A worker manipulates capsules containing radioactive isotopes stored in cooling pools in a plant at the Fluor Daniel Hanford site. Fluor Daniel credits corporate re-engineering with winning the multibillion-dollar Hanford remediation contract

At first glance, an outsider might wonder why Fluor Daniel would need to re-engineer at all. Already one of the world's largest international engineering and construction firms, the company posted record earnings for fiscal year 1996, with revenues of $11 billion. Fluor Daniel also increased its backlog of work to $15 billion, a new high.

Two factors led management to begin a re-engineering program in 1994, according to Marilyn Coll, vice president of continuous performance improvement and a key player in the re-engineering program. One consideration was that the company has underused its own potential for growth, particularly in light of strong global positioning. "We've operated on every continent on the globe for more than 50 years, we have some $300 million in cash, virtually no debt, an excellent reputation in the world's financial communities, and a skilled workforce dispersed throughout the world," said Coll.

The second factor was client requirements. Clients, Coll said, told Fluor Daniel to help them improve their capital effectiveness, to be more flexible, and to help them go global.

Fluor Daniel had three responses to these demands, encompassing restructuring, automation, and cultural transformation. The first step was dividing the company's several large units into 32 individual operating companies focused on specific regions and industries. By becoming more familiar with their clients' business needs, they can offer tailor-made solutions to problems. This is a natural response to Fluor Daniel's diverse client base, Coll said. "We serve clients like Frito-Lay, who want us to design and construct a potato-chip factory. That's a lot different from designing and constructing a refinery for Chevron."

The second response involved automation. The company formed an interdisciplinary Global Automation Team, made up of Fluor Daniel professionals from around the world. The team works with each operating company to identify work processes that can improve clients' time to market and lower costs. "Although the Global Automation Team is funded and coordinated at the corporate level to ensure top-ranking support," Coll said, "the process improvements and automated methods are developed in partnership with each operating unit."

Cultural transformation was the third step in Fluor Daniel's re-engineering strategy. "Our objective is to encourage client-focused innovation and entrepreneurship, and enable individuals to grow to their potential and be accountable for their performance," Coll said. To this end, Fluor Daniel has revamped its strategic planning process so more people could contribute to the development of business strategies and so there is widespread awareness of the company's strategic goals.

Because Fluor Daniel is inherently technically based, the company invested more resources in strengthening the business skills of its personnel. This included providing more business-education courses and seminars, conducting more leadership training, and using 360-degree feedback methods. Smoother and faster employee communications is another hallmark of the Fluor Daniel re-engineering program. "We inaugurated a straight-talk hot line where we share strategic information with employees and enable them to ask us questions on a variety of topics," Coll said.

Fluor Daniel has created a diversified services group that augments the company's traditional strengths in engineering and construction. The company has become much more involved in areas that complement its engineering and construction project expertise, such as equipment leasing, plant maintenance, and temporary staffing. "This adds value not only to the client's project but to the life cycle of that facility," Coll said. As a result, Fluor Daniel has expanded into 12 new countries in the past three years, such as the ex-Soviet republic of Azerbaijan. The company has reduced costs through networking its computer-aided design tools, enabling design engineers separated by a dozen time zones to communicate directly with one another.

"We have to repeat frequently the rationale for these changes, because it is very hard for any of us to change our work process without a reason, particularly when the company is doing well," Coll said. "We have also learned that changing a technical process or business practice must be market-driven." In addition, Fluor Daniel has learned to be careful not to develop a technically elegant solution that may suit the company's engineers but does not necessarily meet clients' needs.

"We are learning that change cannot be directed from an ivory tower or from behind a computer. We need to get out in the organization to identify and coach those individuals who are influencing the workforce," Coll said. The most influential people often are not found at the highest rank but are interspersed throughout the corporation, she added. "Those of us who have lead responsibilities for change need to work in and around the organization to help create some momentum among those people who truly influence the workforce."

Coll credited the re-engineering program with helping Fluor Daniel to get multibillion-dollar engineering contracts such as the $8 billion Hanford Nuclear Waste Remediation Project that the company won in October from the U.S. Department of Energy (DOE). Fluor Daniel was hired to be the prime, or management, contractor for the cleanup of the Hanford site in Richland, Wash., where plutonium was produced for American nuclear weapons during World War II and from 1949 to 1987. Nuclear fuel and radioactive waste generated by plutonium production are stored on the site.

Re-engineering gave Fluor Daniel four major advantages to win the Hanford project, according to Ron Peterson, an industrial engineer and group president of the Government and Environmental Group at Fluor Daniel who oversees the Hanford project. "First, re-engineering enabled us to select and focus on specific targets in the marketplace, such as the Hanford site.

"Second, empowerment resulting from our re-engineering strategy enabled us to direct the people and dollars necessary to win the Hanford contract," said Peterson, who noted it took Fluor Daniel two years of effort and $5 million to develop the winning proposal. Re-engineering also spurred advanced thinking that enabled Fluor Daniel to develop innovations that won over DOE. "For example, we put up 100 percent of our fee at risk for the project," Peterson said. "We also created a unique three-tiered insurance plan for the project. We will purchase insurance to a certain limit and insure ourselves for the next level, and DOE will cap the third level of coverage."

The teamwork encouraged by re-engineering enabled Fluor Daniel to attract and build a world-class team of subcontractors, Peterson said. "The days when a single contractor could do the entire scope of work at major engineering projects are long gone." A big factor in the company's win, he added, was breaking the job down into four specific tasks—spent nuclear fuel, waste management, facility stabilization, and tank-waste remediation—then getting the best companies in the world to address them.

Lockheed Martin Hanford Corp. manages the high-level waste at the site, while Rust Federal Services Hanford Co. manages the low-level radioactive waste landfilled there as well as the low-level liquid wastes. B&W Hanford, a Babcock & Wilcox subsidiary, is responsible for facility stabilization—essentially cleaning out and shutting down the site's production facilities. These include the B Plant that produced plutonium during World War II, the Purex facility that produced plutonium powder or nitrate during the Cold War, and the plutonium finishing plant that converted the powder or liquid into a metal for use in atomic bombs.

DE&S Hanford Inc., a subsidiary of Duke Engineering and Services, is tackling the spent nuclear fuel. There are 2.1 million kilograms of this material stored in cooling basins in a defunct reactor within 1,000 feet of the Columbia River. Because the basins contain highly hazardous material and leak in proximity to the Columbia, the cooling basins represent the gravest environmental threat at Hanford. DE&S will remove the nuclear fuel rods from the basins, dry them, and dry-store them in facilities now being built.

Numatec Hanford, a subsidiary of the French nuclear giant SGM Cogema, provides technology and engineering support to all the companies across the site. The sixth subcontractor, DynCORP Tri-Cities Services Inc., is responsible for landlord/infrastructure services at the site, including maintaining the buildings, providing fire services, and operating the on-site railroad.

Engineers at Fluor Daniel bring their own experience in cleaning uranium enrichment and gaseous diffusion sites, earned at the Fernald site in Cincinnati in 1992. Enriched uranium used in atomic weapons and depleted uranium used to make M-1 tank armor were produced at that location. "We also have a great deal of experience assisting Los Alamos National Laboratory in designing nuclear-weapons systems," Peterson said.

Fluor Daniel Hanford's president and CEO, Hank Hatch, manages the integration of all the contractors, who are charged with meeting commitments and milestones to achieve cleanup of the Hanford site. "I have to walk a fine line between being a teammate and being a taskmaster," he said. "This new contracting concept is a dramatic change for the Hanford workforce and is requiring a cultural transformation for nearly everyone on the site."

While change is always uncomfortable, Hatch said he seeks to create a working environment at Hanford rich with opportunity for the workforce. "The key to our success is maximizing the talent and skills of the Hanford. Our workforce at Hanford is second to none. I have to make sure barriers are removed so they get the support they need to succeed."

A unique feature in the Fluor Daniel Hanford contract is its provision that the integrating contractor and the six subcontractors establish an economic presence in the local Tri-Cities region (Richland, Kennewick, and Pasco) that will last after the cleanup is completed. This stems from DOE's desire to mitigate the boom-and-bust cycle, caused by changes in American nuclear-weapons production, that has buffeted the area. Indeed, the Hanford remediation is only the latest government-funded effort to pour billions of dollars into the region, employing 10,000 people out of a general population of 100,000.

To strengthen the local economy as the cleanup winds down, Fluor Daniel and its subcontractors at Hanford have each created an enterprise company in the Tri-Cities area. These companies are committed to replacing their government work with commercial-sector projects, and they must create a certain number of jobs by the time the site is cleaned up—again at the risk of their fees. Fluor Daniel Northwest, an architectural/building/ construction management firm employing 868 people, was established in Richland, and is now their fourth-largest office.

In addition to creating subsidiaries in the Tri-Cities area, the seven Hanford contractors founded Columbia Basin Ventures, a venture-capital company with a $10 million line of credit. Each contractor invests between 5 and 12 percent of its earned fees into the company, which provides funding for local start-ups.

According to Hatch, this economic transition has another benefit: It will surround DOE, Fluor Daniel Hanford, and its subcontractors with successful companies. "Our client is demanding that we bring more commercial practices to the site to drive down costs and speed the cleanup," he said. "The more successful we become in attracting new firms to the area, the greater the competition, which drives down costs and makes us more valuable to our client. It also saves taxpayer dollars, and that's good for everyone."

Peterson said these measures will become less novel and more standard business practice in the future. "We expect that there will be an ever-increasing demand for engineering companies to become involved in the communities they operate in, especially in the case of government contracting."

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