Cost Management Best Practices for STO

1. Cost Management Best Practices for STO Christen Bergerud EcoSys

2. Agenda • Introduction • STO Cost Management Challenges • Attributes of a STO Controls System • Marathon Petroleum Turnaround Case Study • STO Controls Systems – Other Examples and Screenshots • Questions

3. EcoSys Company Background • Planning and Controls Software Vendor • Designers & Developers of original Primavera P6 • Current focus is EcoSys Enterprise Planning and Controls (EPC) Software • Consulting Practice • Focuses on Implementing Processes and Systems for Planning and Controls of Capital Projects including Shutdowns, Turnarounds, Outages • Partnerships with Oracle, SAP, Microsoft, & IBM

4. EcoSys Enterprise Planning and Controls Software

5. Over 200 Customers GloballyPublic & Private Sectors

6. STO Cost Management Challenges Shutdowns, Turnarounds and Outages can have vast cost implications on a company • Cost of Delay can be immense • Lost Revenue, Lost Market Share, Regulatory Impacts • Cost tends to be a Principal Way that Management Evaluates the Success of Turnarounds

7. STO Cost Management Challenges Better STO Cost Management Has Many Benefits • Confident cost analysis justifies further investments in improvements to STO processes • Tom Lenahan provided example in keynote - $2.5 MM estimate was actually $10 MM true cost. This led to greater management engagement.

8. STO Cost Management Challenges Better STO Cost Management Has Many Benefits • Understanding of Cost allows fine-tuning of model for future STO events • Monitor planned and actual against past performance • Understand directs/indirects • Understand performance by cost type, phase, contractor…

9. STO Cost Management Challenges But Really, You Don’t Have Time to Track Cost during a Shutdown, Turnaround or Outage • During a Turnaround it’s easy to conclude that what matters more is: • Safety • Regulatory Requirements • Productivity • Schedule

10. STO Cost Management Challenges But Really, You Don’t Have Time to Track Cost during a Shutdown, Turnaround or Outage • And if you focus on safety, productivity and schedule, your costs should stay in line… right?

11. STO Cost Management Challenges STO Status Quo: • Big contingencies • Sometimes big enough to allow even poor cost performance to come in under budget • Limited accuracy of cost performance reporting by: • Direct / Indirect • Cost Type • Cost Breakdown Structure • Asset

12. STO Cost Management Challenges STO Status Quo: • Lots of Manual Effort During and After a STO event to make sense out of the cost picture

13. STO Cost Management Challenges Management Demanding More • Picture of True Cost of a Shutdown, Turnaround, or Outage • Understanding how STO costs interrelate with Capital Projects and Operations • Planning and Budgeting based upon real understanding of Past Performance • Better Control over Late and Emergent Work

14. Challenges for Cost Controls Systems Fall Short during a Turnaround • Schedules, ERPs, Timesheets Rarely Integrated • If Integrated, don’t deliver easy to use, real-time tools for managing schedule, productivity and cost • Excel = time consuming, error-prone manual entry • Very short time windows to capture productivity between shifts “We have people in at 4 AM racing to compile productivity data in Excel before the next shift. We type in the actuals twice daily. “We create a bunch of change orders in SAP in advance, in anticipation of emergent work.

15. Challenges for Cost Controls Systems Fall Short before a Turnaround • Budgeting often based on blended rates • Scheduling systems co-opted into budgeting systems • Not a lot of controls over late work

16. Challenges for Cost Controls Systems Fall Short after a Turnaround • Lack of Integrated Systems makes visibility by KPI or cost attribute hard to achieve • Very intensive efforts to reconcile cost reports with true cost “Well, then we re-type the data into our Japanese parent company’s general ledger system.” “The actuals in the schedule don’t tie out to the G/L or vendor invoices. We think maybe an activity got deleted.” “We may not see the real costs from SAP for months.”

17. Current Utilization Cost Analysts Spent 61% of Time on “wasteful” activities 1% Analyzing Budgets & Actuals 2% Reconciling General Ledger Data Forecasting & Trending 6% Change Management 20% 30% Correcting Labor Coding 16% Monitoring & Controlling Costs 13% 12% Collating Internal & External Reports Manual Downloading Source: Internal Study by EcoSys Customer

18. Target Utilization Cost Analysts provide much greater value added Troubleshooting 5% Running Reports 5% 25% Forecasting & Trending 65% Analyzing Data Source: Internal Study by EcoSys Customer

19. Attributes of a STO Controls System

20. Attributes of a STO Controls System • Single, Integrated System to Track Hours, Productivity, Cost • Consolidates Data from Multiple Systems: • Scheduling • G/L • Timesheets • Estimating

21. Attributes of a STO Controls System • Web-based Dashboards with Drill-down based on Role (Executive to Foreman) • Variable Access Rights with Spreadsheets or Forms that Enforce Business Rules

22. Attributes of a STO Controls System • Ability to reclassify direct/indirect • Structured change control and scenario analysis • Rate Tables • Multicurrency (if needed) • Versioning and variance analysis

23. Attributes of a STO Controls System • What If Analysis • Single Database manages STO and Capital Projects • Visibility by Any Attribute and at Any Level

24. Projects / WBS Schedule Dates Resource-loading (units & costs) - Baseline - Current - Remaining Activities Resources Codes (activity, resource, project) Percent Complete Timesheets Typical Integration Scenarios - Turnarounds Contractor & Other Timesheets Projects/WBS Activity Networks Cost Elements Actual Costs Timesheets Commitments Integrated Earned Value Management Consolidated Performance Reporting Budgets, Forecasts, Commitments Actual Costs Change Management Data Transformations Historical Snapshots Transaction/Audit Repository WBS & WBS Status Budget / Planned Costs

25. Marathon Petroleum Turnaround Case Study

26. Case Study: Marathon Case Study: Marathon • 6 Refineries in US • Legacy Artemis reporting system integrated with P6, Time & Attendance • Tried several tools to replace, none met functionality and performance requirements • Successful pilot in 2010 • Advantages seen in EcoSys: • Flexibility and speed of P6 Integration • Performance of integrations and reporting with large datasets • Flexibility of configuration and reporting to meet advanced best practices • Rapid software implementation • EcoSys certified SAP integration aligns with Marathon’s future plans Marathon Petroleum

27. Case Study: Marathon Functionality Highlights • Management of Contingency/Drawdown, Forecast, Earned, Expended, Estimates • Daily/weekly time-phasing • Daily integration with P6 for progress • Daily integration with time & attendance/contractor billing

28. Case Study: Marathon Functionality Highlights • Preserve daily history of earned value (S Curve data) • Define complex transformation rules in EcoSys (i.e. Craft ABC + Vendor 123  Indirect) • Implemented all Marathon TA KPIs • Extensive performance reporting: direct/indirect, vendor, unit, craft, work order, phase • Integrate Changes/Growth into Performance Baselines

29. Thank you! Any Questions?

30. Christen Bergerud EcoSys cbergerud@ecosys.net