The PROGRESS from a mule-powered grading team in Oklahoma Territory in 1898 to the technological dazzle of its new virtual reality laboratory in San Francisco brings the old cliche irresistibly to mind: Bechtel Corporation has come a long way.
Now a sophisticated organisation employing 28,000 people that has carried out projects in 140 countries throughout the world, Bechtel is still a privately-owned company in its fourth generation of family leadership. The current chairman and chief executive officer, Riley P. Bechtel has served as president since 1989 and CEO since 1990.
He was appointed chairman in a reorganisation that took effect at the beginning of this year.
Bechtel’s corporate headquarters is in San Francisco, but the company has a decentralised structure with considerable authority delegated to its principal regions: the Americas, Asia-Pacific based in Hong Kong, and Europe, Africa, the Middle East and SouthWest Asia (EAMS). which operates out of London.
The company is organised in matrix fashion: the first axis comprises the regions while a second axis is formed by the global industry units (GIUs). As the name suggests, these units focus on one particular industry from a worldwide perspective. They cover Bechtel’s main areas of operations, such as power, based in Gaithersburg, Maryland and petrochemicals and chemicals, which is headquartered in Houston.
Other areas covered by the GIUs include mining and metals, telecommunications, civil works, and pipelines.
For several years we have had the policy of following our clients, moving away from the United States and out into the regions. There was no big bang, (the current organisation) is the result of being more customer-focused,’ says Lindsey Holbrook, managing director of Bechtel Ltd, the entity responsible for Bechtel operations in the EAMS region.
The finishing touches to the present struc ture were added at the start of the year. All the heads of the GIUs were formally given the rank of president as part of the decentralisation of the decision-making process.
At the same time, the structure at the top of the company was redrawn. Adrian Zaccaria was appointed president and chief operating officer and Frederick Gluck was elected vice-chairman, replacing an executive committee of five or six top executives which previously handled major decisions, Gluck, who joined Bechtel from business consultants McKinsey & Company in February 1995, is responsible for corporate development and strategy, the power, petrochemical and chemical and civil GIUs, and central corporate services. Zaccaria, who joined Bechtel in 1971, was most recently president of Bechtel’s Global Energy Industries. He has overall responsibility for thecompany’s worldwide network of offices, the company’s engineering, procurement and construction (EPC) functions and the remaining GIUs.
They both report to Riley Bechtel, who became chairman in the same re-organisation.
Bechtel describes these changes as fine tuning, which improve the speed and quality of the decision making.’ Their purpose is to provide what Riley Bechtel calls a winning combination of Bechtel’s global reach and a sensitive local touch.’ And winning it certainly appears to be. In 1995 Bechtel recorded $12,466 million in new job awards, a 61 per cent increase compared with the 1994 figure and the highest level since the industry-wide slump of the mid-1980s. In addition to this, revenue for work performed and billed in 1995 came to $8,504 million, a 7.8 per cent increase compared with the previous year and the highest figure of the 1990s.
A survey of international contractors in the US’ trade magazine Engineering NewsRecord ranks Bechtel as the fifth largest group in the world in terms of construction revenues from outside the US, with earnings of $3,165 million. Overseas projects account for 70 per cent of Bechtel’s total workload.
A breakdown of the figures shows that 24 per cent or $2,058 million of the $8,504 million revenue for work billed and paid for in 1995 came from the EAMS region. This is a 4 per cent rise compared with 1994, but still lower than the figures achieved in the early 1990s. The EAMS region generated 53 per cent of new work booked last year, however, which was considerably higher than in previous years.
‘We have seen a signficant increase in the Middle East, which accounts for about 20 per cent of our overseas work,’ says Holbrook. ‘We are also doing well in India and Russia and in the UK, with the Channel Tunnel Rail Link and the North West Water projects.’ Bechtel has been active in the Middle East since 1943 when it carried out work in Bahrain for the Bahrain Petroleum Com pany. In 1944 the Arabian American Oil Company invited Bechtel to build a small refinery at Ras Tanura, which was the start of numerous large projects in Saudi Arabia.
Key projects include the development of the new industrial cities of Jubail and Yanbu, which started in 1973 and continues to this day; King Khaled airport in Riyadh and King Fahd airport in Dammam. Bechtel was also involved in support of Operation Desert Storm in the 1990-91 Gulf crisis and in the largest ever recovery of spilled oil when the fighting was over.
In the UAE major projects include the $1,500 million onshore gas project 545 at Habshan, being carried out on a lump-sum, turnkey basis in joint venture with France’s Technip and the Athens-based Consolidated Contractors International Company (CCC), and the Dubai airport expansion (see page 40).
Other important work in the region includes assisting in the restoration of Kuwait’s oil production facilities, a 170-mile section of the Gerede Ankara motorway in Turkey, Algeria’s portion of the Maghreb Europe pipeline, power plants at Sidi Krir and Ayun Moussa in Egypt and a petrochemical project in Haldia, India.
In these highly competitive times, Bechtel is focussing on more complex projects where it feels it can provide better value to its customers, rather than conventional projects where it is difficult to pare down the price any further than the competition can.
Bechtel is concentrating on standardised designs, global supply agreements and superior electronic links in a bid to reduce costs and speed up project completion.
‘We like to go after the difficult stuff, especially where we can offer our standardised products: off-the-shelf power stations and petrochemical plants, where we have already done our own engineering effort,’ explains Holbrook. ‘Being able to buy both engineered equipment and bulk materials from the cheapest and most reliable source is critical to our business today. We are always pushing that frontier. We set up standard agreements to buy at fixed prices because of the volume, and set up alliances with our suppliers whereby we understand what they can offer most effectively and we modify our designs to suit.’ Holbrook considers that engineered equipment and bulk materials form about 60 per cent of the cost in capital projects. ‘If you couple savings in that area with savings on the engineering side, then you can get a dramatic reduction in cost,’ he says.
Another important factor in Bechtel’s performance is its use of the latest electronic linkages to improve the front-end conceptual engineering of projects. Its advanced visualisation and virtual reality group is based in San Francisco, and its manager Coby Everdell describes Bechtel as the EPC leader in this field.
Bechtel engineering specialists have imported the designers’ 3D-CADD drawings into the virtual reality (VR) software. By using VR technology as a design tool they can instantaneously test the practicalities of different ideas in a ‘real’ environment.
Pioneering use of this technology is being applied in the current expansion of Dubai International Airport, due for completion in 1999, where the client has already ‘walked’ round the finished product, courtesy of VR. The results can be transmitted around the Bechtel network by video conferencing, by sending one of the two virtual reality machines around the world, and by communicating between machines on the ISDN network.
‘The link costs $75 per hour between London and San Francisco,’ says Everdell.
‘There is no comparison with the cost and time involved in shipping models. You can’t replace face-to-face contact, but the old days of heroic trips to Riyadh and back in 24 hours are gone.’ The global networking of Bechtel specialists means that front-end engineering may be carried out in the US and modified in London, with detailed engineering being carried out by Bechtel’s low-cost engineering centres in Delhi or Al-Khobar.
This enables designs to be worked on continuously, through the different time zones. This latest satellite communications technology links Bechtel designers, engineers, buyers and builders all over the globe – and gives clients the same access.
‘My vision of the future is to be a decentralised organisation where in every region we can pull together the products that make the most sense,’ says Holbrook.
‘We are trying to move towards an organisation that is global but where we can dip down anywhere and pull up products as required to complete specific tasks.’