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Working
closely with its clients, Fluor Global Services provides
a full range of leading edge business asset and operations
management solutions – including operations, maintenance
and consulting services; construction and industrial
equipment; contract and direct-hire personnel and training;
and program and asset management services to industries
around the world – with the goal of becoming the
dominant provider of outsourced asset optimization capabilities.
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James
C. Stein
President
and
Chief Executive Officer
Fluor Global Services
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The
Mission of Fluor Global Services is to assist every
client in achieving a sustainable competitive advantage
and profit growth by providing customized and integrated
services that optimize the total life-cycle of their
assets better than any competitor.
During
1999, Fluor Daniel’s Diversified Services Group
underwent a significant restructuring and transitioned
from being a division of Fluor Daniel to a separate
Strategic Business Enterprise. Renamed Fluor Global
Services (FGS), the new enterprise is well positioned
to capitalize on significant growth opportunities being
created by new and changing client needs. FGS is a diverse,
but integrated, services portfolio of six Strategic
Business Units assembled to provide value-added services
outside the clients’ traditional EPC value chain,
consisting of American Equipment Company, TRS Staffing
Solutions, Fluor Federal Services, Telecommunications,
Operations & Maintenance and Consulting Services.
Operating
profits for FGS increased 13 percent in 1999 to $92
million compared to $81 million in 1998. Annual new
awards grew 12 percent over last year, with gross margins
increasing to 7.8 percent from 7.6 percent in 1998.
Backlog increased by 6 percent, with gross margins declining
slightly to 6.1 percent from 6.4 percent a year ago.
The
future offers significant opportunity at a time when
outsourcing non-core activities by clients is gaining
increased momentum, as they focus on their core businesses
and look for creative and cost-competitive approaches
to improve productivity and return on assets. As clients
restructure their in-house capabilities, Fluor Global
Services’ ability to deliver tailored solutions
to meet individual needs, including total life-cycle
asset management and performance improvement services
is timely. With the continued strong growth in outsourcing
trends, FGS is enhancing its full-scale capabilities
to meet its customers’ growing demand for cutting-edge
facilities and knowledge-based services to meet the
challenges of competition.
American
Equipment Company (AMECO)
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| AMECO
provides on-site fleet and tool management
services to Phillips Petroleum at their Borger,
Texas refinery. |
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American
Equipment Company (AMECO) provides a full array of construction
equipment, tool and fleet management services on a global
basis, focused on reducing its customers’ total
cost at construction projects and plant environments.
To better serve its clients, AMECO reorganized into
three business lines: Fleet Services — providing
outsourcing services to targeted industrial markets;
Site Services — providing complete equipment and
tool programs for capital construction projects; and
Dealerships — providing new and used equipment
sales and rentals, parts and service in targeted geographic
regions.
AMECO
faced a challenging business environment in 1999. Industry
consolidation in the U.S. created intensely competitive
markets, while business conditions in Asia and Latin
America remained depressed from previous activity levels.
However, the U.S. equipment rental market is expected
to continue to grow at more than 20 percent annually.
AMECO’s markets in Canada, Mexico and Puerto Rico
remained strong, and there are encouraging signs that
Asia and South America are beginning to rebound.
AMECO’s
Fleet Services unit, established in 1999 to capitalize
on the outsourcing trends in the industry, grew rapidly
during the year. Fleet Services has been successful
at providing total fleet management solutions to clients
in many industries, including chemicals, steel and refining.
During 1999, AMECO entered into an outsourcing agreement
with a large chemical manufacturer to manage client-owned
tools and small equipment, as well as handle purchases
of new tools for client personnel. AMECO also expanded
outsourcing agreements with a large aluminum manufacturer
and a major oil company.
Additionally,
to create a value advantage for an increasing number
of clients, AMECO is working with other Fluor business
units to cross-sell a variety of Fluor’s services.
For example, this year, AMECO and FGS’ Operations
& Maintenance unit renewed a long-standing relationship
with TXU, a major energy service company, to provide
integrated plant maintenance, equipment and tool services
to their network of plants.
TRS
Staffing Solutions
TRS
Staffing Solutions (TRS) is a global enterprise of staffing
specialists with a focus on serving high-growth, high-margin
segments in temporary, contract and direct-hire positions.
Over the past few years, TRS has been pursuing a strategy
to expand its global presence and capitalize on strong
market growth. However, 1999 brought clear recognition
that the expansion effort had been overly aggressive,
increasing overhead expenses beyond current business
activity levels. Additionally, a significant reduction
in its Fluor Daniel related workload further contributed
to TRS’ business challenges. As a result, TRS implemented
a number of significant actions during 1999 to address
its performance shortfall and return to profitability.
Under
new leadership, TRS closed unprofitable branch offices
and dramatically reduced operating expenses, resulting
in a return to profitability in the fourth quarter of
1999. As a result of comprehensive strategic review
of its business strengths and market potential, TRS
refined its target market to focus on information technology,
accounting and finance, and certain select engineering
disciplines.
A
key focus for TRS’ reenergized management team
will be a renewed emphasis on building stronger client
relationships, including implementation of a large account
management strategy to increase market share with existing
customers as well as develop new ones with large volume
potential.
Specific
initiatives include the introduction of TRS’ Managed
Staffing Services offering, commonly referred to as
Vendor On Premise within the staffing industry. This
program represents a true distinction in providing value
to clients by managing the entire procurement, hiring
and reporting processes necessary to effectively recruit
and retain staff. TRS is also uniquely positioned to
play a key role in FGS’ strategy to provide value-creating
outsourcing solutions for its customers. Additionally,
TRS is developing and will implement a state-of-the-art
internet/e-commerce strategy to increase the speed and
quality of its services and capitalize on the enhanced
growth potential this new technology offers.
Fluor
Federal Services
Fluor
Federal Services (FFS) provides a range of services
to the United States Federal Government that include
project management execution, business management systems,
architectural and engineering services, construction
and construction management. Through FFS, federal clients
receive innovative solutions such as concept to closure
planning and execution, unique cost effective approaches
to contract structuring, best commercial practices,
outsourcing and economic transition expertise.
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| U.S.
DEPARTMENT OF ENERGY |
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| Fluor
Federal Services is the prime contractor for
the remediation of the Department of Energy’s
Hanford site in Washington. Pictured is a
prototype calciner at Hanford’s Plutonium
Finishing Plant, which began converting corrosive
plutonium solutions to a stable, dry powder
for safe storage in September of 1999.
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FFS
is a major contractor for the Department of Energy (DOE)
including prime contractor roles at the DOE’s Hanford,
Washington and Fernald, Ohio sites where remediation
of these former nuclear weapons plants is taking place.
FFS is now a recognized leader in this market because
of its experiences and success on these two key projects.
The national need for management of the DOE sites contributes
to a large market that has more predictability and level
budgets than many other markets. The unit intends to
increase its share of the $10 billion DOE market.
FFS
also works with the Department of Defense through its
Logistical Civil Augmentation contract, where FFS was
called upon to help build installations in East Timor,
and with the Federal Emergency Management Agency through
a Technical Assistance Contract. Successful experience
with these government agencies has demonstrated the
unit’s capacity to respond to clients’ needs
and has helped validate FFS’s strategy of selling
its services to these and other federal customers on
a greatly expanded level.
FFS
will maintain a focus on prime contract management along
with traditional engineering, procurement, construction
and operational opportunities in carefully selected
situations. Participation as a team member in strategic
alliances is also pursued to address specific project
opportunities.
Telecommunications
FGS’
Telecommunications unit is establishing itself as a
leading provider of program management services for
the rapidly expanding global telecommunications market.
Following a comprehensive restructuring of its sales
and marketing strategy, Telecommunications delivered
outstanding performance in 1999, winning more than $600
million in new awards compared with an average of $150
million for the previous three years. These results
were achieved by limiting bid and proposal activity
in favor of a strategic account management process,
which focused on selected key clients to build a sustainable,
profitable business.
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| LONDON
UNDERGROUND LIMITED |
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| London
Underground Limited selected FGS’ Telecommuni-cations
unit for the $500 million Connect project,
where Fluor played a leading role in sourcing
and arranging the private debt and equity
capital to finance the project. Pictured from
left to right, following the contract signing,
are Denis Tunnicliffe, chief executive, London
Transport; Derek Smith, managing director,
London Underground Limited; Patrick Flaherty,
vice president, Global Business Development
for Fluor Corporation; and Jim Rummings, vice
president and project director, Fluor Global
Services. |
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The
Telecommunications unit has been encouraged by its results
from being selective, as world-class clients have chosen
the unit as its implementation management partner of
choice. Level 3 Communications selected Telecommunications
for a $320 million project to manage its Local Loop
IP Network buildout of fiber-optic cable and point-of-presence
units, which has been primarily fueled by the growth
of the Internet. The unit also expanded its involvement
with AT&T to include a broad service offering to
AT&T Fixed Wireless Services, AT&T Broadband
and Internet Services and AT&T Local Services. Signifying
a strong start in FY2000, Telecommunications was recently
named program manager of a $500 million project to provide
a new integrated radio and transmission communications
network for the London Underground subway system. These
strategically significant programs are propelling this
unit to a clear leadership role in this high-growth
and dynamic market.
The
telecommunications market is tremendous in size and
continues to grow at a phenomenal rate. The Telecommunication
unit is challenged to selectively penetrate this market
and be positioned with strategic clients to capture
new project opportunities as waves of new technology
drive the market and expand geographically. Time to
market is crucial. The emerging and incumbent wireless
and wireline carrier market, along with North America
and Western Europe, are all high-growth, high-revenue
markets where Telecommunications is focusing its time
and resources.
Operations
& Maintenance
Operations
& Maintenance (O&M) provides innovative and
competitive asset management services across a wide
range of industries including manufacturing; fossil
and nuclear power; oil and gas; and chemicals and life
sciences. O&M’s strategy is to continually
migrate up the clients’ value chain from providing
maintenance and operations services to total asset management,
offering the opportunity to deliver significant value
to our customers through reduced operating costs and
improved performance. This in turn can create further
opportunities utilizing an integrated package of Fluor
capabilities.
The
market for O&M services is large and continues to
grow steadily as companies focus on their core competencies
and outsource non-core services. Fluor has a strong
base of expertise and experience in the O&M services
market, including world-class people, technologies,
processes and management skills, which can be leveraged
against its broad cross-industry exposure to achieve
significant long-term growth.
Key
to capitalizing on the market growth potential, as well
as increasing market share, will be client focus and
differentiated value. O&M’s approach is to
structure its compensation to be strongly performance
related, sharing in savings achieved for clients in
their total operating costs. Client receptivity to this
value proposition has been encouraging.
Consulting
Services
The
Consulting Services unit, with a major presence in the
United States and Western Europe, provides clients with
professional advisory services and operational diagnostics
to reach optimum business performance.
Consulting
Services also improves the positioning of other Fluor
units regarding the implementation of actions recommended
by this unit. Synergies are especially evident with
Operations & Maintenance as clients worldwide move
towards outsourcing and asset optimization. Through
the Consulting Services unit, FGS can help assess a
client’s needs, provide strategies and tactical
approaches and offer long-term solutions in asset management.
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