing and Baugh The process provided improvement 5
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