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Construction Project Improvement Through Selected Integrated Business Process Re-design and Supporting Technology Enablers

Course: APRJ-699 Applied Project

By: David Walsh

Advisor: Joyce Fortune

Date: May 31, 2009

Word Count: 15,029

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ABSTRACT

North American Construction group has grown significantly over the past 5 years. However, field level operations business processes and technology have not kept pace in terms of maintaining efficiency and delivering the levels of client satisfaction that are required in today’s competitive environment. The purpose of the study is to develop operations management strategies and devise a major business process for change, supported by software technologies, which will drive efficiencies and greater client satisfaction. The research questions that are explored are:

1. What operational strategies and objectives will best support NACG business environment?

2. What key production processes and control system provide value? 3. What root causes of inefficiencies exist? 4. Which key business process requires alignment and redesign?

This study reviews literature and related theory surrounding Business Process Reengineering and Management (BPR, BPM), and it’s relation to integrated information technology enablers. In addition, literature relating to operations management strategy development and business process design from a market client perspective is reviewed. An integrated strategy is expected to provide synergy and continuous improvement for greater Organizational Competitiveness and efficiency. An investigation using cross functional department discovery sessions and a field project management survey indicate a non-integrated approach to business process design has resulted in numerous inefficiencies. The analysis identifies the root cause of these inefficiencies and client dissatisfactions. Operational strategies are developed to focus on organizational capacity and efficiency, business process development and design and information technology. For management, results provide strategic guidance in using an integrated Operations Management and BPR to counteract the dynamic competitive environment. The study identifies major integrated work streams through an extensive review of business processes and the value chain. This provides a framework for an integrated strategic BPR approach to project selection and implementation in the future. Recommendations are developed with the selection of one major integrated work stream for redesign. This work stream’s existing process is detailed for requirements and understanding in order to select a software enabler and new process design. A detailed software evaluation based on the work steam business requirements shows that it is necessary to change the current legacy system. A proposed redesign business process and prototype taking into consideration client and field requirements results in a strong link to developed operations strategy and objectives. Integration of third party software with the

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redesigned business process and existing systems is a complex and high risk task. The recommendations include an integration framework with the organization’s ERP system. A project execution framework is proposed as a guide to develop a detailed plan for the selected process change and software implementation. This study proposes a more strategic program selection and market client perspective. Process Improvement is an organizational approach to defining, planning, implementing, and monitoring change. Business process change activities include development of business vision and process objectives, identify processes to be redesigned, understand the existing process requirements, identify technology enablers and design the future state business process. The main accomplishment of this research is the application of operations management strategy theory, business process reengineering and design to develop key operation strategic objectives and selection of a key business process for change to support critical field and client requirements. In addition, by developing key organizational work streams it provides an excellent framework for future BPR prioritization and implementation.

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Table of Contents

Introduction ...........................................................................................................6 General Background for the Study ....................................................................6 Purpose of the Study.........................................................................................7

Research Purpose and Research Questions........................................................7 Guiding Questions.............................................................................................7 Scope ................................................................................................................8 Significance of the Study...................................................................................8

Literature Review and Related Theory .................................................................8 Framework of Review........................................................................................8 Operations Management...................................................................................9 Business Process Change and Management .................................................14 Design .............................................................................................................22

Design Objectives........................................................................................22 Customer Process Design Objectives .........................................................23

IT Strategy and Objectives ..............................................................................25 Business to Business E-Commerce.............................................................27 Enterprise Resource Planning Systems ......................................................27 Integration....................................................................................................28

Process Improvement Methodology ................................................................29 Research Design and Data Collection ................................................................30

Business Processes Discovery Sessions........................................................30 Field/Project Management Survey ..................................................................31

Results................................................................................................................32 Discovery Sessions .........................................................................................32 Field/Project Management Survey ..................................................................35

Analysis ..............................................................................................................37 Root Clause Analysis of Major Findings..........................................................37 Developing Operations Vision and Strategy....................................................39 Identification of Processes for Potential Re-design .........................................43

Recommendations..............................................................................................46 Selection of Key Process for Re-Design .........................................................46 Understand Existing Process ..........................................................................47 IT Technology Enablers ..................................................................................49

Evaluation....................................................................................................51 Design and Build a Prototype of the Process ..................................................53 Implementation................................................................................................57 Summary of Recommendations ......................................................................57

Conclusions ........................................................................................................58 APPENDIX A – North American Construction Group Summary Information ......60 APPENDIX B – The Process of Selecting a Software Vendor and an EC Package............................................................................................................................61

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APPENDIX C – Project Management Field Survey ............................................62 APPENDIX D – Environmental Analysis North American Construction Group ... 67 APPENDIX E – NACG Major Processes ............................................................69 APPENDIX F – NACG Key Business Processes................................................73 REFERENCES ...................................................................................................74

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Introduction

General Background for the Study North American Construction Group (NACG) is a leading industrial construction services provider to major oil and other natural resource companies, primarily focused on the Canadian oil sands. NACG provides a wide range of mining and site preparation, industrial, piling and pipeline installation services across the entire lifecycle of industrial and mining projects. The company operates one of the largest fleets of heavy construction equipment in western Canada, totaling over 800 heavy construction pieces. Additional information on the organization is contained in Appendix A. NACG has grown significantly over the last five years with resulting increases in revenue, personnel, equipment and earnings. Revenue has grown to $1 billion from $450 million and there has been heavy construction equipment fleet growth of 250 units. Despite this growth, the development of effective business processes, utilization of associated e-commerce technologies and infrastructure enablers to support this growth has not kept pace. The primary reasons are a lack of clear operational strategic objectives, high staff turnover due to tight labour markets and other corporate priorities such as a public offering and SOX compliance requirements. The result has been many stand-alone, non-integrated, manual and labour intensive field processes that are inefficient and lack the appropriate level of internal controls required for a public company. . NACG currently uses JDE as its primary system of record; however functionalities inherent to an ERP are not fully utilized. The entire organization has been impacted as a result. Symptoms include:

• Significant increase in project overhead costs • Poor client and internal reporting resulting in frustrated clients and Project

Managers • Increased investment in working capital and decreased cash flow due to

delayed and inaccurate client invoicing In the current fiscal and credit climate, oil sands projects are being cancelled at an alarming rate. Further compounding the issue is a significant drop in the price of oil and numerous other commodities over the past 6 months and the high cost of oil sands development. Clients are demanding additional and improved costing and billing information in a timely manner. NACG has clearly fallen behind in this area and will potentially be ruled out of future work opportunities if these inefficiencies remain unaddressed.

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Purpose of the Study The purpose of this study is to discover strategies and a major business process for change to be supported by technology enablers to drive efficiencies including client reporting, leading to greater client satisfaction. This will be accomplished by reviewing strategic and operational management theory, business process change, design and information technology. A better understanding of the needs and the development of effective operations management strategies and technology enablers that will support corporate strategies and client reporting will result. Once the factors facilitating alignment have been identified, a specific business process will be redesigned to best meet company and client efficiency and reporting requirements. The literature supports focusing on one major process at a time for change. The study will identify a number of key business processes for re-design and determine the root causes of inefficiencies and develop a recommendation for effective design and integration of one business process. This key business process will be enabled with the correct mix of an ERP platform that will be supplemented, where gaps exist, with a compatible integrated technology solution (3rd party software). If NACG can demonstrate improvements in this strategic key process, they will achieve corporate and operational support for additional process re-designs resulting in a business process continuous improvement structure. The expected result is a competitive advantage in relation to other oil sands contractors for both on-going and future industrial and mining project work. These competitors are also struggling with the demanding and changing client contract reporting requirements. With the recent downturn of oil sands development, there is additional pressure to improve margins creating an effective environment for this study and recommended implementations.

Research Purpose and Research Questions

Guiding Questions The study will address the following primary questions:

1) What operational strategies and objectives will best support the NACG business environment and client needs for project reporting?

2) What are the key production processes, inputs and outputs, and planning and control systems that provide value to NACG and clients?

3) What are the root causes of these inefficiencies from an input, process and output perspective?

4) Which key business process requires alignment between NACG and clients?

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5) What technology enablers most effectively support the operational objectives and client needs for improved project reporting?

Scope The scope of this study will be restricted to the Industrial Heavy Civil Division. This division accounts for approximately 60% of consolidated revenue for NACG. Significant saving and efficiencies can be realized by focusing on the strategic objectives and operational management challenges in this division. Also the focus will be on Time & Material (T&M) type contracts which account for 70% of the project work and provide the most challenge with respect to inefficient field processes and client reporting. Other contract types such as lump sum and unit price do not have the same client reporting requirements and challenges inherent to T&M projects.

Significance of the Study The company has executed a number of large T&M contracts in the recent past that have experienced margin erosion primarily due to inefficient cost reporting and billing processes. The quantifiable result is approximately $20-35 million annually in unrecoverable revenue (2%-3.5% of annual revenue). These inefficiencies have deteriorated client relationships and increased frustration particularly due to the rising cost of oil sands projects and tight market conditions. Additionally, delayed revenue recognition and further decreases to cash flows have been experienced as clients delay approval of project change orders and address these unreported cost increases on their own timelines.

Literature Review and Related Theory

Framework of Review The approach for this study will be based on the premise that integrated and inter-organizational relationships represent a potential source of competitive advantage for NACG. More specifically, the way these business process relationships are managed and operationalized can increase efficiency and project margins. Industrial construction companies focus on schedule and on-time delivery in order to maximize cash flow and equipment utilization. Clients focus on many of the same targets including cost, with quality of service being a defining variable. In mining, quality is mainly a function of on time delivery, reliability and service. A

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large element of that reliability and service is production and cost reporting to the client. Competitive advantage is more likely seen in service and processes vice the end result of the construction and mining effort. The factors contributing to alignment in critical field business processes with clients will be explored via business process reengineering, operational objectives, business process mapping and design, and supporting technologies. Realignment and integration of these business processes with clients is proposed to lead to improved relationships and increased operational effectiveness and efficiency. This can result in reduced investments in working capital, risks and total costs, while improving project cash flow. The literature review covers four major issues for discussion to support analysis and recommendations. These are:

1. Operations strategy and management principles 2. Business Process Reengineering 3. Operations Process Design 4. Information Technology and E-Commerce

Operations Management Operations management is the foundation of the activities that produce products and services. The elements of operations management starts with strategy formulation and objectives followed by design of production processes as displayed in Figure 1.

Design Improvement

Operations strategy

Planning and control

Operations managementInputs

Output

Transformed resources:Material

InformationCustomers

Transforming resources:Facilities

Staff

Customers

Figure 1: Model of Operations Management and Strategy (Source: Slack et al, 2006, p.25)

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The scope of this study will address key operational strategies, identification of processes for change and design objectives of these key processes being reviewed. The five basic performance objectives for operations will provide the foundation for strategic objectives and design development. The five basic performance objectives for operational strategies are:

• Quality • Speed • Dependability • Flexibility • Cost

(Slack et al, p. 39) What objectives can best be realized with implementation of a fully integrated business process and reporting system for project costs and billing to clients? The client will value a system with speed and dependability as the main objectives. However NACG must take into consideration cost and flexibility considering the cost of the billing processes and reporting system are primary project overheads and cannot be recovered. The strategy and objectives of such an effort must balance the five basic performance objectives. There is vast literature on the development and description of operations strategy. Slack et al defines operations strategy as the pattern of strategic decisions and actions which set the role, objectives and activities of the operation. Four different perspectives of operations strategy have emerged:

• Top-down perspective – corporate strategy dictates operations mandate. • Bottom-up perspective – front line day-to-day experience dictates

operations mandate. • Market requirements perspective – market position dictates operations

mandate. • Operations resource perspective – capacity determines operations

mandate. (Slack et al, 2006, p.63) Top down, bottom-up and resource perspectives are supported by Porter’s five forces analysis approach (Porter, 2008). Top down approaches relies on management’s ability to predict business and functional strategies that support external environmental business factors. Resource perspectives take a core competence approach (Porter, 1996). Strategy is driven by what operations can do or what capability the organization has. Bottom-up approaches support an emergent sense of what strategy should be. The idea of strategy is shaped by operational-level experience over time (Hamel, 1998).

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A market requirements approach positions strategy with what the market wants. This has the advantage of tailoring operations strategy around competitive factors such as delivery, time, service specifications and cost. Different operational performance objectives imply different competitive factors (Porter, 1996). There is a clear relationship between strength of strategy and operations success. From a study of defined weak strategic firms all clearly lacked congruence between strategy making process and the market. Of these firms, half also showed little congruence between strategy making process and company culture (Smith, 2007). Porter (1996) argues strategic positions can be based on clients’ needs, accessibility or the variety of a company’s products or services. Different operation strategy approaches put emphasis on various performance objectives such as speed and cost. Market and bottom-up perspectives particularly emphasize the relative importance of competitive factors. Performance objectives and processes can be broken into “order-winning” and “qualifying factors”. “Order-winning” factors are those which directly and significantly contribute to winning business. “Qualifying factors” are the aspects of competitiveness where the operations performance has to be above a particular level just to be considered by the customer.” (Slack et al, 2006, p.69) Market orientation is a business perspective that makes the customer the focal point of a company’s total operations. A business is market-oriented when its culture is systematically and entirely committed to the continuous creation of superior customer value. Order winning and qualifying factors drive day to day operations and strategic focus. Market orientation involves the use of superior organizational skills in understanding and satisfying customers (Karvinen & Bennett, 2006). Strategy Development Grant (2005) proposes a framework for organizing external influences on an organization. A “PEST” analysis (Political Economic Socio-Cultural and Technological), displayed in Figure 2, is a useful environmental scan to determine and distinguish the vital environmental information from clients and competitors. This consists of external influences that affect its decisions and performance.

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Figure 2: PEST Analysis Framework (Source: Mindtools, 2009) Another widely used framework for developing strategy is using five sources of competitive pressures is Porter’s five forces analysis. These five forces of competition include three sources of “horizontal” competition: competition from substitutes, competition from entrants, competition from established rivals; and two sources of “vertical” competition: the bargaining power of suppliers and buyers (Grant, 2005, p.73). Porter (1996) argues operational effectiveness and strategy are both essential to superior performance. Porter’s essential argument is a company can outperform competitors only if it can establish a difference that it can preserve. “It must deliver greater value to customers or create company value at a lower cost, or do both” (Porter, 1996, p. 62).

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Figure 3: Porter’s Five Forces of Competitive Advantage (Source: Porter, 2008, p.80) Understanding these competitive forces and their underlying causes can reveal roots of competitive nature and provide a framework for anticipating competitive and industry behavior over time. Finally another useful analysis tool is the value chain also developed by Porter (1985). The key to successful differentiation is matching the firm’s capacity for creating differentiation to the attributes that customers value most. The value chain provides a particularly useful framework. The value chain is a powerful tool to identify opportunities for differentiation advantage. This can lead to areas of process re-design to support competitive advantage. Developing key business processes from constructing a value chain involves four stages:

• Construct a value chain for the organization and major customers • Identify the drivers of uniqueness in each activity • Select the most promising differentiation variables for the firm • Locate linkages between the value chain of the organization and that of

the suppliers.

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Figure 4: Porter’s Value Chain (Source: Value Chain, 2009)

Business Process Change and Management A Recent History of Process Change The study of business process change has been a complex and changing subject over the last 15 years. The field is growing and being rationalized after a number of shortcomings in expectations and large failure implementations in the 1990’s. Driving a large portion of the confusion is terminology, Business Process Reengineering or Redesign (BPR) and Business Process Management (BPM). In addition BPR and BPM have similarity and overlapping principles with Operations Management, Total Quality Management (TQM) and continuous improvement programs. Further complicating the subject is its strong ties to information technology (IT), Enterprise Resource Planning (ERP) systems and project management principles (PM). The purpose is to provide an overview of the major literature on Business Process Re-engineering and management with related subjects with an emphasis on trends and developments to assist analysis and recommendations for this study. Why do organizations need BPR or BPM? In order to be a profitable growing or efficient organization functional areas need to be integrated. Competitive forces are always changing and the old competitive advantages of cost and quality are evolving to flexibility and responsiveness as value customers are demanding. BPR was proposed to create sustainable competitive advantage. First introduced by Hammer (1990); Davenport and Short (1990) it was a new

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approach to radical change and improvements in business process and performance. This introduction of principles was on the heels of the re-structuring and re-organization business practices in the 1980’s and early 1990’s that resulted in mass layoffs and the hallowing out of many organizations (Davenport & Short, 1990). In addition Porter’s work on competitive advantage throughout the 1980’s provided the theoretical foundation of a number of the principles (Porter, 1985). Also the changing and growing information technology landscape with capabilities offered by computers, software applications and telecommunications drove the requirement for additional business change (Davenport and Short, 1990) Companies were presented with choices ranging from radical change from the reengineering approach or more gradual continuous improvement and TQM. The differences in approach highlight the need to keep abreast with technological improvements, competitive pressures and changing customer requirements. Also highlighted is the need to take advantage of technological leaps and breakthroughs in performance to rapidly drive growth. Business Process Management (BPM) has emerged as a redesigned or repackaged approach to BPR containing components of continuous improvement, benchmarking and reengineering. BPM has been widely recognized as a total approach (DeToro & McCabe, 1997). BPM is an approach that presents a more comprehensive array of improvement options. Definitions

A number of definitions and interpretations of business process change exist. Davenport and Short (1990) have described BPR as the analysis and design of work flows and processes within and between organizations. Hammer and Champy (1993) have promoted the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed. Other authors such as Talwar (1993) have focused on the rethinking, restructuring and streamlining of the business structure, processes, methods of working, management systems and external relationships through which value is created and delivered.

Contrary views of BPR exist. Petrozzo and Stepper (1994) believe that BPR involves the concurrent redesign of processes, organizations, and their supporting information systems. These efforts are meant to achieve radical improvement in time, cost, quality, and customers' regard for the company's products and services. While Lowenthal (1994) describes the fundamental rethinking and redesign of operating processes and organizational structure; the focus is on the organization’s core competencies, to achieve dramatic improvements in organizational performance.

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TQM and BPR have focused on the definition and operation of business processes to produce products and services within a defined business scope. These definitions are missing strategic direction or planning, a necessary component in achieving success in organizational change. Only one definition incorporates the importance of information systems. Hammer and Champy (1993) take the approach process redesign can be independent from information technology. A number of arguments insist that new systems are central to BPR, the challenge is increasingly one of the implementation of organizational change and the visioning involved in that change; rather than the technology itself . BPM has continued to refine these various definitions. BPM’s focus is the understanding and managing the horizontal business process flows within and between organizations and organizational change (Coombs and Hull, 1995). These processes are generally cross-functional, horizontal in nature, lie outside the usual vertical, hierarchical company structure, and no single person has responsibility for the entire process. BPM is intended to align the business processes with strategic objectives and customers' needs but requires a change in a company's emphasis from functional to process orientation. Zairi (1997) describes BPM as a structured approach to analyze and continually improve fundamental activities such as manufacturing, marketing, communications and other major elements of a company's operations. DeToro and McCabe (1997) summarize that BPM is viewed as a series of functional processes linked across the organization, which is how the work actually gets done. Policy and direction are still set from the top, but the authority to examine, challenge and change work methods is delegated to cross-functional work teams. Tools and Methodology

The definitions of BPR involve radical improvement of processes. The definitions of BPM point to a more structured customer focused continuous improvement approach. Both BPR and BPM refer specifically to the tools and techniques used in business process change. Therefore a number of different tools and techniques have emerged over the years. These tools and techniques include the following:

• Process visualization. The development of a vision of the process. • Process mapping/operational method study. The tools of operations

method studies • Change management. The management of organizational change.

Many authors suggest that the management of change is the largest task in reengineering.

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• Benchmarking. It allows for the visualization and development of processes which are known to be in operation in other organizations (Harrison & Pratt, 1993).

• Process and customer focus. Improving performance with customer driven processes as the primary focus of BPR and BPM (Vantrappen, 1992). This tool provides a strong link and overlap with TQM.

The selection and usage of the tools depends on the type of business process change. This type is primarily dependent on the degree of human and technological change in the project (Teng et al. 1994). Business Process Change has a strong strategic, cross-functional activity that must be integrated with other aspects of management if it is to succeed.

Business Process Change can represent a range of activities concerned with the improvement of processes. The literature suggests a strategic approach and the development of a Business Process Change strategy strongly linked to corporate strategy as a key to success (Smith and Lockamy, 1996). It is demonstrated from the research BPR must be strategically driven and supported by senior management if they are to succeed (Gadd and Oakland, 1995;ONeill and Sohal, 1998).

It is important to understand the whole process and how it integrates into the organization. This holistic view is a different approach taken by the continuous improvement approach of TQM (Deming, 1994 and Senge, 1991). This vision is argued to come from understanding both the current and potential future processes.

Where does BPR start? Some research indicates starting the process from scratch with blank business processes. This approach has a number of problems in that the organization may design another inefficient process, poor problem definition and not capture business knowledge accumulated in the organization.

A detailed understanding of the current processes before starting a business process change project is supported by the majority of the literature (Stoddard and Jarvenpaa, 1995). The main techniques of understanding current processes are documented by flowcharting and process mapping. The process flowcharting and maps highlight interrelations and integration opportunities. Structure and Risks

Champy’s research “The State of Reengineering” (Champy, 1995) found substantial reengineering pay offs fall very short of objectives. Overall the study showed that participants had failed to attain these benchmarks by as much as 30 percent. BPM focuses management and change on horizontal business processes such as data collection and payroll processes, invoicing and project

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management. These processes are managed distinctively different by functional departments such as Finance, Human Resources and Business Development. Senior management must understand two basic management principles prior to proceeding with a business process change project:

• The emphasize is primarily on external objectives • Cultural change and communication is required to coordinate the

activities of a complex horizontal process

Both BPR and BPM are structured as a top-down approach and not a “grass roots” change process (Hammer and Champy, 1993). BPM is fundamentally a senior management objective because they are responsible for the vision, determining strategies, designing processes, lowering barriers and enabling employees to contribute. The start of any improvement process is top management leadership. However, this onus on senior management can downplay the importance and role employees must have in a business process change project. Other authors stress a more employee, team orientated approach to BPM, which is more consistent with TQM (DeToro and McCabe, 1997).

These projects can take substantial time and investment. People need to be equipped with the knowledge, methodology and tools to support the key processes that bring value to the organization. These projects require considerable top management support and commitment. Critical to success is good project management and composition of the project team. Most authors suggest that the team comprise as a minimum the following demonstrated in Figure 5:

Senior Manager

Steering Committee

Process Owner

Team Leader

Design Team

Executive Champion

Figure 5: Business Process Change Team Composition (Source: Lombardi, 2008, p.6)

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It is generally not recommended to reengineer or redesign one major process at a time. Business process change is a long term commitment for projects of any size. Once processes are changed and an environment of stability is established usually continuous improvement programs are recommended (Davenport and Short, 1990).

There are number of identified risks with BPR and BPM projects. They can be categorized into two types of risk technical and organizational risk (Eardley et al, 2008). Technical risk is the risk the new process or supporting technology will not actually work. Organizational risk is the largest risk and this is the failure of change management or corporate culture not supporting the change. There is a tendency to focus on tools, techniques and IT systems challenges rather than culture change and human resources. From lessons learned and best practices literature a number of trends from successful and failed implementation emerged (Hengst and Vreede, 2004). Strong upper management support and commitment was a strong indicator. Clear, simple and strategic communication early in project with understanding, buy-in from upper management and key organizational stakeholders is required. In addition reduction of risk through the implementation of targeted and controlled pilot programs help to communicate strategy, success and reinforce commitment to the project. The Steps of Business Process Change The decision to start a business process change must involve an assessment that an organization’s processes are inefficient or due to environmental or technological changes process change is required. Davenport and Short present five major steps:

• Develop Business Vision and Process Objectives. • Identify Processes to be redesigned • Understand and measure existing processes • Identify IT enablers • Design and build a prototype of the process

These steps are general to apply to a number of organization types and additional stages inside each of these steps are required and can be fine tuned per the organizational requirements. Harrington (1995) proposes five major phases - organizing for quality, understanding the process, streamlining the process, implementation, measurement and controls, and continuous improvement. Both BPM and BPR acknowledge that not all processes are equal. DeToro and McCabe (1997) propose creating an inventory of the organization’s processes. From this inventory core processes are identified and using benchmarking

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processes are identified to undergo improvement would be chosen and ranked. Davenport and Short (1990) propose two approaches to process change selection. The exhaustive approach and the high impact approach. The exhaustive approach attempts to identify all processes within an organization and then prioritize them in order of redesign urgency. The high impact approach attempts to identify only the most important processes or those most in conflict with the business vision and process objectives (Davenport and Short, 1990). To achieve substantive business process redesign performance, a business process must first be analyzed by certain characteristics from a high-level perspective. These pertain to how different functions are coupled to each other and orchestrated to produce a common process outcome. Second, IT is viewed as a powerful enabler in Business Process Management (BPM), and thus BPM efforts would be difficult to implement without the support of IT. An integrated management approach is required and the construction manager’s experience plays a key role. Client orientation will also require a focus on value in process change (Karvinen & Bennett, 2006). This is the reason why business process change be aimed at improvements along multiple strategic dimensions and not narrowly focused objectives such as only efficiency or cost reduction. Research shows that differences in business process change definition, methodology and strategic focus play an important role in determining implementation success (Kettinger and Teng, 1998). Business process management involves relatively extensive work, not only in emphasizing the concept of processes, but also by requiring understanding in parts of the organization on topics such as: adoption of technology, organizational structure, job design, human resources etc. In particular, information technology (IT) is essential in the innovative redesign of business processes. Studies of BPM projects have reported vary large failure rates (Abdolvand et al, 2008). The majority have been connected to the mismanagement of projects. Also a large cause has been the misalignment of the firm’s goals with the project objectives. Good business process re-design involves strategy linkage. This emphasizes the securing of executive management commitment and the discovery of re-generation opportunities and the matching of corporate strategy with emerging information technology. The solution proposed aims at setting long-term goals and then bases BPM on the needs. This helps understand requirements and the selection of business processes to be re-designed and the definition of the project scope and approach. Once strategy is defined selection of candidate processes in the context of strategy can be done with such techniques as competitive analysis, Value Chain Analysis and Critical Success Factors. This task is followed by the identification of major corporate processes that support the business objectives and goals. For this study the Value Chain approach is proposed and further discussed.

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From these core processes indentified supporting change technology enabling software and platforms will be determined. Criticism of BPR In the 1990’s BPR enjoyed both great success and failures as a business improvement model. Hammer (2001) pointed out he and the other BPR leaders forgot about people. The original literature by Hammer and Champy raised expectations of managers for revolutionary changes that could not really be delivered. The greatest shortcoming of the Hammer and Champy reengineering work is not that it neglects people or that it employs overblown rhetoric, but that it fails to acknowledge how difficult, time-consuming and expensive it is to reengineer (Davenport and Prusak, 2003). This unfounded optimism led to the rapid rise and fall of reengineering. Companies initiated large projects with sweeping change with high expectations of quick success. As they encountered difficulties, slipping project deadlines and escalating costs many projects were dropped in failure. Combined with these process change failures many companies’ implemented expensive ERP systems that did not deliver the change envisioned. Many failed projects took on too much change at once. They tried to change multiple processes, information systems, organizational structure and business strategy all at once. The other critical shortcoming of past BPR initiatives was it was treated as a short-term project rather than a continuous change to the organizational business and culture. Recently the reengineering term has been abandoned for such terms as process innovation and redesign. This evaluation of BPR will still be focused on process. In future process change initiatives the people who do the work would adopt the new processes and have a hand in designing them. Every change effort needs both the process, the design for how work is done, and practices, how individual workers complete the work (Davenport and Prusak, 2003). Future process change will relay on technology. ERP systems will be the primary backbone for transaction based processes. However, ERP systems are changing and companies have needs to address customer driven processes that ERP systems have been lacking. With the addition of new tools, their integration will continue to be difficult. The goal of cross-functional, cross-business and cross-organizational integration will continue to be elusive (Davenport and Prusak, 2003). Future process change programs are recommended to combine the incremental, continuous improvement approaches of total quality management or six sigma with the power of IT.

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Design Design Objectives Business process design objectives surround a number of literature fields. This review will focus of design objectives surrounding operations performance objectives. Slack et al (2007) positions the purpose of design is to make sure the performance of the process meets the operational objectives stated. Operational objectives translate into process design objectives. Processes must not be designed with excessive control if the operational objective is speed and flexibility. Different process types imply different volume-variety characteristics. The implications of volume and variety have a large impact due to the nature and complexity of most industrial processes. Cost and flexibility vary with process choice is the result of the product-process matrix.

Figure 6: The Product-Process Matrix (Source: Slack et al, p.101)

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The product-process matrix represents the lowest cost position for an operation on the volume-variety continuum.

Customer Process Design Objectives Many process change projects are initiated to improve customer facing or driven business processes. Lockamy and Smith (1996) proposed a strategic alignment between a firm’s strategy, processes and customers is essential to ensure that:

• Strategic objectives are driven by customer needs and expectations. • Processes selected for re-design have a strategic impact on the creation

of client value • Processes are re-designed in a manner which supports strategy

achievement. Heard clearly highlights the importance of the design process to get ideas, market information and technology from the environment in which the company operates (Heard, 1993). Getting closer to customer requirements realignment, re-empowerment and reengineering is a strong argument. The strategic importance of client satisfaction and congruency has prompted many companies to begin examining core processes from the perspective of the customer (Lockamy & Smith, 1996). Therefore areas for re-design and technology enablers must first concentrate on processes that have an impact on providing client value, satisfaction and enhancing the company’s strategic advantage over competitors. As a result the priority behind effective business process reengineering efforts must be those critical factors which influence the client perception of value and improve the company’s competitiveness. The impact of client facing processes on operations drives a number of challenges. The service/system design matrix demonstrates the tradeoffs involved in service operations design.

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Figure 7: Service/System Customer Contact Design Matrix (Source: Operations Management Study Guide, Lesson 2-9) Chase and Tansik (1983) argue potential operating efficiency is a function of customer contact time and service creation time. As the customer contract time increases in relation to the service creation time any potential efficiencies decrease. “Service facilities characterized by high customer contact are perceived as being inherently limited in their production efficiency because of the uncertainty that people introduce into the service creation process” (Chase & Tansik, p.1040). Different types of services have differing features of client involvement. In particular to the extent and nature of the client’s participation in the creation of the service. The partial inclusion of clients into the organization can vary considering the type of service, but also on task requirements within a given service and the client’s skills and motivation level (Mills & Morris, 1986). Heard proposes in reengineering processes, a company should strive for the following:

• Simplicity – each key process faces a variety of customer needs and expectations. Each key process must work out ways to provide the required variety of outputs at the lowest cost.

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• Focus – Horizontal customer/supplier organizing principles should be reflected in the each key process.

• Energy – Employees should be empowered with access and authority equal to their improvement and operating responsibilities. Continuous training and improvement programs should be in place.

• Continuity – Reducing quality and reliability problems requires extensive improvement and refinement of each key process. Each key process must be highly capable, flexible and reliable.

(Heard, 1993, p. 25)

IT Strategy and Objectives The literature review is clear in order to meet client requirements and stay competitive business process change is highly interrelated with information technology and e-commerce initiatives. This element of business process change can also be the most complex and expensive considering the escalating cost of software implementation. Slack et al highlights the volume and variety of operations impact on technology requirements. Different process technologies reflect different volume and variety processes or where a company intends to position itself on the product-process matrix. Different process technologies are associated with different volume-variety combinations. Scalability, connectivity, security and compatibility of the technology can change depending on the business and process requirements. Figure 8 demonstrates the process technology considerations for variety and volume.

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Variety

Volum e

M anual, general

purpose, flexible

Autom ated, large scale,

inflexible

Con

nect

ivity

High

Broad

Narrow

Low

Sca

labi

lity

High

Low

Aut

omat

ion

Figure 8: Degree of Technology Automation (Source: Slack et al, p.239) The choice between alternative technologies is a relatively long-term and strategic issue. It can have significant and lasting impacts on the operations capability and processes. Turban et al (2007) argue a market and knowledge perspective in technology decisions if the outcome is unknown or traditional financial criteria are difficult to justify. The authors show that there is significant opportunity cost for the company if it delays investment in client facing process change technology when there is a possibility that the competition adopts better processes (Gaimon, 2008). Legacy systems and non-integrated silo approach to technology solutions is a large barrier to gaining process improvement from field operations. Integrated IT has a strong facilitating role in process improvement efforts. Improved supply chain, reporting benefits and exchange of information have been a strong focus. Research have suggested that organizational inertia (we have always done it this way) combined with a lack of strategic integrated technology approach has slowed the impact of any new technology initiatives (Newman et al, 2009). The lack of an integrated process perspective and a reliance on silo based systems can limit evaluation of technology enablers.

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Business to Business E-Commerce Business-to-Business e-commerce (B2B) refers to transactions between businesses conducted electronically over the internet, extranets, intranets, or private networks (Mahadevan 2003 and Haig 2003). The major characteristic of B2B is that companies attempt to electronically automate trading or communication processes in order to improve them. The major transaction type of B2B is collaborative commerce; activities other than buying and selling among business partners. Examples range from communicating, collaborating and sharing of information for joint design and planning (Turban et al, 2006). To qualify as collaborative commence, the activities that are shared must represent far more than just financial transactions. Collaborative commerce refers to the use of digital technologies that enable companies to collaboratively plan, design, develop, manage, research products, services and innovative EC applications. Few organizations have the time, financial resources, or technical expertise required to develop complex e-business systems. This means that most EC applications are built with hardware, software, hosting services, and development expertise provided by outside vendors. Thus, a major aspect of developing an EC application revolves around the selection and management of these vendors and their software offerings. Martin et al. (2002) identified six steps in selecting a software vendor and a package, as illustrated in Appendix B. Enterprise Resource Planning Systems Enterprise Resource Planning (ERP) systems’ purpose is to integrate all significant resource planning and control systems with other functions of the business (Slack et al, p.452). If designed and setup with full understanding of business process requirements an ERP can significantly improve performance and enhance information integration. This can provide a number of benefits surrounding visibility of information across the organization, standardized business processes, control of business processes, information and integration of a number of supply chain functions from suppliers to clients. This is very difficult to achieve in practice and many of these benefits escape organizations (Slack et al). At the heart ERP architecture enforces a range of business processes and practices on an organization. In many cases these business processes and practices do not meet organizational objectives and requirements. If these processes do not fit, two options exist. Change processes to fit the ERP package or modify the software to fit current processes. Both options involve risks and costs. Many of these risks and costs are difficult to quantify due to impacts on efficiency, business process and reporting.

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How can organizations improve ERP performance? ERP improvement and implementations efforts have to done in conjunction with business process design and change. The objective of BPM is to eliminate non-value added activities and administrative barriers. ERP projects seek to streamline processes via integrated information flow. The benefits in combining the effort relate to combining organizational change with information technology. ERP implementation should not stop at start up but be viewed as a continuous improvement; effort after start up will influence system and business process success. Nah et al identified a number of key success factors to ERP improvement implementation success. Project management and team composition in the ERP partnership is a key factor. Good co-ordination communication is essential with a cross functional support team that understands a wide range of the business requirements (Nah et al, 2001). Combined with top management support, clear business vision and objectives these key elements are fundamental to change success. Integration The main purpose of an ERP system is the integration of various business functions under one application and database. As discussed above an ERP requires a company to fit its business processes to the software. As alternative companies can choose specialized software to support specific business functions such as data collection, project management and scheduling, and integrate them. There are two basic types of systems integrations, internal and external. Internal integration refers to the integration within a company between applications and/or between applications and databases. For example a construction company may integrate field project management change order information with an ERP job cost module. External integration refers to integration of applications and /or databases among business partners, suppliers or customers. External integration is especially needed for B2B transactions. In order for these specialized applications to be part of an integrated business process connection with the ERP system is necessary. Siau and Tian (2005) discuss and highlight a number of these benefits. Integrating EC systems can be a complex task. Integration involves connectivity, compatibility, security and scalability. In addition, applications, data, process and interfaces must be integrated. Finally, a major difficulty is the connection of web-based systems with legacy systems. To ease the task of integration, many vendors have developed integration methodologies and special software called middleware. A middleware essentially provides a separate program to do the interface between diverse client and server systems (ObjectWeb, 2009).In addition, major efforts

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are being undertaken to develop standards and protocols that will facilitate integration, such as XML and web services. XML (eXtensible Markup Language) is promoted as a new platform for B2B and sometimes as a replacement for EDI systems. It is used to improve compatibility between the disparate systems of business partners by defining the meaning of data in business documents (XML, 2009). Web Services is a general purpose architecture that enables distributed applications to be assembled from a web of software services in the same way that web sites are assembled from a web of HTML pages. It currently is one of the most talked about topics in e-commerce and IT (Erl 2004 and Glass 2002). Because all communication is in XML, Web services are not tied to any one operating system or programming language.

Process Improvement Methodology

Business process improvement initiatives should follow a standard methodology.

1. Data gathering with a focus on high level issue identification 2. Analysis of areas for improvement 3. Identify business process 4. Selection of key process 5. Detailed analysis of current state 6. Detailed design of future state solution 7. Gap analysis from current state 8. Software selection process to facilitate future state process 9. Revision of future state to address remaining gaps 10. Implementation

Supporting steps are required for full integration into the business model which is outside of the scope of this paper.

The reminder of this paper will discuss the design and data collected in support of business process change selection and design. Findings of the data collected will be presented to support analysis of the results. From this analysis development of a business vision for process change will be presented with a framework for business process going forward. From this framework one key business process area will be selected for redesign in the recommendations section. Recommendations will be supported with a current state business process for the selected business stream in order to understand and measure the existing process. This will be supported with an IT technology enabler review and recommendations for the designed and prototype business process.

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Research Design and Data Collection

Business Processes Discovery Sessions The research was designed as a qualitative study addressing operational management strategy and design with supporting arguments for associated potential business process change and enabling e-commerce initiatives. The study included discovery sessions held with field, support personnel and management in addition to a field project management survey. The data compiled during these sessions formed the basis for strategy development in addition to root cause analysis of inefficiencies in the key core business processes. The sessions produced interview notes, current business process documentation and sample reports. Discovery sessions were conducted with representatives from the following departments:

• Operations (includes field personnel and Project Managers) • Human Resources and Safety • Supply Chain • Equipment Department • Finance • Information Technology

Preliminary identification of key processes followed these sessions with individual follow up as required. The preliminary design and operational strategy and objectives were confirmed in an integrated session with a cross section of senior corporate and field management. The purpose of the integrated sessions was to agree between the Operating Units and the Support Functions on the major integrated processes and confirm which processes can be enabled by the ERP system JD Edwards (JDE) to an acceptable degree. As NACG’s ERP, it was determined at the executive level that it would be utilized providing the business requirements could be adequately supported. If not, the goal was to document the process following by generation of potential third party software solutions to close the gap. A review of current processes within the organization with a specific focus on NACG’s major integrated work streams covered the following key business processes:

• Bid award to project setup • Data collection • Labour Equipment & Material (LEMs), billing & invoice generation • Project management and change orders • Equipment tracking, scheduling and utilization • Procurement and Receiving

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• Human Resources and Payroll • Safety • Reporting for clients • IT Platform

The intention of the discovery sessions was to identify key business processes in NACG’s value chain. These processes were reviewed for problems areas and analysis of non-integrated systems. The primary objective of the sessions and interviews were to identify and agree on major issues encountered by operations and support departments. The sessions reviewed the following agenda:

• Summary of overall high level issues • Review current process maps, noting the differences in major areas,

divisions, the review focused to identify the top priorities highlighted below, • Review current and future required performance metrics and identify any

key missing metrics • Process vision / top priorities

o Data collection o Equipment & Employee tracking o Invoice Generation o Project cost structure o Project client reporting

Field/Project Management Survey A survey was conducted with a broad group of internal NACG project managers, project coordinators, project accountants and other site staff. The survey specifically addressed process challenges and the required support tools for operations field staff. The results of the survey are discussed in the results section and strongly support the findings around inefficiency. Also highlighted, was the lack of project management tools to support timely and accurate single source data collection and reporting. The survey questions and details are contained in Appendix C.

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Results

Discovery Sessions A number of recurring themes were observed during the assessment and discovery sessions. Each one was responsible for and/or resulted from a number of process issues and organizational wide inefficiencies:

• Duplicate tracking and entry of source data • Data errors and integrity • Data visibility due to offline processes • IT capacity, connectivity and stability • Under utilization of software systems • Lack of real time data • Lack of software integration • Lack of process flexibility • Lack of process automation • Lack of understanding and trust in current systems • Lack of accountability to follow standards which do exist • Lack of knowledge and training

Critical field data (labour hours, equipment hours, production stats and safety information) to support both internal and external reporting requirements and billing does not reside in a central database and is often inaccurate in addition to not being available in a timely manner. This has greatly impacted both field and corporate reporting capabilities. Duplicate and even triplicate entry of the same data is entered into a number of non-integrated systems. This has created numerous frustrations with respect to gathering information and critical project management reporting. The multiple entry into different non-integrated systems also resulted in numerous system data integrity issues. It was noted for a number of major projects both labour and equipment hours in the legacy system, Just1, that is used for data collection and LEM generation for the client did not match labour and equipment hours posted in the ERP system JDE. The results were inconsistent reporting and time consuming reconciliations between the multiple systems. Equipment costing, a large portion of the business cost, was poorly structured and cumbersome for reporting. Many large items such as maintenance labour, shop overhead and major parts are not costed to specific assets, resulting in inaccurate equipment reporting. Collection of equipment hours are not standardized; resulting in poor equipment utilization and job costing reports. All equipment cost data is exported from the ERP system into large excel spreadsheets that are reformatted and reconciled to a number of systems. This

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reporting is very time consuming and prone to numerous errors. Work order systems and preventive maintenance schedules are not integrated with purchasing and work flow. All of these functions are in JDE but the business process currently being followed is not integrated. Payroll processing is very unstable. The data collected in the non-integrated legacy system, Just1, is imported with numerous errors including invalid employees and project cost codes. Multiple adjusting entries from the field are required to correct errors in employee pay which slow the processing considerably and frustrate both payroll staff and employees. Two construction sites in the past 6 months had crews resign due to late or incorrect wage payments. In addition, there has been 100% payroll turnover rate over the last 18 months. Construction project cost and forecasting is completed in large excel spreadsheets using extracted and reconciled data from a number of systems. The current process is extremely time consuming and prone to errors. The current system only uses job cost from the previous month and forecast forwards because of the data integrity and unreliability of the information. This process causes delays and errors in project client reporting. Basic project costing and reporting is not enabled within JDE; therefore Divisional Controllers and Project Accountants have numerous stand alone spreadsheets, both within the field and at the corporate level. This has proved challenging for project managers to identify change conditions and manage these efficiently. Construction and Project Managers, field engineers and site administration voiced concern of the enormous amount of work keeping track of construction project change orders and requests for information from the client and corporate. This is consuming a vast amount of time for the Project Manger searching for information in the various systems, consolidating this information into numerous reports, schedules and budgets for both the client and corporate. On many occasions the reports presented to clients are wrong and are require adjustment. This is a major issue as stated by numerous clients after the project is complete In many cases costs are 20% to 30% higher than forecasted by NACG project management staff. In procurement a number of significant improvements have been implemented over the last year. Best practices and standard procurement and receiving processes were implemented with supporting procurement manuals. Operations personnel indicated the manuals are very detailed and difficult to read. In addition they find the processes very cumbersome and labour intensive. Procurement would like the process to involve less work on their part. The field and maintenance shops struggle with recognition of materials and parts and 3rd party service costs due to time consuming receiving process. Projects are behind due to effort associated with completing requisitions which delay the creation of purchase orders in JDE and subsequent payment to vendors. The

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accounts payable department continued to receive a high volume of phone calls from vendors requesting payment status on overdue invoices. In many occasions these overdue invoices have not been committed nor recognized as costs to either a project or equipment shop. The information technology findings were consistent with operations and functional support departments. The primary concerns originate from the interface with JDE. For most critical operations data, with the exception of labour and equipment hours, JDE is not setup to accept or report on this data. Getting information extracted is a usable format is very difficult. Most information is downloaded into excel where it is manipulated and reformatted for the majority of the reporting requirements. During the discovery the following factors were noted:

• JD Edwards has had 3 outages within the past 60 days that affect the company’s ability to conduct business,

• There is no failover capability within the current architecture. Should the system suffer a significant outage the company’s financial records and the ability to conduct business is at risk,

• There is no plan in place for ensuring high availability, • Historically, JD Edwards has had very poor performance and has

negatively impacted business units. This point was continually mentioned in the discovery sessions with all operations and support departments

• The current infrastructure supporting JD Edwards is not scalable and cannot grow with the company,

• The current database used by JD Edwards is not of the enterprise level required by the company,

• The design of the JD Edwards platform leaves it vulnerable to security risks that include physical risks and risks concerning viruses

The main data collection software tool Just1 is heavily used by the operations group is very unstable. Just 1 is an internally developed and built software program to meet NACG field data collection and reporting requirements. The individual who developed, build and maintained the system departed the company 2 years ago. The system has become increasingly unstable due to lack of technical knowledge of the program and the company’s decisions to abandon further development of the system in favour of developing JDE. File sharing is not standardized due to a disorganized file system on the network. Due to poor connectivity at a number of the operational sites, project management staff creates file systems on their personal hard drives which are not backed up or lost if the employee departs the company.

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Field/Project Management Survey The project management and site survey was to determine requirements for project management and data collection business processes and software tools. It delivered the following key feedback in Table 1: Table 1: Summary Field Project Management Survey Source: Project Management Survey, 2009

The survey clearly demonstrates the fields current situation of spending a large amount of time using workaround processes and duplicate entry of data into JDE, Just1 and excel. The two main areas of concern are data collection and daily activity reporting (LEMS – Labour, Equipment, Material and Subcontractors) and project management. Data Collection and LEMS �

Currently, data (labour and equipment hours) is collected via Just1, excel spreadsheets and direct entry into JDE. The shop and maintenance primarily use JDE direct entry and field operations use Just1 with the exception of one large project site, CNRL Horizon, which uses JDE direct entry. Key production and safety data are entered into a variety of different programs such as TOMS, an internal developed production data collection and reporting software, and excel spreadsheets. There is no consistent standard of data collection or entry at any operations sites. For the field operations labour hours can be complex due

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to union rules, schedule agreements and the number of pay items (ie LOA, travel time, bonus hours) that need to be broken out for both internal and client reporting requirements. The survey indicates that any tools to support the field need to be robust enough to allow for simple entry and flexible reporting while maintaining the proper controls. Just1 works in this respect but is unstable. Seventy-five percent of the respondents are using Just1 for time entry and 61% indicated it is somewhat flexible. Therefore the importance of flexibility is key when reviewing any front end operations software tools. Over 80% of respondents indicated that the automated creation of LEMS would improve their efficiency and effectiveness. Various obstacles to producing an automated LEM include lack of trust in the data produced from the system (53%) and the current automated process does not support the client timelines (68%). As a result, 78% of responders’ manually prepare LEMs by double entering the data into at least 2 locations and 63% used this workaround daily. The survey has a high percentage (72%) of respondents indicating there are no tools provided to the field and what is available is not easy to use (33%). �

�

Project Management Functionality �

According to the survey, site staff creates and utilizes the following processes and workarounds to supplement the lack of an effective project management system:

• Weekly cost and revenue reporting • Client reporting • Change order logs • Request For Information (RFI) logs • Budgets • Safety statistics • Forecasting • Document control

Seventy-four percent of the survey respondents indicated a need for field level document management tools supporting key project related documents. As a result of multiple non-integrated systems in use, project managers indicated they are spending in excess of 25% of their time ensuring accuracy of data, reports and other documents. Because of these demands project managers have indicated carrying two extra employees directly attributable to these workarounds. �

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Analysis

Root Clause Analysis of Major Findings From the findings section two major results can be highlighted as an area of concern with respect to operational client driven processes. Daily activity reporting (LEM) and project management critical functions are a significant area of concern. A cause and effect analysis on daily activity reporting (LEM) demonstrates a number of root causes:

. Figure 9: Cause and Effect Daily Activity Reporting A number of root causes of the ineffective LEM reporting are system processing, speed and system errors. In addition, equipment and employee setup with associated rates and information is not happening quickly enough for field administration. Poor communication between corporate office, field personnel and client representatives result in the wrong data being collected or entered incorrectly. This has resulted in additional project indirect costs and overheads and is a primary symptom of poor and non-integrated data collection as the foundation of the business process. As a result, project management is not able to meet invoicing deadlines, client reporting and change recognition

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requirements. These work arounds have resulted in the need for additional personnel, processes and stand-alone systems to deal with faulty front-end client facing processes. The data collection problems impact equipment processing and maintenance shop costing. Equipment which is not setup in the ERP system, processing problems and poor communication with site regarding what and when equipment will arrive have resulted in additional workarounds and non-integrated reporting efforts. In addition, the process for work orders and maintenance does not support or enable the inherent functionality of JDE. Poor process design and objectives not integrated with system setup has resulted in maintenance schedules not being followed or properly costed, increased equipment downtime, lost warranty claims and lost equipment revenue. Material and 3rd party processing has a number of other root causes. These processes did not meet field project management requirements and therefore client objectives were not met. This was a non-integrated supply chain approach that has provided more control for a centralized supply chain system. This non-integrated process change did not take the perspective of the client nor field project management needs into consideration. Core processes with a high degree of customer contact requires either total customization or loose configurable specifications. Procurement processes are neither flexible nor timely for field level operating staff. Lack of training and understanding of processes, requirements and capabilities have restricted operations by providing inaccurate details on third party commitments and timely costing. This poor design has resulted in purchase orders not being setup in the ERP system and therefore receipt of goods and services not being recognized. Combined with a lack of training and operations input of the new processes have compounded the problem. There are no specific standard tools and training for field and project management staff. These root causes directly result in Project Managers not understanding or reporting on their costs in an accurate and timely manner. This leads to lost opportunities to recognize and negotiate change conditions with the client, increased investment in working capital, poor claims management and inaccurate financial statements. As noted in the literature review, project based business processes and systems require a non-standardized tailored design. This design must take a client requirement perspective in order to meet field operations requirements as identified in the cause and effect analysis. The design of many setup processes takes a corporate or back-office approach. Delay of field level processes results in postponed processing of key information needed for the daily activity report. JD Edwards is currently challenged to support the services required by NACG field personnel. Its current supporting infrastructure of servers, storage and other

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equipment and software cannot meet the demands placed on it by the organization and its clients. As a result, the infrastructure is in need of significant upgrade or replacement. Given the legacy issues associated with JDE, the significant growth of NACG business requirements and future business opportunities, NACG requires a scalable, reliable, accurate JDE application to effectively manage financial records. This growth and the amount of newly hired staff in the company have made it increasingly important to have a dependable financial system. The volume and complexity of records can no longer be effectively managed by key staff members and the existing system may negatively affect achieving corporate goals and effective working relationships with employees, clients and vendors. In summary, over the past five years of growth the organization has taken a non-integrated business process and systems approach. This has resulted in the development of stand alone business processes and systems to meet individual departmental needs. This has been primarily driven by a lack of a strategic integrated operations management approach. The design of good processes be dictated by a solid operations management strategy which enhances good planning and control followed by continuous improvement. The problems occurring in planning and control of operations are a direct result of poor design. The initial configuration of JDE did not introduce effective processes to support NACG’s field work. Structure, reporting and foundations have not been maintained in addition to limited ownership and accountability of master files in the ERP system. Due to the lack of training, knowledge and support of an integrated ERP system, a team of ERP super users was not developed to help sustain business processes using JDE as their primary tool.

Developing Operations Vision and Strategy The industrial construction services industry is typically managed along traditional lines, fragmented with an unfavorable culture, poor quality and low productivity. It is plagued with being divided into two types of operations - design and construction. Human resource issues are largely neglected because the industry operates under project management, which does not allow for systematic and long-term strategic development. In addition, changing client demands combined with cost and schedule pressures have complicated data collection and billing processes. Consequently, these factors have caused the industry to remain non-integrated in its processes and systems. Environmental and Competitor Analysis

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Appendix D contains an environmental and competitor analysis for NACG showing the external environment NACG operates in. This information was gathered from the discovery sessions, integrated sessions and discussions with executives and senior management. From this analysis over 70% of NACG’s revenue comes from five clients in the Fort McMurray region. Capital spending in the Alberta oil sands and other natural resource development has slowed the last 10 months due to large project delays and cancellations. This is the result of decreasing oil prices and general global economic slow down. Numerous contractors have expanded capacity due to the construction boom the last five years resulting in significantly dropping rates and changing processes to protect margins and satisfy changing client demands. The majority of large competitors compete on the premise of full service providers from project design to site reclamation and tear down. This is defined as a “build it then maintain it” strategy which provides revenue and cash streams through out the life cycle of a large construction projects. Smaller competitors are competing on price and ability to deliver specialized services at various stages of a projects life cycle. Customer relationships play a key role in current competitor relationships with clients. These relationships need to be reinforced and supported with good process design and change. Porter’s Five Forces Table 2 Five Forces Analysis Summary Source: Discovery Session Notes

Forces High Medium Low Substitutes X Entrants X Established Rivals X Power of Buyers X Power of Suppliers X Threat of substitutes in the industry is medium. The biggest threat is the client completing their own construction and heavy civil work. The threat of new entrants is low. Although there are no legal or legislative barriers in order to bid and execute large industrial oil sands projects a new entrant would have to establish a relationship with one of the major oil sands producers and have access to a large equipment fleet. The threat from established rivals is very high. The top three competitors are larger than NACG with a diverse equipment fleet and established repetition in the market. Switching costs for customers due to demobilization and contract termination costs acts as a restriction. Also customers have established

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communication channels and embedded working relationships and processes with various long standing industry players, making large scale conversions to other competitors potentially difficult. The bargaining power of customers is very high. The majority of new contracts are obtained mainly thought a competitive bidding process however, in some instances, NACG or its competitors are the sole source contractor. Price, operating efficiency, project execution, safety record, and equipment fleet availability are key factors on successful bids. The bargaining power of suppliers is medium but volatile depending on demand. The company’s suppliers consist of trade labour, equipment and parts distributors and sub-contractors providing specialized construction services. The industry employs a mix of union and non-union labour depending on the worksite. The bargaining position has increased significantly over the last five years resulting in increased costs and lower productivity. The industry has a limited number of suppliers for heavy equipment; however, competition between the largest suppliers is aggressive. The company has developed preferred supplier relationships with equipment suppliers taking advantage of volume discounts and relationships. Operational Objectives Based on the environmental and five forces analysis above an operational strategy emerges. Table 3 is an analysis of a number of key characteristics and issues for the industry to identify order winning and qualifying factors. Analysis of these factors can determine the best internal performance objectives and strategy indicating that a market requirement perspective would be successful. Table 3: NACG Project Key Characteristics Analysis

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Project Type Industrial Construction Heavy Civil Clients • Wide range of natural resource and

large commercial clients • Primarily oil sands and mining clients

Service Range • Underground piping • Construction management

• Mining subcontracting • Overburden removal and sand

hauling • Heavy civil work

Changes • Numerous client orders • Occasional client change orders Delivery • Problem solving of complex industrial

construction problems • maintenance of construction schedule

and cost

• Volume of material and ore hauled

Quality • Safety • High level quality assurance and

quality control program

• Safety • High equipment utilization • High data collection of mining and

equipment data Risk • Higher risk due to complexity of work

with mixed contact types of unit priced and Cost-Plus contracts

• Low risk due to primarily cost plus contracts

Reporting Requirements

• High – many cost, quality and schedule reports required

• Medium – daily labour and equipment time and utilization reporting

Profit Margins • Medium to high • Low to medium Competitive Factors

Industrial Construction Heavy Civil

Order Winners • Experienced project management • Quality control and efficiency

programs • Good change management and cost

control

• Large equipment fleet • High equipment utilization • Good reporting of labour and

equipment usage • Low cost

Qualifiers • Safety record • Previous relationship with client • Access labour pool • Cost reporting

• Safety record • Previous relationship with client • Experience in mining & oil sands

industry Strategy Development Areas

• Process improvement • Informational technology • Document Management &

communication • Training

• Organizational capacity • Organizational efficiency • Information technology

Internal performance objectives

• Quality • Flexibility • Dependability

• Cost • Speed

Development of an operations management strategy for the Heavy Civil and Industrial Division is imperative to support any process change initiatives. Client requirements drive the operations management approach. The analysis

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demonstrates performance objectives and strategies focus on quality, flexibility and dependability for process design and improvement. Based on this analysis a framework for operations strategy can be developed on the following key elements:

• Organizational Capacity and Efficiency – Ensure required resources, processes, systems and controls are in place and functioning effectively to meet client changing project demands. Capacity needs to be scaled in order to profitably execute construction work while meeting client schedules, budgets and reporting requirements.

• Business Process Development and Redesign – Key client facing processes be designed to allow flexibility for meeting changing client demands. These processes require a framework of standardization that can be easily configured for the different projects and clients in NACG’s operating environment. This allows for the incorporation of key business internal control points and standardization of training new employees on the business process.

• Information Technology – Enable effective management of client facing business processes through the usage, accessibility and integrity of information. It is recommended this be supported by specialized field software for client facing processes integrated with the JDE ERP system.

Identification of Processes for Potential Re-design Figure 10 below identifies NACG’s value chain. The primary client driven processes surround opportunity development, estimating, bid award, project startup, project execution and performance and project closeout.

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Figure 10: NACG Value Chain The specific business processes of each of these functions are detailed in Appendix E. The findings and root cause analysis point to a number of processes inside the project & change management portion of the value chain. It is this portion of the value chain that has the most interaction with the client and execution of the construction work. The approach of process selection must take an integrated approach as opposed to considering individual departmental functions or processes. There are a number of processes that are directly and indirectly involved with and impacted by the project and change management functions in the value chain. A number of support functions such as Asset & Equipment management and Human Resource management are critical to these field functions. Appendix F takes the details of each of the value chain processes and creates a visual presentation of a number of key processes, inputs and outputs of NACG’s operational business model. As demonstrated in Appendix F, the bulk of NACG’s value is created in business development and estimating, job start up and daily operations. Key support processes that cannot be ignored are project performance and change management, purchasing and payroll. The key client facing business processes can be broken down into elements of:

• Project acquisition and execution • Transactional processing and support • Project reporting and communication • Project change management

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• Planning, scheduling and business capacity forecasting Information technology architecture provides the backbone for the business process and technology environment to operate. The results of these processes drive operational metric and financial reporting. Executive planning, scheduling and business forecasting provide guidance and oversight to these processes. These processes and outputs provide strategic direction and capacity management through IT management, employee and asset capacity and health and safety. The NACG key business processes can be formulated into a model of major work streams that integrate the processes across business functions and support departments. The NACG Major Work Stream Model (Figure 11) can be used to drive logical and prioritized process change selection.

Figure 11: NACG Major Work Stream Model From the NACG Major Work Stream Figure, the ERP and IT platform provide the foundations for business processes to operate and integrate. Award to cash processes contain the field and corporate support processes impacting data

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46

collection, payroll, daily activity reporting (LEM), invoicing and cash collection. The second most important work stream is asset management. These processes include both the field and shop equipment utilization and maintenance planning. Improvements in these processes would resolve a number of the findings discussed in the root clause analysis. Higher level functions such as project forecasting and change management can only be fixed when key processes in award to cash and asset management are redesigned with supporting enhancements in the ERP system and 3rd party software enablers. This approach incorporates a key argument from the literature review that process change be aimed at improvements along multiple strategic dimensions and not narrowly focused on single or stand alone objectives. This model provides a strong link between business process change strategy and corporate strategy as the key to success. This analysis has been limited to key operational management strategy issues and the core business processes in NACG value chain. It does not take an exhaustive strategy development approach reviewing various scenarios and options for the future. Only the core business processes in NACG’s value chain have been explored, a number of key field and corporate functions have been overlooked as part of this analysis because the process has no involvement with the client. However a number of these processes impact the major work streams. Recommendations Selection of Key Process for Re-Design The current credit crunch and significant increase in project overhead costs, decreased cash flow and higher client reporting demands were the main factors in selecting the key process for redesign. Utilizing and studying the value chain model and application of this model to NACG’s major work streams is expected to provide the largest potential business process improvement. The business processes surrounding data collection (primarily labour and equipment hours), LEM generation (critical daily activity reporting) and invoicing relating to the award to cash work stream, form the backbone of a number of value chain activities. These include critical client and project reporting which generate cash flow for the organization. These processes are the cause of a number of the problems highlighted in the findings section. This business process, although basic, is the starting point of a number of key business sub-processes and information. It is recommended this work stream be selected for process change to improve client reporting and communication.

47

Understand Existing Process Project based companies are associated with lower volumes and higher variety processes requiring high flexibility, low standardization and often increased costs. Finding a low cost, high flexibility fit for process design to support operational objectives and strategy is a challenge for project based organizations. The product-process matrix demonstrates important elements of strategic and process choice. Process design considerations must account for these factors. Maintaining a position above the diagonal in the product-process matrix will maintain flexibility to change services, capacity and processes quickly. Ultimately this will result in a reduction of the company’s capital needs. This will however potentially make the company vulnerable to competitors that have standardized, narrowed services and processes to reduce costs. On the other hand, maintaining a position below the diagonal can lock the company into a set of services that clients do not desire at a lower cost of delivery. Deviating from the natural diagonal on the product-process matrix has consequences for service cost, flexibility and the ability of the company to delivery client requirements. These choices are driven by strategic positioning and market conditions. In the section Identification of Processes for Re-design it was indentified that the business processes for data collection, LEM generation and invoicing were the key business processes best for re-design at NACG. Figure 12 below shows the current state process which was used to review changes to the current data capture to invoicing process. Review of the as-is processes were completed to develop the desired future state process.

48

A dju s tm en ts

E qu ip. M as te r T ab le

E m pl oy ee M as te r T ab le

C on trac t

J ob S e t u p(n ew B U )

T im e C ardLa bou r &

E q uip m en t

Sh opt im e

S hee ts

Eq ui p.T im eC a rd

T im eE nt ry

( uni ts)

D ail y

D A ILY O r O T H E RLE M S a r e ru n f ro m G L

a n d m a tc h ed to LE M s en t t o c l ie n t

O ve rt im e r u le s a r e ve r y co m p lex w ith a n um b er o f un io n s a n d s ta t w e ek r u le s ; s om e n on - s ta n d a r d ag r e em e n ts a re a l s o m a d e o r o ver t im e.

S it e s p o s s ib l y sh o u ld n o t s ee t h e $ $ a m o u n t s o nly u n i ts. Re sp o ns ib i l i t y o f t he O T ru l e s et u p is w ith P ay ro l l.

R un LE M F ina l

LE M F IN AL

D a ta C a p tu r e

L E M G e n er a t io n

In v o ic in g

D a ta C a p ture to In v o ic in g

Tim e e nt r y i n clu d es u n io n , n o n u n io n la b o u r , c o nt r a c to r s , s a la r i e d em plo ye es , sh o p em p lo ye es (w o r k o r d er s ) ; eq u ip m en t – o wn e d a n d r e n tal

C on s id er el ec t ro n ic ca p tu re o f t im e fo r r e a l t im e u p d ate i n to E R P o r c a p tu r e t o a sp r e a d sh e et th a t co u ld b e u p lo a d ed d a i l y t o E R P

D ata ca p tur e r e qu ir e s o n l in e v a lid a t io n fo r l a b o u r a n d eq u ip m en t t im e a n d T r a n sa c t io n g en er a t io n /co d in g .

A d d i t i on a l d ata t ha t c o u ldb e ca p tu re d a t t h i s

t im e:- a t t en d a n ce - d ay s in c a m p- E m p lo y ee a l lo w a n ce s- e tc .

SIT E w an ts LE M S P roo f

H er e

P os t E qui pm e nt

Ge n era l L e d g er

P os tLa bo ur

F ina nc e E qui pm e ntP ay ro ll

W e ek ly Pa y rol l& be ne f it s

Ac c o unt in g Ad jus tm e nts

E qu ip m en t M an age m e nt

In v oic in g

T o cl ien t

S ig n ed co p y i s r e tu r n e d To s i te

M O NT H LYLE M S fo r t h e i n v o ic e

M o n th a r e p ul l ed

U p d a te r ec or d s a s “B i l le d ”

Inv o ice

Se rv ic e B illi ngAA Is p os te d T o G L

J o b S e t U p & Ta b le m a int e n a n ce

1

3

2

5

6

D aily LE M s an d 3 r d P a rtyIn vo ic e s a t ta c he d.

W ork O rde rEq ui p. /M atS ho p t im e

C re ate P roF o rm a

J E

J ob C os t

F il e : L ab ou r & M a te ria ls

LE E P R O O F

Bi llin gR ate T ab le

LE E F IN A L T o c li ent

S erv ic e B ill ing

4

D ai ly

R u n LE E P roo f(La bo ur &

E qu ipm ent on ly )

Pro jec tM a na ge m en t

M a te ria ls L i s tin g

P u l l m a ter ia l s r e cei v ed o r m a te ria ls v o u ch er e d

W eek l y o rA s r eq uir ed

Pre pa re Inv o ic e

P ull “B ill ed ” r ec o rds F rom G L

At tac hm en ts

R u n O v er ti m e G en era tor

(un its an d $ )

A dju s tm en ts

E qu ip. M as te r T ab le

E m pl oy ee M as te r T ab le

C on trac t

J ob S e t u p(n ew B U )

T im e C ardLa bou r &

E q uip m en t

Sh opt im e

S hee ts

Eq ui p.T im eC a rd

T im eE nt ry

( uni ts)

D ail y

D A ILY O r O T H E RLE M S a r e ru n f ro m G L

a n d m a tc h ed to LE M s en t t o c l ie n t

O ve rt im e r u le s a r e ve r y co m p lex w ith a n um b er o f un io n s a n d s ta t w e ek r u le s ; s om e n on - s ta n d a r d ag r e em e n ts a re a l s o m a d e o r o ver t im e.

S it e s p o s s ib l y sh o u ld n o t s ee t h e $ $ a m o u n t s o nly u n i ts. Re sp o ns ib i l i t y o f t he O T ru l e s et u p is w ith P ay ro l l.

R un LE M F ina l

LE M F IN AL

D a ta C a p tu r e

L E M G e n er a t io n

In v o ic in g

D a ta C a p ture to In v o ic in g

Tim e e nt r y i n clu d es u n io n , n o n u n io n la b o u r , c o nt r a c to r s , s a la r i e d em plo ye es , sh o p em p lo ye es (w o r k o r d er s ) ; eq u ip m en t – o wn e d a n d r e n tal

C on s id er el ec t ro n ic ca p tu re o f t im e fo r r e a l t im e u p d ate i n to E R P o r c a p tu r e t o a sp r e a d sh e et th a t co u ld b e u p lo a d ed d a i l y t o E R P

D ata ca p tur e r e qu ir e s o n l in e v a lid a t io n fo r l a b o u r a n d eq u ip m en t t im e a n d T r a n sa c t io n g en er a t io n /co d in g .

A d d i t i on a l d ata t ha t c o u ldb e ca p tu re d a t t h i s

t im e:- a t t en d a n ce - d ay s in c a m p- E m p lo y ee a l lo w a n ce s- e tc .

SIT E w an ts LE M S P roo f

H er e

P os t E qui pm e nt

Ge n era l L e d g er

P os tLa bo ur

F ina nc e E qui pm e ntP ay ro ll

W e ek ly Pa y rol l& be ne f it s

P ay ro ll

W e ek ly Pa y rol l& be ne f it s

Ac c o unt in g Ad jus tm e nts

E qu ip m en t M an age m e nt

In v oic in g

T o cl ien t

S ig n ed co p y i s r e tu r n e d To s i te

M O NT H LYLE M S fo r t h e i n v o ic e

M o n th a r e p ul l ed

U p d a te r ec or d s a s “B i l le d ”

Inv o ice

Se rv ic e B illi ngAA Is p os te d T o G L

J o b S e t U p & Ta b le m a int e n a n ce

1

3

2

5

6

D aily LE M s an d 3 r d P a rtyIn vo ic e s a t ta c he d.

W ork O rde rEq ui p. /M atS ho p t im e

C re ate P roF o rm a

J E

J ob C os t

F il e : L ab ou r & M a te ria ls

LE E P R O O F

Bi llin gR ate T ab le

LE E F IN A L T o c li ent

S erv ic e B ill ing

4

D ai ly

R u n LE E P roo f(La bo ur &

E qu ipm ent on ly )

Pro jec tM a na ge m en t

M a te ria ls L i s tin g

P u l l m a ter ia l s r e cei v ed o r m a te ria ls v o u ch er e d

W eek l y o rA s r eq uir ed

Pre pa re Inv o ic e

P ull “B ill ed ” r ec o rds F rom G L

At tac hm en ts

R u n O v er ti m e G en era tor

(un its an d $ )

Figure 12 Data Capture to Invoicing Current Process

Figure 12 Source Discovery Session Notes

49

As shown there are a number of setup processes and functions that impact field level processing functions. Currently all these processes are done in JDE and other stand alone systems. They rely on a number of back office functions to occur before the field can collect data, generate daily Labour and Equipment activity reports (LEM) for the client. This lack of integration between the systems combined with the current process of corporate set-ups completed first does not meet key operational and client objectives. This results in delayed client reporting and invoicing of construction services. Setup processes such as project setup, employee master files, equipment master files and billing rate tables represented by the processes in box 1 are an area of corporate responsibility. The objective of maintaining corporate control over employee pay rates, capital assets and contractual billing rates is related to regulatory compliance. In addition, general ledger posting functions such as payroll, equipment and job costing in box 4 are defined as corporate or back office functions. Key field client facing processes are indentified as data collection; time entry, LEM generation and invoicing are represented in boxes 2, 3, 5 and 6. The objectives of these processes are different but currently tied to the same system as corporate processes. Corporate functions have the objective of control vice speed and flexibility. The corporate and client facing processes must be able to function separately to balance control and flexibility. Once the current process is understood we will explore the IT technology enablers needed to support the process.

IT Technology Enablers As discussed in the process-technology considerations in the literature review, automation is not a high technology requirement for low volume high variety operations. Scalability, the ability to shift to different levels of capacity quickly is also not required. Technologies for low volume high variety processes are required often to be nimble, simple and flexible. As demonstrated higher-variety processing generally requires a more open and unconstrained level of coupling because different services require a wider range of activities. Client reporting demands and need for more information on construction and development costs have increased the need for business process e-commerce. This has led to an increasing need in specialized middleware software tools, workflow management and corporate portal infrastructure to support internal and external reporting requirements. The current business process assessment above identified potential gaps in the ability of the JDE ERP system to enable a number of operational business requirements. These were mainly in the areas of field labour and equipment

50

report generation and project management software tools. JDE does not allow for a number of critical field capabilities:

• Off-line data entry • The ability to use and report on suspense data, defined as data

validated at source but not verified through the entire general ledger posting process

• The requirement for multiple set ups, processes and reports in order to post daily activity and create a LEM report is not supported to enable key operational and client objectives with respect to timeliness and flexibility

These shortcomings strictly challenge the field to meet demanding and ever changing field operations and client reporting requirements. NACG uses JDE as their enterprise software application to manage key financial and business information, however, there are limitations in its ability to handle flexible client driven business requirements. The fundamental requirements of any middleware software solution is to bridge the gap with JDE and generate required field functionality surrounding flexible and efficient data capture balanced with good internal controls. Also there is the requirement to provide project management functions encompassed within a solid integration plan with JDE. Software selection and implementation needs to provide the following objectives:

• An effective data collection tool that supports the requirements of field

operations while maintaining the appropriate controls • A flexible LEM generation and daily activity reporting software taking

into consideration field and client change and approval processes • Fully integrated with JDE • Replacement of legacy system Just1 • Off-line data collection and work continuation • Allows site to easily work with and report on suspense data awaiting

validation • User friendly front end requiring minimal field level training

With a well designed and proven integration strategy, data integrity issues currently plaguing the system will be reduced. Through data validation at point of entry with single source master file maintenance, data and reporting is more reliable and results in more effective outputs.

51

Evaluation �

A formal and structured analysis evaluating integrated middleware software was conducted to evaluate the capabilities of a number of technology solutions. The objectives of the technology analysis, assessment and validation were:

1. Determine business requirements at a mid-level of detail 2. Determine if a solution could meet the defined business objectives 3. Understand the flexibility of the solution and how modifications could be

made 4. Determine if the solution can be integrated with JDE 5. Determine what additional functionalities the tool can provide 6. Understand the total expected cost to procure and implement 7. Understand the architectural foot print of the solution and the infrastructure

required to host the software selection �

Based on the findings discussed above, six technology solutions were analyzed with respect to data collection, LEMS and project management functionality:

1. Meridian Systems (Prolog/Prolog Connect software) 2. Penta Technologies Inc 3. JDE (Data Collection and LEM Generation only) 4. CMiC 5. Daxware (Data Collection and LEM Generation only) 6. Digital Time Capture (Data Collection and LEM Generation only)

The initial review evaluated critical functionality based on available corporate literature, phone interviews and demonstrations. On review, Draxware and Digital Time Capture did not have critical functionality to support project management and change management documentation capabilities. CMiC being a full ERP system lacked any solid ERP integration experience. As a result, they were eliminated. The three technology solution vendors that were assessed:

1. Meridian Systems: Prolog/Prolog Connect

2. Penta Technologies Inc.

3. JDE (Data Collection and LEM Generation Only) Based on the solutions above the following options with pros and cons are discussed. �

52

Alternative A: Deploy Customized JDE Solution Through use of software configuration improvements the goal is to reduce processing errors, decrease man hours associated with validation while streamlining the process for generating a client approval. This option assumes extensive modifications to JDE and will draw on key internal resources

This approach would offer NACG the initial benefit of a low cost, improved data collection system through an existing hardware and infrastructure platform.

Alternative B: Deploy Prolog Solution This approach would offer NACG the maximum benefit of a field and client focused solution but at a higher cost and risk of integration. The result would be improved and flexible data collection capabilities, entry, validation and reporting. Through the use of middleware software, integration can ensure issues presently experienced with processing and validation errors are addressed. JDE would remain the system of truth. This would equate to reduced headcount at site having to deal with the associated process for generating a client approval. The modifications envisioned would be undertaken by both internal and external resources and implemented according to the newly mapped business processes. The Prolog solution has a Microsoft look and feel which is expected to increase user acceptance. Project management, document management, corporate portals and collaborative functionality is inherent in the Prolog product.

Alternative C: Deploy Penta Solution Essentially a construction focused ERP, this approach would offer NACG the maximum benefit of a field and client dedicated solution but at a higher cost. The result would be improved data collection, entry, validation, reporting and a host of construction activity based functionality. The modifications envisioned would be undertaken by internal and external resources and implemented according to a newly mapped business processes. The Penta solution has an ERP feel and look which may potentially decrease user acceptance similar to the present JDE interface. Integration costs and methodology are less defined but approximately equal to the Prolog option. As determined from the technology finding section JDE does not meet the client facing processing and reporting requirements. Review of JDE modifications would still not meet the simple and flexible objectives required for field and client data collection and daily activity reporting. Option A is ruled out for this reason. The Penta software is specifically designed for construction operations and a number of the functions will support field and client design objectives. The integration of this software is a greater risk due to not using XML or web services

53

technology. It is not recommended to tie the architecture to one integration language therefore this option is not recommended. It is recommended to proceed with Option B, the Prolog software solution. This technology has an easily configurable front end for setup. Its data entry screen will have high user acceptance in the field with both operations and client staff. The ability to report validated data prior to integration and posting in the ERP system allows the flexible and nimble controls field operations requires. Integration of this software would utilize web services capability.

Design and Build a Prototype of the Process Service process designs of industrial construction projects have the primary objective of flexibility and dependability. The processes must have a structure in order to provide elements of standardization around key control points. This will increase the potential to make training and implementation a higher success. However, the new process must be configurable to meet different client demands at different construction sites. The recommended design must be simple compared to the current process but meet critical project management and client objectives. The process must allow for client participation at key control points. The process must empower field personnel with authority and control of the data and information they are responsible for. Good process design must take into consideration both the people and technology required. Figure 13 below is a recommended design and prototype framework for data collection and LEM generation.

54

`

D ata E xchange #3

A pproved H ours sen t to JD E

N AC G A pprova l

(P ro ject M anager,

S uperin tenden t or C M )

C lien t A pprova l

(E lec tron ic or pape r)

L E R eport

D ra ft S ta te

D ata E n try C lerk en te rs tim e shee ts the m orn ing o f the next business day .

JD E needs hours on M onday a t 12pm fo r the previous w eek (S unday through S aturday ). H ou rs from S a turday need to be en te red M onday m orn ing .

P ro ject A ccoun tan t

(P rocessing )

A pp roved Y es /N o

A pproved Y es /N o

N A C G A pprova l typ ica lly occu rs w ith in one business day o f w o rk pe rfo rm ed .

LEM R eports are sent to the ow ner w eek ly and are typ ica lly requ ired to be app roved w ith in 48 hou rs .

N o t A pp roved - R esubm it

N o t A pp roved - R esubm it

D ay 1 – W o rk D o n e D ay 2 – D ay A fte r W o rk D o ne

W eek 1E

vent

s

Labor

E quipm ent

C lien t F ie ld R ep R eview

(of hou rs )

P ro jec t S pec ific

Tim

eP

roce

ssD

ata

Exc

hang

eD ay 2 o r L a te r

Sta

te

F or R ev ie w S ta te S u bm itte d S ta te A pproved S ta te

Hou

rs S

ent t

o JD

E

C lien ts w ith F ie ld R eps m ay approve tim e shee ts p rio r to data cap ture

Rep

orts

and

Ale

rts

LE M E xcep tion R eport # 1 – E m p loyee T im e N o t S ubm itted

S end an a lert to respons ib le ro le s ta ting tim e has no t been subm itted ove r a spec ified period of tim e.

LE M E xcep tion R eport #2 – E qu ipm en t T im e N ot S ubm itted

S end an a lert to responsib le ro le s ta ting tim e has not been subm itted ove r a spec ified pe riod of tim e .

N o te : N eed an attr ibu te to track w hen equ ipm en t is no longer onsite . In a la te r phase th is in fo rm a tion could be pulled from JD E.

LEM E xcep tion R eport # 3 – C lien t A pp rova l not R eceived

S end an a le rt to the responsib le N A C G ro le sta ting a LEM has no t been app roved and is ove r due

LE M

O ption - D e live r the LE M E lectron ica lly in a fo rm at the C lient can review w ith ease ( i.e . E xce l)

F ie ld D a ta C o llec tion

D a ta C ollection by D ata E n try

C lerk

D ata E xchange #2

A d jus tm en t sen t to JD E

D ata E xchange #1

U napproved LE M H ours sen t to JD E

D a ily Job C os t R eport

(N A C G R equirem en t fo r the BP IP

In itia tive )

A u tom ated in tegra tion be tw een 3 rd P a rty and JD E . N ot show n in th is d iagram are the rea l tim e and schedu led upda tes betw een JD E and 3 rd pa rty for va lidation and reporting purposes .

S ee the de ta iled in teg ra tion schem atic outlin ing the in tegra tion po ints betw een 3 rd P a rty and JD E.

#1 - A t som e point in tim e (i.e . M onday a t 12pm ) hours tha t a re no t approved w ill be sen t to JD E for P ayro ll R equ irem ents

#3 – Th is w ill be the m ost com m on transac tion . H ours a re subm itted to JD E from 3 rd P a rty based on N A C G and C lient app rova l o f the LE M R eport(s).

M anual A d justm en t inpu tting hours in

JD E

M anual

The ab ility fo r m anual ad justm ents w ou ld be availab le fo r use rs in a specified ro le . U se cases fo r a m anua l ad jus tm en t cou ld include :� R etroactive ra te ad justm ent

over a pe riod o f tim e

#2 - T he A utom ated In teg ration w ould be leve raged for ce rta in ad jus tm en ts sending a deb it /c red it transaction (i.e . -8 hou rs to code 1 and +8 hours to code 2) to JD E . U ses cases fo r ad justm ents cou ld inc lude :� M issed a P iece o f E quipm en t� Inco rrec t C ode assigned

A u tom ated

JD E

dwar

ds3rd

par

tyLa

bor T

ime

She

ets

and

Equ

ipm

ent U

sage

Tim

e S

heet

sR

epor

ts a

nd A

lerts

K ey

P M & C lient nego tia te

Y es

N o

Y es

Figure 13 Future State Data Collection and LEM Process

55

As demonstrated from the future state design, the proof daily activity report (LEM) can be viewed and approved by field project management staff and clients prior to posting in the JDE ERP system. This will eliminate a vast number of data errors, adjustments and corrections. Critical client and field reporting is considerably enhanced due to the simplified process and timely presentation of information. Under this design a clear separation of client facing processes and corporate control processes is evident. The number of contact points with the client is controlled in order to provide the client the best information on a timely basis. As the client contact time increases it can potentially introduce inefficiencies and delayed processing time. This has been mitigated with the introduction of client field rep review prior to data entry and presentation of the LEM proof. This newly designed process prototype is the first step towards collaborative and e-commerce initiatives with clients. The major transaction type of B2B is collaborative commerce. The process and selected software has the ability to deliver LEM’s electronically to the client. In addition, the recommended software has client portal capability for future expanded use. These activities represent a starting point of shared information and collaboration with clients using digital technologies that enable planning and design. In order for the process to be successful through the work stream the integration of the systems must be accomplished. In order to leverage an ERP system, 3rd party software and processes must be integrated across business functions. As discussed in the literature review an ERP requires a company to fit its business processes to the software. In order for specialized middleware applications like Prolog to be part of an integrated business process connection with the ERP system is necessary. Integrating systems can be a complex task with a number of risks. This integration has the added complexity of the removal of the legacy system Just1. Web Services will be utilized to provide the architecture that enables distributed applications to be integrated together. Figure 14 below provides a summary of the proposed integration recommended 3rd party software, Prolog, specialized in data collection, LEM generation and invoicing of construction based costs with the JDE ERP system.

56

Labor Equipment

Employee Master

Equipment Master

Business Unit Master

Employee Billing Rate

Client Field Rep Review (of hours)

Project Specific

JD Edwards

3rd Party

Employee MasterJDE F.060116� Name � Employee ID� Trade � Classification

Equipment MasterJDE F.1201� Name� Unit #� Description� Rate Group� Classification Code

Business Unit (BU) MasterJDE F.0006� BU # (Project #)� BU Name� BU Classification� Codes

Equipment Billing Rate

Business Unit

Employee Billing RateBilling Rates Table� Trade� Classification� Cost Code� Standard Rate� Overtime Rate� Double Time Rate

Equipment Billing RateBilling Rates Table� Rate Group� Cost Code� Operating Rate� Idle Rate� Standby Rate

Business UnitProject Properties� BU #Field Data Capture� Date

Approved Hours from a New LEM

Report or Adjustment

3rd Party Data Collection

L E Report

Hou

rs to

JD

E if

not

App

rove

d by

Pay

roll

Dea

dlin

eNACG

Approval

Owner Approval

*See LEM Report

� Data Collection of Hours

� Overtime Generator

Data ValidationData Collection and Approval

JD E

dwar

ds3rd

Par

tyLa

bor

Tim

e S

heet

s an

d E

quip

men

t Usa

ge T

ime

She

ets

Key

Notes:1. See detailed integration schematic for touch points , table names and field names. 2. This is a summary document intended for high-level presentation and does represent the entire ‘data collection and approval’ process and does not include all ‘validation’ and integration touch points and business rules. 3. Nomenclature used in this summary diagram is from operations and does not represent the nomenclature necessarily used by the financial or JDE team .

NACG Approval

Payroll process

GL Master GL MasterJDE F.0902� Account ID� Account Description

Hours Sent to JDE

Figure 14 Proposed Integration Model

57

Implementation To ensure the implementation of this process change will meet its objectives, the following path and tasks are recommended for the award to cash work stream to ensure the implementation is successful and the changes are adopted within the organization in a sustainable manner.

Figure 15 Implementation Path and Tasks (Source: Celerant Consultants, personal communication, 2009) It is recommended a full implementation plan for the future state process be formulated following the methodology highlighted above.

Summary of Recommendations The organization must adopt an integrated operations management and business process approach, driven by client market requirements. In order to accomplish this, the following recommendations are presented and summarized:

Understand current processes

Identify process enabler

Develop & document the improved process, reports, KPIs & other outputs

Configure software, test & develop reporting

Train the users in process and reporting

Reach compliance level in process & reporting

Support to reach understanding Level

Support to reach usage Level

Sustainability

Continuous Improvement

�

Next Phase

Study

Procedural Change

Behavioral Change

Cultural Change

58

• Operational management strategy must be developed using a client market perspective around the following key elements:

o Organization capacity and efficiency o Business process development and redesign Information Technology

• Adopt the NACG major work stream model for selection and prioritization

of integrated business process redesign and change initiatives • Prioritize “Award to Cash” business process for change using sound

BPM and organizational change methodology. • Implement the redesigned data collection and daily activity reporting

business process. This model is recommended for future process selection, design and implementation projects

• Implement the field and project management software, Prolog, to support the new design business process.

• Develop a detailed implementation plan based on the organizational change methodology presented.

Conclusions The purpose of the study was to review and discover key business processes for change and indentify supporting technology enablers to improve efficiencies and effectiveness leading to greater client satisfaction. The literature review, subsequent findings and analysis demonstrated a model that can be used by key decision makers to accurately choose processes for redesign projects. The model was created using developed operational strategic objectives and the value chain approach. The two main accomplishments of this research are the development of key operational strategic objectives and selection of a key business process for change to support critical project management and client requirements. The development of the NACG key work streams can provide an excellent tool for the company’s on-going BPR endeavors and prioritization, providing project leaders with a good starting point. The majority of companies in today's market places still rely on organizational charts and functional departments to determine who performs certain activities. It is hoped that, through this research, businesses will see that these activities are related and begin to focus on their overall business processes. In conclusion, to review the study’s guiding questions, operational strategies and objectives have been reviewed and presented to support NACG’s business environment and client needs. Key production processes, inputs and outputs, planning and control systems have been indentified. Root causes of a number of inefficiencies from an input, process and output perspective have been analyzed

59

and identified. The award to cash business process of data collection, daily activity reporting (LEMS) and invoicing have been redesigned to align project management and client requirements with corporate control and reporting needs. Finally a technology enabler has been recommended to support operational objectives integrated with the company’s ERP system JDE. The NACG key work streams ensure that BPR teams will take into consideration the company’s strategic objectives during process selection. The first steps towards a truly defined methodology for performing BPR projects at NACG have been taken. It is hoped that research in this area will continue, and that the success rate of BPR projects at NACG will soon increase.

60

APPENDIX A – North American Construction Group Summary Information NACG provide services to customers through three primary segments:

• Mining and Site Preparation. Surface mining for oil sands and other natural resources; construction of infrastructure associated with mining operations and reclamation activities; clearing, stripping, excavating and grading for mining operations and industrial site construction for mega-projects; and underground utility installation for plant, refinery and commercial building construction.

• Piling. Installing all types of driven and drilled piles, caissons and earth retention and stabilization systems for industrial projects primarily focused in the oil sands; and

• Pipeline Installation. Installing transmission and distribution pipe.

Mining & SitePreparation

Piling

Pipeline

Canadian OilSands

Conventional Oil& Gas

Minerals Mining

Commercial andPublic

North American Mining & Industrial Group

The reporting unit provides a wide variety of services including outsourcing of equipment and direct labour services. Project Services include removal of overburden, ore mining, reclamation activities, general construction projects and installation of underground utilities used by plants and refineries. This is NAEP largest and most capital intensive of the three reporting units.

$750 million

North American Piling Unit The piling reporting unit installs all types of driven and drilled piles, caissons and earth retention and stabilization systems used in the construction of commercial buildings and private industrial projects, such as plants and refineries, and infrastructure projects such as bridges.

$90 million

North American Pipeline Unit This unit installs field, transmission and distribution pipe used in the transmission of oil and gas.

$37 million

Source: North American Energy Partners Annual Report 2008

61

APPENDIX B – The Process of Selecting a Software Vendor and an EC Package

Step One: Identify Potential Vendors

Step Two: Determine the Evaluation Criteria

Step Three: Evaluate Vendors and Packages

Step Four: Choose the Vendor and Package

Step Five: Negotiate a Contract

Step Six: Establish Service Level Agreemetn

Source: Martin et al,p. 6

62

APPENDIX C – Project Management Field Survey ����������� ���������������������������������������� ���������������������������������������� ���������������������������������������� ����������������������������� �� ��"!�# ���$����%'&)(*��# +�����,� &��������*-/.�&��0�1��+��*����# ���$����%2���1�������"�3��������!�# ���$����%'&)(*��# +�����,� &��������*-/.�&��0�1��+��*����# ���$����%2���1�������"�3��������!�# ���$����%'&)(*��# +�����,� &��������*-/.�&��0�1��+��*����# ���$����%2���1�������"�3��������!�# ���$����%'&)(*��# +�����,� &��������*-/.�&��0�1��+��*����# ���$����%2���1�������"�3����������4�����*!"���5 6�4�����*!"���5 6�4�����*!"���5 6�4�����*!"���5 6

738*91:/;'<</= >�?�?@

1. Please identify your job position and the site you are working from.

11 Responses

construction manager mayfield, suncor,

Project Manager, Fort Hills ����������� ������������ � � �

� � ������������������������������� �������� � �

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2. What Project Management tools and processes do you feel would assist you in efficiently and effectively performing your job at NACG that are not currently available?

The automated creation of LEMs 9 82%

Document management tools (eg. change management documentation and logging, RFI creation and automated logging, etc).

10 91%

Client specific reporting requirements (provide specifics) 7 64%

Daily / Weekly internal/external cost report 11 100%

Internal/external Forecast 11 100%

Budget to actual analysis 10 91%

Others (please specify) 4 36%

Safety Statistic database for project

����������� � $�

��������/������#��"��0���������������� �

������������� ����+���������������� �����$$$�

3. What obstacles do you face to produce an automated LEM/Force account/Daily priced work journal. Please select all that apply. Definition: LEM - Labor, Equipment, Materials

I do not trust that data produced from the system of record matches that entered by the time entry clerk

5 50%

NACG's automated process does not support client timelines for reporting 6 60%

Inaccurate coding / employee numbers 5 50%

Time is not entered and posted daily. 7 70%

Materials billing is very manual. 9 90%

63

Others (please specify) 6 60%

architecture and setup shortfalls

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� � �

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4. What workarounds do you use to avoid these obstacles?

Manually prepare LEMs via double entry of data (eg. into corporate system and second manual site system)

8 80%

Other, please specify 6 60%

tedious manual checking

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3�� �������"�����(� �������������������� � � � �

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5. With what frequency are you required to use these work arounds?

Daily 6 60%

Weekly 3 30%

Monthly 4 40%

Occasionally - the automated process generally works 0 0%

Others (please specify) 1 10%

6. What would you estimate is the cost/productivity impact of using these workarounds?

8 Responses

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7. Are you using manual processes for any of your PM tasks today? For example, change log tracking, budget to actual analysis, etc.

Yes 10 91%

64

No 1 9%

Total 11 100%

8. If yes, please briefly describe the process. If no, please provide specific tools used.

11 Responses

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- Change logs

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_ NCR logs and rework logs and cost tracking associated with reworks.

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All forecasting, costing, revenue analysis

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9. If so, what is the cause of using manual processes?

Lack of tools. 9 90%

Tools are not easy to use. 3 30%

Manually track data as you do not trust the system produced results. 4 40%

Other, please specify 4 40%

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65

10. What time entry method is used to support NACG payroll at your project site?

Just1 9 75%

JDE direct time entry 7 58%

Excel upload 2 17%

Other, please specify 2 17%

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11. How would you rate the flexibility of the time entry tool?

Very flexible. My time entry staff has very few concerns about the usability and flexibility of the tool

0 0%

Somewhat flexible. The tool is adequate but could be improved. 6 55%

Inflexible. We use various workaround and / or the tool is very time consuming to use.

3 27%

Other 2 18%

12. What concerns do you (and your team) have with the time entry tool?

9 Responses

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*������ ���������� ����������� �����������������*��������� $�/*����� ����� �������� ������#��"�#����*���� ������ �����# ���������������� ���"������ � ���� ���� "0�

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13. Please provide any other comments you have on the tools/processes at NACG to support Project Managers and their teams in the successful completion of their duties

6 Responses

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66

!3(�� ������������+�������������.������������ ������������� ����� ������������������/������������������� �� ������+������������������),�����+��������� ����!3(0$�*��� � �� ��������� ������� ���� � �������(��� � �������������!3($����#��� ��������� �������������������� ���� � �� ��������� �������� ���� ���������� � ��+������? ����������+��$�7�#�+������#��������� �� ���� ����������������������������������������������#�� $�

*������� �������� ���� � ���������������+��������������������� �#����� ���������#�������� ����������$�C ���������� � ���������������,��+������������������� ���#�� ���������/��$�!� �5�������#� �+�������+�������D����� �����#�������#� �#�������������%������ ������������������������������+��� ������� 0�

14. What type of support (training and/or documentation) would best support your duties?

Full classroom training with hands on examples that relate to our business. Include documentation that provides step by step instructions.

7 58%

Classroom overview session with documentation that provides step by step instructions.

2 17%

On-line training with documentation that provides step by step instructions. 1 8%

Documentation that provides step by step instructions and access to a subject matter expert.

2 17%

15. What is the most efficient way to introduce process changes into your area/job?

Person to person overview and supporting documentation. 10 91%

Formal documentation that discusses the changes and provides step by step instructions for the revised process.

1 9%

Formal documentation that provides step by step instruction of the new process. 0 0%

Email outlining the changes and the start date for the new process. 0 0%

16. How would you rate your staffs ability to adopt process changes?

Willing and able to change processes with little stress or resistance. 1 9%

Able to adapt to changes with little stress or resistance. 5 45%

Able to adapt to changes but will experience stress during the change period. 4 36%

Resistant to change. 1 9%

Source: Field Project Management Survey

67

APPENDIX D - Environmental Analysis North American Construction Group Macroenvironmental

Factor Threats Opportunities

Demographic

• 70% of NAEP’s revenue is generated in the Northern Alberta and Fort McMurray area. Significant economic downturn in this area or delay of major projects would have a negative impact on NAEP’s financial results and growth.

• NAEP is one of the largest providers of mining, site preparation, piling and pipeline installation services in Western Canada. The Company’s services are primarily provided to the major integrated oil and gas, petrochemical and other natural resources companies

Economic

• The rapidly increasing demand for construction, mining, piling and pipeline services in NAEP’s market space has created a shortage of people, equipment and tires for large trucks making servicing the increased demand at reasonable profit margins a significant challenge.

• NAEP has been involved in the majority of all

large projects in Fort McMurray. However, forecasted projects to be undertaken in relation to the oil sands industry is now so significant in terms of volume, value and expected timing that NAEP can no longer expect to be involved in all major projects. Therefore giving an opportunity for competitors to gain a foothold in our dominant Fort McMurray market.

• The world demand for oil and other resources has grown rapidly over the last few years. Prices have risen dramatically, driven by a worldwide undersupply of oil and resources to service the demand generated by expanding economies of China and India. This, in turn, has assisted in strengthening demand for goods, services and labour in the resource rich Western Canadian economies.

• Oil from the Fort McMurray region is seen as

strategically critical to the US in its efforts to reduce reliability on the Middle East. Additionally because the scope of most projects in Western Canada is so large, the project’s sensitivity to short term oil price fluctuations is reduced.

Technological

• The two common methods to recover bitumen in the Alberta Oil sands are open surface mining and In-Situ Steam Assisted Gravity Drainage (SAGD). NAEP has developed expertise and strong customer relations in the open surface mining, historically the most commonly used extraction method. However, the development and expanding use of the SAGD extraction method with uses injected steam to exact bitumen has a lesser environmental impact and long term cost advantages over open surface mining. The expansion of this type of extraction method could have a negative impact on NAEP growth strategies.

• A majority of the Company’s operating areas are remotely located in Northern Alberta, Western Canada and Northern Ontario making data collection and communication difficult. Significant opportunities exist to invest and expand existing technologies to enhance service provided, and operational and financial reporting.

Political/legal

• The numerous oil sands and other natural resources expansion projects have created strong growth in Western Canada, particular Alberta. This has lead to an “over heated” economy without the proper infrastructure growth and planning. This lack of infrastructure in labour, housing and roads may cause the Alberta and Municipal governments to delay or cancel current planned oil sands projects.

NAEP operates in the political stable environment of Western Canada that promotes strong business growth and low taxes. Additionally NAEP has a excellent history and strong working relationship with various labour union memberships that it works with

Socio/Cultural

• There are no socio/cultural opportunities and threats identified for this industry.

68

Macroenvironmental Factor

Threats Opportunities

Natural/Ecological

• Through the execution of NAEP’s numerous oil sands and natural resource site preparation and mining projects the Company is at risk with changing environmental laws and regulations. Additionally NAEP operates many heavy equipment maintenance shops in Western Canada, at the end of these long term contracts or lease expiry the Company is financially obligated to return to the land to its original natural state free of contaminants.

• Expanding oilsands and other natural resource development also provides additionally growth and business opportunity in environmental reclamation projects. These projects have a tendency to be long term and low risk, therefore increasing NAEP’s recurring revenue mix with shorter-term higher risk construction lump sum and unit price contracts.

Competitor Service Provided Estimated Revenue Peter Kiewit & Sons Co Heavy construction contractor that has had

operations in Western Canada since the early 1940’s. Projects include construction of highways, airports, mass transit, site development, canals, dams and tunnels.

$3.9 billion

Washington Group In the oil sands the company is mainly involved in engineering design specifications, prefeasability studies, stripping plans and cost estimates

$3.2 billion

Ledcor Ledcor has operations in the building, civil, industrial and technical market sectors. The company has international operations and in Alberta its involvement is primarily with the pipeline industry and highway construction.

$900 million

Klemke Mining Corp KMC mining is a privately owned company that began operations in southern Alberta in 1949. The company’s primary focus since 1973 has been the open pit mining industry, and in particular, the Canadian oil sands region.

$54 million

Thompson Bros Ltd. Established in 1964, Thompson Bros. is a prime contractor in all aspects of resource industry and heavy civil construction, including highway construction and mining. They have a large equipment fleet of 200 pieces of Caterpillar equipment.

$37 million

Agra Foundations Ltd. Serving clients in Canada, the US and select international markets, AGRA Foundations is a specialist foundation drilling and ground improvement contractor providing design and construction expertise to industrial, commercial, resource and government clients

$30-40 million

Fraser River Pile & Dredge

FRPD is 100% employee owned and the largest Canadian Marine and foundation contractor, which operate mainly in Western Canada. The company’s foundation work segment includes caissons, cofferdams, ground improvement, timer and steel foundation piles, sheet piling, drilled piles, and restricted headroom piles

$20-50 million

Flint Energy Services Ltd.

FES is an integrated midstream production services provider headquartered in Calgary, Alberta. The company serves several industries, including: oil & gas, petro-chemical, manufacturing, pulp & paper, power generation and mining

$944 million

Source: Discovery Session Notes

69

APPENDIX E – NACG Major Processes The opportunity phase looks for work opportunities and does the initial high level evaluation to determine if the work should be perused. This phase can also be revisited if opportunities are discovered while in the field working on a current client site. Functions Sub-Functions

Identify potential work • Obtain tender documents • Create Opportunity Form • Update Project List

Identify new expansion opportunities on existing sites

• Change orders from clients

The estimating phase is the process of developing a formulated response to client requests for proposals in the form of firm price, cost reimbursable or force account tenders, budget pricing and pre-qualifications. During the estimating process an interdepartmental review of risks, liabilities, labor resource requirements, equipment resource requirements, subcontractor requirements and third party rental/purchase requirements is completed. Functions Sub-Functions

Evaluate New Opportunity • Receive new opportunity • Conduct initial assessment • Discuss opportunity with Divisional leads • Make Go/ No Go Decision

Create preliminary package • Create preliminary document • Review document • Identify key issues

Develop Bid Package • Assemble estimate team • Assess need for Risk Committee • Prepare the estimate • Complete risk evaluation • Create standard margins

Review Bid Package • Conduct Risk Review • Conduct final review with Authorized personal

Send bid submission • Send to client • Notify entire bid team • Update Job in JDE

Track bid through negotiations • Revised bid package • Conduct final review with Authorized personal

Resubmit bid package • Develop Letter of Intent

Evaluate lost bids • Request information from client

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• Complete competitor analysis • Review current bid process • Make recommendations • Complete risk committee post tender review if

required The Award phase includes all the processes required to finalize the budget and prepare all contracts to enable NACG to legally begin the work. Functions Sub-Functions

Build Excel estimate file • Create account code view in Excel • Add mobilization / demobilization, survey, etc

costs to Indirect cost codes • Enter cost codes into foundation set up • Create new job for budget file • Create subordinates

Deliver Excel sheet to Project Accountant

• Print and Sign budget sign off sheet

Develop Resource and Budget Plan (RAPP)

• Finalize contract scope and details • Assign direct cost codes • Produce RAPP Data sheet in Excel • Sign off and accept RAPP sheet.

Contract to begin work • Develop or receive letter of intent • Manage Letter of Intent ( LOI) cycle • Acquire Insurance Certificate • Acquire WCB letter • Develop contract • Manage contract cycle • Develop contract summary sheet • Develop Revenue Recognition check list

The startup phase includes all the processes necessary to begin work at the site. This includes not only the equipment and resources but all the financial reporting agreements and the technology needed to support the reporting aspect of the job. Functions Sub-Functions

Setup Project • Setup Job master • Setup Job master client codes • Transfer cost codes to JDE • Transfer budget to JDE

Acquire Supplies • Issue Requisitions, POs, and Sub Contracts Set up IT Infrastructure • Mobilize IT equipment and communications

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Recruit Staff • Recruiting of field and project management staff

• Setup employees Set up Infrastructure • Setup Project Accounting job records

• Add Job to Work in Progress (WIP) schedule • Setup Monthly forecast summary in JDE • Determine bonding requirements • Acquire bonds

Request Equipment • Coordinate equipment requirements with Supply Chain

• Equipment transfer, purchase and rentals • Setup equipment

Hold Client Kickoff • Develop Startup Kit • Determine Client Reporting needs • Develop Initial Client Report • Set up Client Portal

The project and change management phase is the field construction execution as per the defined contract scope and both client and internal initiated changes. This phase generates the revenue and cash for the company from project execution and billing of construction costs, overhead and profit margin to the client. Functions Sub-Functions Manage Project Performance • Daily activity capture (Data collection)

• Labour hours • Equipment hours • Production stats

• Site meetings with client Manage Forecasts • Prepare Internal Forecasting

• Prepare Client Forecasting Manage Revenue Recognition • Invoicing

• Approved contract value Manage Change • Recognition Update RAPP sheet Manage Invoices • Invoicing

• Cash collection • Credit management

The closeout phase includes all the processes to successfully and legally close out the work and demobilize from the construction site. In addition collection of any outstanding billings and holdbacks from the client and payment of outstanding amounts to third party suppliers.

72

Functions Sub-Functions

Project Management Closeout • Final Billing and communications • Completion of schedule

Financial Management Closeout • Feedback final costs to Estimating • Sub-Contract Holdback management

Document Management Closeout

• Quality control documentation

Contractual Documentation Closeout

• Substantial Performance Certificate • Certificate of Completion • Release & Certificate of Final Payment • Closeout Master list • Archive documents

Contractual Obligations – Client close out

• Prepare punch list • Turnover packages • Identify warranty period • Perform contract reconciliation • Submit Holdback release • Issue final invoice

Finalize RAPP • Send modified RAPP sheet to Estimating Source: Discovery Session Notes

73

APPENDIX F – NACG Key Business Processes Source: Discovery Session Notes

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