Malcolm Baldrige National Quality Award
2005 Award Recipient, Service

DynMcDermott Petroleum Operations

Type of Work: DynMcDermott Petroleum Operations Company (DM) is the sole management and operations contractor for the Department of Energy’s Strategic Petroleum Reserve. The SPR is the United States’ emergency oil stockpile and is the largest emergency petroleum supply in the world. As the operations and maintenance contractor, DM performs all tasks to ensure the availability of oil upon order of the President during a supply disruption.

Web site: www.dynmcdermott.com

Budget: $108 million annually

Workforce: 554 employees

Location: Project management office—New Orleans, La.; oil storage, receipt, and delivery locations—Bayou Choctaw and West Hackberry, La., and Big Hill and Bryan Mound, Texas; and a continuity of operations center at Stennis Space Center, Miss.

Highlights

• After September 11, 2001, President Bush ordered the Strategic Petroleum Reserve filled to 700 million barrels in order to meet potential crude oil supply disruptions. This goal was achieved in August 2005. In fiscal year 2005, DM completed fill of the SPR from 500 million barrels (MMB) to 700MMB. During 2005, DynMcDermott also achieved the 50 percent milestone for a cost reduction target of $64 million over the period of the present contract ending in 2008, and received the highest performance rating to date from DOE.

• In 2001, DynMcDermott received ISO 9001 registration and since 2001 all four storage sites have achieved Voluntary Protection Program (VPP) certification status from the U.S. Occupational Safety and Health Administration and the Department of Energy. All storage sites exceeded Star status achieving Star Among Stars status. As an example, DM’s Lost Workday Case Rate of less than one workday lost (0.83) due to injury per 200,000 worker hours demonstrates industry leadership compared to the Bureau of Labor Statistics average of 5.3, the VPP Star Among Star level of 2.3, and the VPP Super Star level of 1.33.

• Several of DM’s sites were directly impacted by the recent hurricanes Katrina and Rita, resulting in the majority of employees being displaced from their homes and worksites. DM was able to restore operations immediately and begin the Oil Exchange Program (providing oil to refiners in order for them to continue operations) in less than five days after Hurricane Katrina. To conduct these operations in the face of Hurricane Katrina, the primary SPR computer network was re-routed and deployed to an Emergency Operation Center in Texas. Hurricane Rita forced another evacuation and DM deployed its mobile emergency operations center according to plan. During this period, President Bush declared a drawdown from the SPR, an action that has occurred only twice in 30 years. Even though the Emergency Operation Center had to be relocated over 200 miles, DM made its first drawdown oil delivery three days after Rita.

• Overall customer satisfaction has steadily improved from 67 percent satisfaction in 1999 to 85 percent in 2004, exceeding the DOE target of 75 percent. Since 2001, performance levels have ranged from 4.50 to 5.80 on a 6 point scale, above the DOE’s satisfaction target of 3.0.

• Since 1999, DM’s performance scores have ranged from 89 to 95, which is indicative of overall performance and customer satisfaction. These scores exceeded the goal in 10 of 11 semi-annual scoring periods. Comparatively, the previous contractor received performance scores from 1989 to 1993 ranging from 84 to 90.

• DM’s favorable performance has led to an exclusive contract with DOE over a five-year period (2003-2008) with up to 5 option years through 2013. DM has held its status as the management and operations contractor for the longest period of time in the Strategic Petroleum Reserve’s 30-year history.

• Employee satisfaction increased from 74 percent in 2000 to 83 percent in 2005, which compares favorably to the 43 percent Business Research Lab (BRL) Benchmark. (BRL conducts employee satisfaction surveys for approximately 300 top performing organizations.) The percentage of employees agreeing with the statement “I am proud to be associated with DM” improved from 74 percent in 2000 to 84 percent in 2005, comparing favorably to the BRL benchmark of 71 percent. Employee Understanding of DM Mission is at 89 percent in 2005, above the Society for Human Resources Management (SHRM) norm of 72 percent and the BRL benchmark of 82 percent. DM employee retention is 97 percent.

• DM has maintained favorable results in its measures of critical mission readiness over the period from 2000-2005. Twenty-one measures have been identified by DOE as being critical to the readiness of the SPR. Drawdown systems availability has sustained a 98 percent or better performance level and has exceeded DOE expectations in each year and at each site since 2001. Drawdown, providing crude oil to U.S. refineries by order of the President during severe disruptions of foreign supply, is the primary mission of the SPR. The drawdown rate has been sustained at the target level since 2000 and met the 2005 DOE target of 4.4 million barrels per day, while overall distribution capability as a percentage of drawdown rate has been sustained at 153 percent, compared to the DOE goal of 120 percent. Drawdown readiness shows a steadily improving trend from 95 percent in 1999 to 99 percent or better from 2002 through 2005, exceeding DOE’s 95 percent drawdown target. Days to Commence Drawdown, as a measure of performance, has been reduced from 15 in 2002 to 13 in 2005.

• The SPR is the global benchmark in storage efficiency and has won engineering awards for being much less expensive and safer than other large-scale storage operations. A 2003 comparison of storage cost per barrel between Japan, Europe, U.S. industry, and DOE SPR shows favorable performance for the DOE SPR. The storage cost per barrel was $3.00 for Japanese Oil Reserves, $2.40 for U.S. industry storage, $1.60 for the European Oil Stockpile and $.20 for the SPR. Operating Cost Per Barrel decreased from $0.1537 in 2001 to $0.1480 in 2005, below DOE’s target of $0.1664.

• Security Systems and Computer Network Availability have been maintained at 100 percent since 2001, and system recovery following hurricanes Katrina and Rita, which affected the primary and backup computer centers, was seamless. The SPR Network was reestablished in less than 72 hours after Katrina landfall and infrastructure destruction.

• DM demonstrates benchmark leadership in its commitment to the environment. It has maintained certification with the International Organization for Standardization’s environmental management standards since 2001. DM has had no Environmental Notices of Violation from any state or federal environmental protection agencies since 1999. Other DOE labs averaged between 2-4 violations per year since 1999. DM has decreased total pounds of hazardous waste from 3,802 pounds in 2000 to 515 pounds in 2005, compared to the DOE goal of 539 pounds. DM has received numerous environmental awards including the 2005 Clean Texas—Clean World National Award, the 2005 National Environmental Excellence Award for Best Available Environmental Technology from the National Association of Environmental Professionals, and the 2005 Louisiana Environmental Management Awards.

• From 2000 to 2005, DM averaged fewer than two ethics allegations per year, below the DOE norm of five. Additionally, DM has averaged more than 100 internal organizational assessments per year since 1999, with zero findings relating to ethics. In 2005, 95 percent of employees agreed with the statement “I am expected to maintain a high standard of ethics.”

• DM has received 11 quality-related awards and is the only company to win the Louisiana state quality award three times (1996, 2001, 2003). Its Big Hill site received the Texas Performance Excellence Award in 2005.

Processes

• DM’s strategic planning process is directly integrated with the DOE planning process; DM employees are directly involved in the DOE strategic planning activities. The DOE SPR strategic plan is the basis for the DM performance-based contract and includes work authorization directives which are used to allocate resources. The outcome of the DM nine-step Values-Based Strategic Planning Process is an annual plan and a rolling 5-year strategic plan. Action plans are organized around DM’s six core values and are linked to its eight strategic challenges and 15 strategic objectives. Action plans have milestones and annual targets and are monitored for completion. This systematic planning process ensures DM is aligned with its customer’s values, vision, and mission.

• DM employs numerous methods to build relationships to meet and exceed customer expectations and to increase loyalty and contract continuity. For example, the DM and DOE project management offices are located in close proximity and DOE senior site representatives work side-by-side with storage site directors, which enable daily interaction. DM and DOE hold joint planning and performance reviews, share computer networks, and have access to critical information. With an open meeting policy, DOE personnel attend DM meetings and informal teambuilding and problem-solving sessions, champion and join formal performance improvement teams, and share training resources, when appropriate.

• The Performance Evaluation Management Plan (PEMP) and Work Authorization Directives (WADs) are used to select and align measures for tracking overall organizational performance and progress relative to strategic objectives and customer requirements. Data on over 1,200 metrics are collected and integrated using a variety of integrated data systems such as pbViews for reporting results and identifying actions for underperforming measures, Centra for status reporting, and MPAR reports for tracking operational data. The pbViews system is used by senior leaders at DM and DOE in New Orleans and Washington, DC to review the status of top-level and supporting measures and drill down to identify and analyze measures that are not achieving targets.

• DM uses numerous exercises and drills to identify potential needs and challenges in the operating environment and assess its ability to rapidly respond to changing needs and conditions. The EAGLE exercise is conducted every other year using a variety of scenarios to assess operational readiness. The Drawdown Readiness Review is conducted quarterly to evaluate the organization’s preparedness for a drawdown order. Numerous security and fire drills are conducted to assess the readiness of these operations to address potential threats or incidents. A system test exercise is conducted at all four sites once per year during which oil is pumped to an offsite terminal.

• DM ensures a high performing organization and empowers employees in a number of ways. Employees at the storage sites can stop any practice they deem unsafe and are encouraged and rewarded for identifying improvement ideas. Skill sharing and sharing of best practices between storage sites and within job categories is facilitated through standardization of equipment, procedures, work instructions, and regularly scheduled meetings by job title. Operations and maintenance employees work closely with counterparts at other sites and rotate to meet changing requirements.

• Employee education, training, and development address key organizational needs associated with new employee orientation, diversity, ethical business practices, safety, the environment, and management and leadership development. For example, new hires attend training to familiarize them with SPR operations, requirements, and responsibilities; videos cover orientation, diversity, and records management; and mandatory training is provided via a special webpage. Annually, each employee must attend workplace diversity and Equal Employment Opportunity training; an ethical business practices course, and sign an agreement accepting the policy; and numerous courses on workplace and environmental safety.

Leadership/Social Responsibility

• DM addresses potential adverse impacts on society and anticipates public concerns with current and future operations through its strategic planning process, its environmental management system, an annual site environmental report, and a voluntary Environmental Advisory Committee (EAC). The EAC is composed of external scientists, technical experts, and community representatives who meet quarterly to help anticipate public concerns, incorporate public involvement in SPR decision making, and provide assessments and advice.

• DM’s governance system consists of multiple processes that address accountability for management’s actions; fiscal accountability; transparency in operations; independence in internal and external audits; and protection of stakeholder interests. For example, formal reviews of how DM is managed are conducted by DOE, the organization, and/or external entities on a daily, monthly, and annual basis. Accountability for governance is reinforced through the annual contract performance award fee, which is based upon a customer-defined Performance Evaluation and Measurement Plan (PEMP). Since 1993, DM has never been cited for significant findings from internal audits, DOE external audits, or by an independent accounting firm.
  

Created: 11/21/05
Updated: April 2, 2007
Contact: inquiries@nist.gov