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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 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 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 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 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 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 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
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
