MSPM 6170 PMC Corporation Case Study
Part 1: PMC History and Organizational Structure
In 1947, Jim Kelly founded the PMC Corporation to build houses for an emerging market created by the return of veterans after World War II. PMC built standard houses in subdivisions throughout North Carolina and South Carolina and quickly gained a reputation for quality construction delivered on time and on budget. As the number of new homes and subdivisions grew, so did the demand for other amenities. PMC was well positioned to expand its business to meet the need in the market for commercial buildings and small industrial plants.
By 1960, PMC operated three divisions: housing, commercial building, and small industrial plants. During this time, PMC grew in size and profitability, increased its bonding capacity, and developed both technical and management expertise. During the 1970s, PMC diversified and began building manufacturing plants for the food, auto, steel and aluminum, and oil and pipeline industries. By 1976, PMC was out of the housing construction business and turned its focus to large industrial plants. It incorporated the mining and chemical industries into the range of industries it served. PMC also grew geographically, serving clients in North America, South America, Europe, Asia, and the Middle East.
PMC developed additional expertise, through acquisitions and in-house development, to offer a full range of engineering and construction services to its clients. By 2005, the company provided a full range of services, from site location to plant startup. PMC could help a client find a location for its plant, design the equipment and facilities, procure all the materials and equipment to build and start up the plant, and train the workforce for the new plant. A client could purchase any or all of the services needed to locate, design, construct, and start up a new plant.
By 2015, PMC was a public corporation, operating in 27 countries, and managing more than $10 billion in projects. PMC organized around three components for managing large industrial projects: technical knowledge and expertise, regional knowledge and administrative support, and industrial knowledge and relationships.
Today, PMC corporate headquarters houses executive leaders, who determine corporate strategy. Financial management, legal and human resources functions, and government relations staff are also housed at corporate headquarters. Staff at headquarters focus on strategy and how to deploy the strategy throughout the organization. For example, the director for safety and security establishes global policies and procedures for safety and security and the regional offices are responsible for regionalizing these policies and assuring compliance on all projects within the region.
Regional offices are established throughout the globe to manage the projects within that region. A senior vice president in the regional office manages operations, including all projects and sa ...
MSPM 6170 PMC Corporation Case StudyPart 1 PMC History and O.docx
1. MSPM 6170 PMC Corporation Case Study
Part 1: PMC History and Organizational Structure
In 1947, Jim Kelly founded the PMC Corporation to build
houses for an emerging market created by the return of veterans
after World War II. PMC built standard houses in subdivisions
throughout North Carolina and South Carolina and quickly
gained a reputation for quality construction delivered on time
and on budget. As the number of new homes and subdivisions
grew, so did the demand for other amenities. PMC was well
positioned to expand its business to meet the need in the market
for commercial buildings and small industrial plants.
By 1960, PMC operated three divisions: housing, commercial
building, and small industrial plants. During this time, PMC
grew in size and profitability, increased its bonding capacity,
and developed both technical and management expertise. During
the 1970s, PMC diversified and began building manufacturing
plants for the food, auto, steel and aluminum, and oil and
pipeline industries. By 1976, PMC was out of the housing
construction business and turned its focus to large industrial
plants. It incorporated the mining and chemical industries into
the range of industries it served. PMC also grew geographically,
serving clients in North America, South America, Europe, Asia,
and the Middle East.
PMC developed additional expertise, through acquisitions and
in-house development, to offer a full range of engineering and
construction services to its clients. By 2005, the company
provided a full range of services, from site location to plant
startup. PMC could help a client find a location for its plant,
design the equipment and facilities, procure all the materials
and equipment to build and start up the plant, and train the
2. workforce for the new plant. A client could purchase any or all
of the services needed to locate, design, construct, and start up
a new plant.
By 2015, PMC was a public corporation, operating in 27
countries, and managing more than $10 billion in projects. PMC
organized around three components for managing large
industrial projects: technical knowledge and expertise, regional
knowledge and administrative support, and industrial knowledge
and relationships.
Today, PMC corporate headquarters houses executive leaders,
who determine corporate strategy. Financial management, legal
and human resources functions, and government relations staff
are also housed at corporate headquarters. Staff at headquarters
focus on strategy and how to deploy the strategy throughout the
organization. For example, the director for safety and security
establishes global policies and procedures for safety and
security and the regional offices are responsible for
regionalizing these policies and assuring compliance on all
projects within the region.
Regional offices are established throughout the globe to manage
the projects within that region. A senior vice president in the
regional office manages operations, including all projects and
sales and marketing. The regional vice president for sales and
marketing and the regional vice president of operations report to
the senior vice president for the region.
South Latin America Region (SLA)
The South Latin America region (SLA) includes responsibility
for the seven countries in the southern cone of Latin America:
Argentina, Brazil, Chile, Peru, Uruguay, Paraguay, and Bolivia.
The headquarters for the SLA region is located in Santiago,
Chile. The regional office provides logistical and administrative
3. support to all of the projects within the region. That support
includes accounting, legal, contract review, cultural and
language support, sales and marketing, and project oversight.
The SLA regional office houses the industry leaders for those
industries that have projects in the region. Industry leaders
include managers with expertise in managing projects within
their industry. Industry leaders report to the SLA vice president
of operations. Industry sales and market personnel focus on
developing and managing relationships with industry clients in
the region. The sales and marketing teams report to the SLA
vice president for sales and marketing.
Potential projects are identified by the industrial sales groups.
They do an initial evaluation of the projects and then submit the
potential projects to the regional office for final evaluation and
selection.
Execution Capacity and Oversight
The project management office (PMO) is located in Santiago,
Chile, and is managed by the SLA vice president of operations.
The PMO provides support for the projects in the region. It also
provides project management guidelines, project startup
facilitation, templates, and project management plans. Safety,
logistics, contract review, project accounting, technical and
leadership training, and technical support are available as
needed by the project. Project managers report to the SLA vice
president of operations.
Part 2: Evaluating, Selecting, and Prioritizing Portfolio Projects
SLA Regional Goals
To support the PMC corporate strategy, the SLA region
4. established the following goals:
· Increase net earnings 10% per year for the next 3 years.
· Introduce at least one new industry to the region.
· Develop additional technical expertise within the SLA region
to reduce dependency on resources from the United States.
· Develop two new local partnerships with companies that have
specific industry expertise.
· Promote safety.
· Contribute to the local economy by hiring and purchasing
locally.
· Manage projects sustainability by following environmentally
sustainable practices.
Currently, the mining, pipeline, infrastructure, commercial, and
telecom industries have projects in the SLA region.
Project Evaluation and Selection
The SLA vice president for sales and marketing receives input
from both the regional and industry group sales teams on
prospective projects in the region. The SLA vice president for
sales and marketing collects the information and records it in
the Prospective Project Register. She then completes the
Prospective Project Evaluation Form using established criteria
for meeting the SLA regional goals. The prospective projects
are then prioritized from the greatest to the lowest contribution
potential for meeting strategic goals.
Part 3: Argentina in the Spotlight: Monitoring and Controlling
Project
Performance
Les Walker, CEO of PMC Corporation, is visiting selected
company locations on his annual “walk around tour.” The tour
5. allows Les to visit several of the corporation’s operations and
get into the details of the projects in those locations. This tour
is promoted as an opportunity for employees to get to know the
CEO and express their ideas about how the company can
improve. Everyone knows that this is also an inspection, so the
operation needs to be in good order. Les will attend the SLA
Project Review Meeting, where the project managers present the
project data, discuss opportunities and issues, and resolve
problems.
Argentina has four active projects: two mining, one
infrastructure, and one commercial.
The Jones Mining Company has two ongoing projects in
Argentina. Jones Mining has been a good client for several
years, and Les Walker has a personal relationship with Mike
Jones, president of Jones Mining. He will be having dinner with
Mike Jones after the project review meeting.
Argentina Copper Mine Uno
The Argentina Copper Mine Uno project is Jones Mining’s
largest investment in South America and will represent 25% of
the revenues in South America over the next decade. Jose
Martin, the project manager, is considered one of the best
project managers in South America and was requested by the
client.
The safety record is excellent with no loss time accidents, and
the safety training program at the project site was recognized by
the corporate safety manager as the best in South America. The
monthly client surveys indicate a high level of satisfaction with
the project team, communication, responsiveness, and overall
approach to the project. The client highlighted the cleanliness
of the project site as an example of the project team
understanding the client’s culture. The safety approach was also
highlighted by the client as best in class. The local chamber of
6. commerce recognized Jose Martin for establishing a training
program in construction skills for local youth.
The original budget for the project was $250 million. The
current cost metrics for the project are:
· Planned Value (PV) is $90 million
· Actual Cost (AC) is $95 million
· Earned Value (EV) is $100 million
· Estimate at Completion (EAC) is $265 million
Argentina Copper Mine Dos
The Argentina Copper Mine Dos project is a test project in a
new region of Argentina to determine if there are greater
opportunities in that area. If the project goes well and the
region shows promise, Jones Mining plans to expand in this
region. Glen Smith is a new project manager. This is the first
time he is managing a project from the beginning of a project.
The project had a serious accident when one of the workers fell
from a platform, and the accident investigation indicated that
the worker was not properly tied off. The SLA region sent
safety experts to conduct a project audit and provide additional
training at the site. A second audit conducted 1 month later
indicated all but three recommendations were fully
implemented.
The client survey indicated concerns. The client rated the
project communication as extremely low because they had not
been informed about the accident until after the safety audit.
Also, there are several outstanding change orders, so a project
review has been scheduled by Mike Jones. There have been no
environmental fines or complaints.
The original budget for the project was $15.1 million. The
7. current cost metrics for the project are:
· Planned Value (PV) is $13 million
· Actual Cost (AC) is $15 million
· Earned Value (EV) is $12 million
· Estimate at Completion (EAC) is $15.5 million
Catamarca Bridge
The Catamarca Bridge project is the design and construction of
a major highway bridge in the state of Catamarca, Argentina.
This is the first infrastructure project for PMC Corporation in
Argentina. This is an opportunity for the SLA region to develop
a reputation for high-quality construction and also establish a
relationship with decision makers. The state of Catamarca has
plans for several major road and bridge projects in the next 10
years.
Sarah Lopez is an experienced infrastructure project manager in
the United States, but this is her first project in South America.
The project team developed new partnerships with local
companies and suppliers in Catamarca. There have been no
safety issues on the project. Ms Lopez is working closely with
the mayor of Catamarca to address local complaints about the
dust caused by the bridge construction. The client surveys
indicate general satisfaction with project performance, but the
client feels that Sarah could improve communications
management.
The original budget for the project was $230 million. The
current cost metrics for the project are:
· Planned Value (PV) is $74 million
· Actual Cost (AC) is $76 million
· Earned Value (EV) is $75 million
· Estimate at Completion (EAC) is $233 million
8. Shell Oil Office Building
The Shell Oil Office Building project resulted from the ongoing
relationship between PMC and Shell Oil. PMC does billions of
dollars in projects for Shell Oil around the world. Shell
contracted with PMC to build corporate headquarters and an
office complex. The project is almost complete with no safety
concerns and the client seems very satisfied. The client praised
the project for designing the building to meet the Green
Building Standard as recognized by the Green Building
Initiative. The project manager, Jose Pena, has requested to be
transferred back to Chile. Jose has recommended that the
assistant project manager be promoted and complete the project.
The original budget for the project was $17 million. The current
cost metrics for the project are:
· Planned Value (PV) is $16.7 million
· Actual Cost (AC) is $16.9 million
· Earned Value (EV) is $16.9 million
· Estimate at Completion (EAC) is $17.1 million
Argentina Project Performance Report
Project Name
Project Manager
Project Status: Red, Yellow, or Green
· Red: Needs immediate attention of SLA and industry
leadership
· Yellow: Issues have emerged, and SLA operation manager
should be involved
· Green: No significant issue
Schedule status:
· Provide SPI and discuss implications
Cost status:
9. · Provide CPI and discuss implications
Risk assessment:
· Evaluate current risk status
Client relations:
· Evaluate current status of relations with the client
Major issues:
· Summarize project issues and concerns, including management
response
Opportunities and alignment with SLA region goals:
· Opportunities for project improvement
· Opportunities for the SLA region
Part 4: Trouble Hits the SLA Region: Managing Risks in Project
Portfolios
Sid Johnson, the PMC corporate safety officer, is visiting the
region prior to the visit of CEO Les Walker. Mr. Johnson
requested a complete risk analysis of the top three risk projects
in the region. The regional safety manager met with the SLA
region operations manager to select the top three risk projects.
Summary of the projects selected for analysis by the PMC
corporate safety officer:
Argentina Copper Mine Dos
Glen Smith is a relatively new project manager but is
considered an expert in mining technologies. An Argentine
mining technical expert was hired to be the technical expert for
the project but resigned because of “constant criticism from the
project manager.”
The Argentina Copper Mine Dos is in a new region of South
America for the client, and there is a significant lack of
trained/skilled labor to perform the tasks needed for the project.
10. The project manager was able to contract a significant portion
of the construction work with Pico Construction Company. Pico
Construction is a small local company with experience in
housing and small industrial projects. Pico is a family business
with all the managers related to Ernesto Pico, the founder and
CEO. The project will need 50% of Pico’s workforce for the 6
months of the project to complete the work on time.
The project team submitted three change orders for additional
work that was performed on the project. The client rejected the
change orders, indicating that they had not approved the
additional work. The project manager, Glen Smith, has
requested a meeting with the stakeholders to negotiate the issue
about the work orders.
Mike Jones, CEO of Jones Mining, indicated that this region of
Argentina is looking less promising for possible expansion.
ATT Chile Fiber Optics
ATT Chile is expanding its fiber optics throughout the country.
The Chilean government set a priority of “bringing high-speed
Internet to every home in Chile.” This government initiative
supports governmental goals related to increasing educational
quality and access, heath care access and quality, and support of
economic development with technology.
This is the first of 20 projects planned by ATT Chile. John
Heinz managed a similar project in Chicago and brought his
entire project management team from Chicago to manage the
ATT Chile fiber optics project. The ATT Chile client sponsor,
Juan Casales, does not speak English and no one on the project
team speaks fluent Spanish.
A 6.8 earthquake hit Santiago, Chile, 3 weeks ago. A member of
the client’s team was killed on the project site. The damage to
11. the project work appears to be minimal. Although the contract
states that the client is responsible for any damage caused by
natural disasters, the client claims the work was not adequately
protected for earthquake zones.
Catamarca Bridge
The Catamarca Bridge design is 75% complete and the steel has
been ordered based on the approval of the structural drawing.
To date, labor costs and steel costs have been below estimates
that were developed based on experience in the United States.
However, conversations with the new partners on the project
indicate that lower performance in labor productivity and
increased costs for specialized steel for the project are likely.
The project manager, Sarah Lopez, has not revised cost
estimates or schedule changes.
The two new Argentine partners are performing well and have
established a good working relationship with the client. The
project review meetings are very formal, and no issues have
been raised during these meetings. After the meeting, the
project partners share with Sarah concerns expressed privately
to them. Although no major issues have arisen, Sarah is
concerned that the partners have a much better relationship with
the client than she does.
Below is the portfolio of projects in the SLA region based on
the information providedby the project manager for each
project. Safety is rated on a scale of one (1) to three (3), with 3
representing safety issues that need to be addressed. Risk was
rated as either yes (Y) on no (N). Yes indicates there was a risk
event identified in the initial risk assessment that occurred.
Project
Industry
Start
12. Date
Client
Safety
Risk
Comments
Argentina Copper Mine Uno
Mining
05/12/17
Jones Mining
1
N
Project cost, schedule, and quality in line with project plan.
Client surveys were very positive. Change orders are all
approved.
Argentina Copper Mine Dos
Mining
04/12/16
Jones Mining
2
N
Safety audit found contractors without appropriate safety
equipment. See audit report for details. Client expressed
concern over safety audit findings.
Catamarca Bridge
Infrastructure
05/12/17
Catamarca
1
N
This is a lump sum contract. Project is on schedule and cost. No
concerns.
Shell Oil Office Building
Commercial
10/12/16
Shell Oil
1
13. N
Project cost, schedule, and quality in line with project plan.
Client surveys were very positive. Client is selecting colors for
the various rooms. Ribbon cutting scheduled for Jan 1.
Chile Copper Mine Uno
Mining
04/10/17
Jones Mining
1
N
Project is on schedule and all change orders have been
approved. Client is discussing another project in 2020.
Exxon Headquarter
Bldg.
Commercial
01/10/18
Exxon
1
Y
Project is on schedule and all change orders have been
approved. The project is still assessing the earthquake damage
from last week.
Fiber Optics
Telecom
07/01/16
ATT Chile
1
N
Project experienced small damage in earthquake after project
signoff. The client insists that the project repair the damage.
Currently, in discussions with the client.
Lima Pipeline
Pipeline
02/01/18
Ariba
1
14. Y
Cost of pipe significantly increased because of new tariffs.
Client believes the cost increase should have been anticipated.
Project could be cancelled.
Pacific Pipeline
Pipeline
02/01/16
Ariba
1
N
All pipe was in- country before tariff increase. Delays in
permitting at the beginning of the project impacted the project
end date.
Part 5: SLA Procurement Resource
Issues with subcontractors in the SLA region caused significant
problems for the region and loss of profits. The SLA president
decided 3 years ago that all SLA region contracts with
subcontractors must be developed by procurement specialists in
the SLA region PMO. Contracts below $25,000 can be
developed by the project management team.
The SLA has three procurement specialists that must develop
contracts over $25,000.
· Contracts between $25,000 and $100,000 require 1 week to
prepare
· Contracts between $100,000 and $200,000 require 2 weeks to
prepare
· Contracts between $200,000 and $400,000 require 3 weeks to
prepare
· Contracts over $400,000 require 4 weeks to prepare.
Weeks are based on a 40-hour work week. No one procurement
specialist can work more than 20 hours overtime per week.
Therefore, a contract requiring 4 weeks can be completed in less
15. than 3 weeks with one procurement specialist using overtime.
The SLA procurement/contract specialists:
· Joe Spencer is the senior procurement specialist and has a
reputation for developing error-free contracts and is always on
time. Joe will work overtime, if required.
· Linda Rodriguez is new and can only be assigned to project
contracts in Chile.
· Sam Smith is a senior procurement specialist from Peru who is
now living in Chile. Sam will work overtime but not on a
project in Peru.
The SLA region project managers have identified 20 contracts
that need to be developed during the next 6 months. They are
listed below by project, the estimated cost of the contract, and
the due date for completing the contract by the procurement
specialists.
Argentina Projects:
Project A needs three contracts:
1. $275,000 by July 30
2. $574,000 by August 14
3. $630,000 November 30
Project B needs four contracts
1. $10,000 by August 30
2. $320,000 by September 30
3. $420,200 by September 30
4. $520,000 by December 30
Project C needs three contracts
1. $125,000 by July 31
2. $225,000 by October 30
3. $625,000 by November 21
