1 st PMI AGC ENERGY FORUM: DMS DEBATES June 2, 2010 EPCs Should be on a Bonus Incentive Scheme to Exceed Contract Expectations Dependability, Expertise, and Safety Jose Luis Bustamante Vice President & General Manager – MENA Region Fluor Mideast Limited

© 2009 Fluor Corporation. All rights reserved. HO ppt 2 EPCs Should be on a Bonus Incentive Scheme to Exceed Contract Expectations  Table of Contents Type of Incentives Outcome of Incentives Considerations on LSTK Projects Potential Indicators Safety Incentives Case Example, Ras Laffan Common Offplot

© 2009 Fluor Corporation. All rights reserved. HO ppt 3 Type of Incentives  Cost Incentives  Performance Incentives (SAFETY)  Schedule / Delivery Incentives  Combination Multiple Incentives

© 2009 Fluor Corporation. All rights reserved. HO ppt 4 Outcome of Incentives  Induce Actions or Motivate Efforts  Discourage Inefficiency and Waste  Promote Partnering Approach to resolve issues  Creates Expectation of Reward / Punishment

© 2009 Fluor Corporation. All rights reserved.  Traditionally, lump sum contracts may create an adversary relation between contractors and clients.  An alignment on certain project objectives can be reached by establishing incentive programs.  Since price is fixed, other areas available are safety, schedule and quality. Considerations on LSTK Projects

© 2009 Fluor Corporation. All rights reserved.  Schedule Agreed upon milestones with gain/pain programs (i.e. mechanical completion, meet specific milestones) Agreed upon milestones with gain/pain programs (i.e. mechanical completion, meet specific milestones)  Quality Based on audit reports monetized as per an agreed up front scheme or a combination with Schedule (i.e. time to ramp up production) Based on audit reports monetized as per an agreed up front scheme or a combination with Schedule (i.e. time to ramp up production)  Safety Fluor is an industry leader and with significant experience on these programs. Fluor is an industry leader and with significant experience on these programs. Considerations on LSTK Projects (cont)

© 2009 Fluor Corporation. All rights reserved. Fluor Safety Performance versus Industry Fluor Fluor – Total Case Incidence Rate (recordables) No. of Cases (per 200,000 hours) Fluor CII * Sources: *Construction Industry Institute (CII). Latest data available Fluor Objective: Zero Incidents Fluor

© 2009 Fluor Corporation. All rights reserved.  Contractor Incentive Part of the Fee at risk Part of the Fee at risk  Project Team Incentives Shared by all project parties (client, contractors and subcontractors) Shared by all project parties (client, contractors and subcontractors) Could be monetary or not monetary Could be monetary or not monetary  Project Funded Ideally site wide Ideally site wide Safety Incentives

© 2009 Fluor Corporation. All rights reserved.  Client:RasGas (QP/ExxonMobil and partners)  Name:Ras Laffan 3 Common Offplot Projects  Contract:EPCM  TIC:1.5 billion USD  Schedule:4Q05 to 3Q09  Lost time Incidence Rate: million hours and 950 days WITHOUT A LOST TIME INCIDENT Safety Incentives at Work

© 2009 Fluor Corporation. All rights reserved.  Schedule The industry was extremely busy and the volume of ongoing work in Ras Laffan was very large –RasGas LNG Trains –QatarGas LNG Trains –Laffan Condensate Refinery –Shell Pearl GTL Pressure on schedule was high. Ras Laffan 3 Common Offplot

© 2009 Fluor Corporation. All rights reserved. Ras Laffan 3 Common Offplot (continued)  Site Conditions Busiest time in Ras Laffan City. Manpower peak: 9,000 workers with tens of thousands trained  Resources Lots of growth in EPC industry forced the sourcing of labor and supervision with limited experience and skills, from new places, with limited safety culture. 40 nationalities under Fluor supervision in the project

© 2009 Fluor Corporation. All rights reserved. Ras Laffan 3 Common Offplot (continued)  Zero Accidents Program in Place All Fluor employees are assessed on annual basis on safety performance. Fluor believes that all accidents are predictable and preventable. Fluor follows a proprietary Safety Program called Zero Accidents Program

© 2009 Fluor Corporation. All rights reserved.  Program Includes: Orientation / Education Pre Task/ Pre Job Planning Assessment / Audit Recognition / Incentives Incidence Investigation Substance Abuse prevention  Program indicators: Training (excluding orientation) – amount on weekly basis. Hazard elimination – number of hazards eliminated on daily basis (Over 982,000 over the Ras Gas project life) Management-attended walk abouts – number on weekly basis Adopt a Crew meetings – number held on weekly basis Safety meetings – number held on weekly basis Weekly self-assessments – number performed on weekly basis Near misses – number of near misses recorded on weekly basis Ras Laffan 3 Common Offplot (continued)

© 2009 Fluor Corporation. All rights reserved. Ras Laffan 3 Common Offplot In addition to the daily and weekly activities the project had a Quarterly Safety Celebration. Participation of all employees, Client and Fluor project teams and senior management Recognition of individuals and team performance Rewards to significance contributors Lunch / Dinner Celebration

© 2009 Fluor Corporation. All rights reserved. Ras Laffan 3 Common Offplot (continued)  Bottom Line “The Common Offplot Projects have set new benchmarks for project execution excellence particularly in the area of safety performance,” Dave Marchak, RasGas Venture Group Manager.

© 2009 Fluor Corporation. All rights reserved. Thank You FLUOR MIDEAST LTD P.O. Box 46858, Abu Dhabi, UAE Tel