B&W operates in a very competitive

global marketplace where continuous

improvement is crucial to the success

of our various businesses; B&W OpEx is

the foundation of that continuous improvement process.

Brandon BethardsChief Executive Offi cerThe Babcock & Wilcox Company

Facts and fi gures contained in this booklet are accurate as of November 2009.

than we are individually. This was one of the basic thoughts

behind the creation of Operational Excellence (OpEx), the

B&W corporate banner for process improvement activities.

By integrating best practices from each group, we have

created a systematic, project-by-project approach using Lean Six Sigma

as a method for improving processes. With dedicated resources, intensive

training and practical application, B&W is achieving real business benefi ts

and solving complex problems through OpEx projects. Achieving our

mission of creating a culture of continuous improvement throughout

B&W will require the participation of all employees. By participating on

teams, identifying areas of opportunity, using data to make decisions and

implementing and sustaining positive changes, you will help to improve

B&W and OpEx will become a part of everyday operations for everyone.

Alan NetheryDirector of Operational ExcellenceThe Babcock & Wilcox Company

Collectively we are stronger

Operational Excellence (OpEx) capitalized on the formal process improvement initiatives that had been taking place across B&W since 2003, aiming to expand and strengthen the existing eff orts by adding a corporate presence. B&W OpEx has a strong corporate capability with more than 50 Black Belts, more than 150 trained project Champions and a core of Master Black Belts, Lean Masters and certifi ed trainers. B&W has the capability to train, mentor and certify Lean Six Sigma professionals internally and has used this capability to provide best practices to the individual groups to identify, prioritize and execute projects and strategy. Our mission is to establish a continuous improvement culture using a systematic approach to achieve business benefi ts.

OpEx draws upon a combination of three important continuous improvement tools that were already being used at B&W: Six Sigma, Lean Enterprise and Performance Metrics. Lean Six Sigma describes both a business strategy and a method used to improve processes.

OpEx OverviewSyste

matic

Appro

ach

The Lean Six Sigma method ensures that data is collected on a process, signifi cant factors are identifi ed, improvements are implemented and the gains from those improvements are sustained. This systematic approach to problem solving leads to more robust processes with less waste, reduced variability and ultimately more satisfi ed customers.

Doug Cook OpEx Director B&W NOG

How is it diff erent?

Disciplined Project Approach

Management Support

Ties to Business Results

Extensive Training

Dedicated Resources

Engages the Workforce

Leadership Development

Customer Oriented

Using Lean and Six Sigma tools, B&W is able to improve the quality and speed of our processes, resulting in the ability to produce better products and services more quickly. Lean tools are used to increase the speed of a process by eliminating waste. Six Sigma uses the DMAIC (Defi ne, Measure, Analyze, Improve, Control) method and is a data-driven, customer-focused set of tools aimed at reducing variation and eliminating defects in a process.

By establishing a continuous improvement culture of identifying areas of opportunity, forming process improvement projects and launching resources to address these issues, B&W is able to reduce the costs associated with these processes.

OpEx projects have focused on both manufacturing and transactional processes and have resulted in an estimated $120 million in internal and external benefi ts.

OpEx is not a fad or a passing initiative. The program and the tools are based upon sound business principles. We had a lot of people who were skeptical about the implementation of OpEx, but after they saw the process and the results, they were sold, right down to the front line worker. It has saved both hard and soft dollars, improved employee morale and improved customer relations. It is a program that is more than just worthwhile. Joel Duling SMC Director of Nuclear Operations B&W TSG

Roles & Responsibilities

The corporate structure at B&W supports a centralized model for standardization of methodologies, training and reporting and a decentralized model for project selection, resource management and decisions related to the individual businesses.

Lean Six Sigma is supported by an infrastructure of roles that support project selection, execution and implementation.

Steering Committee Senior managers from across the organization who are responsible for guiding the deployment decisions for B&W OpEx. The steering committee is instrumental in setting guidelines for organizational resource requirements and goals, position descriptions and initial deployment consultant selection.

B&W OpEx TeamA small group of Master Black Belts and Black Belts who are responsible at the corporate level for executing the plan of the Steering Committee and assisting in implementing Lean Six Sigma throughout the organizations.

OpEx DirectorsManagers identifi ed at most of the organizations who are responsible for managing the project pipeline, assisting

in selecting projects, ensuring resources are properly loaded, and monitoring and reporting project execution and progress. OpEx Directors functionally report to the B&W OpEx Director.

Project ChampionsTypically members of management, Champions are called upon to identify potential project opportunities and serve as the sponsor for the project. They secure the resources for the team, remove roadblocks that may interfere with project success and confer with other management when needed. This role also acts as an ambassador for change and endorses the use of data to make decisions. B&W OpEx recommends that the majority of an organizations management team be trained as Champions.

Black Belts Black Belts are full-time process improvement leaders that are responsible for facilitating the team through the Lean Six Sigma methodology to complete projects that result in benefi ts to the organization. Black Belts can typically complete up to four projects per year once trained and serve as change agents throughout the organization. B&W OpEx recommends that approximately one percent of an organizations workforce be trained as Black Belts.

Green Belts Organizations that choose to deploy a part-time process improvement leader may train their personnel as Green Belts. They may have a lesser degree of training than Black Belts, but are equipped with the tools and methods needed to lead process improvement teams. The part-time model is dependent on selecting projects with a high level of importance, having suffi cient time to complete project-related activities and a project Champion that ensures the progress of the project.

Yellow Belts Yellow Belts are process owners or team participants who are trained in a subset of the Lean Six Sigma method. They use data to monitor activities, have a clear understanding of their process and its internal and external customers and may even work to make process improvements within their area of responsibility.

Master Black Belts Master Black Belts are seasoned Black Belts who continue with additional training and completing larger scope, more complex projects. Master Black Belts may be called upon to lead projects, mentor Black Belt candidates, develop business strategy and/or train Champions, Black Belts and Yellow Belts in the Lean Six Sigma methods.

Team Members / Subject Matter Experts Lean Six Sigma teams rely on the knowledge and experience of their cross-functional team. Typically, team members are selected from all areas of the process to contribute insight and be involved in the identifi cation of potential factors and implementation of improvements.

Financial RepresentativesFinance representatives are fi nancial personnel who are trained in the OpEx savings categories and assist Black Belts in quantifying project benefi ts and reporting of hard and soft savings.

Karate belt colors to identify types of Six Sigma training is amusing. Understanding each as a role critical to teamwork is transformational.

Matt LeVasseur OpEx Manager and Master Black BeltB&W Te

am

work

Implementing OpEx At Your Site

Implementing Lean Six Sigma is diff erent at each location and is a partnership between the organization and the B&W OpEx group. Implementation typically begins with a general assessment of the organization to determine the maturity of its current process improvement activities and putting the appropriate infrastructure in place.

Provide OverviewMembers of senior management may attend Executive Overview training that will provide a background of OpEx principles and provide management with a clearer vision of their role in process improvement. Managers throughout the organization may participate in Champions Training, which encourages them to identify process improvement opportunities and teaches them to sponsor projects.

Identify Project LeadersAfter engaging the management team, the OpEx group may work with the organization to determine the appropriate number of project leaders. B&W OpEx will share specifi c characteristics that are found to be best practices when identifying and selecting project leaders, or Black Belts.

Train Black BeltsOnce the Black Belt candidates are selected, they must participate in training, lead several projects and demonstrate knowledge of tools in order to be eligible for certifi cation. Black Belts are trained in both Lean and Six Sigma methodologies, enabling them to lead projects aimed at reducing defects and improving the effi ciency of processes.

Select ProjectsSenior managers will select projects for the Black Belt to facilitate during training, giving them the opportunity to apply the tools and methods to a practical business need. Champions submit business cases, (scoped opportunities for improvement), which provide a list of potential projects for selection. The project selection is decentralized (i.e., performed by each business unit) in order to empower the organization to identify the area with the greatest impact and get the endorsement of the organizations management.

Assemble TeamsA cross-functional project team is assembled to represent all areas of the process being improved. Participation of those involved in the process is essential to facilitate more eff ective brainstorming,

Business Impact

improve buy-in of the process owners and establish control of the process once the project team has completed their initial objective. To further support the projects, participants on the project team may receive Team Member and/or Yellow Belt training.

Encourage Culture of Continuous ImprovementChampions and senior managers continue to identify business needs to develop a viable pipeline of projects. Black Belts are assigned these projects to support the overall needs of the business. This project-by-project approach sustains the implementation of OpEx. All personnel are encouraged to identify areas of opportunity, use data to make decisions and implement improvements in their areas of responsibility.

Unyielding rigor when selecting projects, focused on driving improvements for the benefi t of B&Ws customers, will generate strong returns to B&Ws bottom line. As our Operational Excellence program matures using this project-by-project approach, we will increase customer loyalty and generate higher profi ts.

Christine WilsonDirector, Operational Excellence & Quality B&W Canada

OpEx 2009 Projected Savings

Productivity this year is at the highest level we have had. With many of the changes we have implemented as a result of OpEx projects, we believe we are a big part of that momentum.

Scott CasturoOpEx Black Belt B&W NOG-Barberton

OpEx Capabilities

The B&W OpEx group has internal capabilities to assist in training and certifi cation, project identifi cation and development, Lean Six Sigma skills mentoring and knowledge transfer.

TrainingThe OpEx group can work with your organization to identify and facilitate the type of Lean Six Sigma training that fi ts your organization. B&W has a standardized set of training material that emphasizes tools deemed as best practices throughout the company. B&W OpEx encourages the mixing of participants from all organizations in each training class to allow for a diversity of backgrounds and a forum for sharing of best practices.

Brief training descriptions are off ered below:

Black Belt Training: Consists of six weeks of training; fi ve of the weeks focus on the phases of Six Sigma (Defi ne, Measure, Analyze, Improve, Control) and one week focuses on Lean Enterprise tools and the execution of Rapid Improvement Events. Participants facilitate a project and receive mentoring throughout training.

Champions Training: Consists of two days of training featuring an overview of the Lean Six Sigma method driving the identifi cation and development

of project opportunities (i.e., business cases) that positively impact the business. Appropriate for members of management and process owners; a project idea is typically the deliverable of this training.

Executive Overview: Consists of a half-day session providing an overview of the Lean Six Sigma method and emphasizing the executives role in creating a culture of continuous improvement. Appropriate for senior management and staff .

Team Member Training: Facilitated by certifi ed Yellow Belt instructors throughout the B&W OpEx program. The two-day training covers many of the tools that will be used by the project team. This training makes up the fi rst two days of Yellow Belt training and is attended by personnel that are participating on Black Belt projects.

Yellow Belt Training: Facilitated by certifi ed Yellow Belt instructors throughout the B&W OpEx program. This is an additional two days of training after the Team Member training (for a total of four days) that provides skills training for process owners and personnel that are participating on Black Belt projects. Yellow Belts can typically use their skills to address process improvement within their area of responsibility.

MentoringChampions, Black Belts and Yellow Belts are mentored through the certifi cation deliverables to ensure Lean Six Sigma transfer of knowledge. This mentoring not only encourages the use of tools, but strengthens participants facilitation and leadership skills. Champions are coached in developing solid business cases, aligning those projects with their strategy and ensuring project progress by coaching Black Belts through to project completion.

Creating Self Suffi ciencyThe B&W OpEx group also assists in the development of internal trainers for Yellow Belt programs and Master Black Belt capabilities throughout B&W by the identifi cation of appropriate candidates, standardization of training materials and monitoring of certifi cation requirements (including instruction). It is one of the goals of B&W OpEx to create self-suffi cient OpEx initiatives at each organization by having the internal capabilities at their organization to sustain the initiative.

The training I have received as a Black Belt has given me a brand-new perspective on how to improve processes. Ive spent most of my career at B&W working on process improvement in one way or another, but this is the fi rst time I feel like I have the tools and support to help overcome our most signifi cant challenges.

John GerstenslagerOpEx Black BeltB&W PGG B&W Service Company

New

Skills

We have a strong nucleus of excited and passionate agents of change and the enthusiasm continues to grow with every success. John RogersOperations Manager & Project Champion B&W NOG-Mount Vernon

Developing Leaders

OpEx personnel throughout B&W are highly skilled in the use of the Lean Six Sigma methodologies and tools, as well as facilitation and change management. The B&W OpEx training not only teaches advanced technical problem solving skills, but allows participants to actively lead projects and project teams, strengthening their project management skills and encouraging them to be results-oriented. These positions of increased responsibility require them to justify the decisions and actions of the team and push for a solution. During training, Black Belts are mentored by experienced project leaders with a focus on developing technical, interpersonal and communication skills. The skills acquired through this role are desired leadership traits within B&W.

Besides the opportunity to learn and apply world-class, problem-solving skills to real business process improvement situations, OpEx provides a chance for Black Belts to develop and demonstrate their leadership skills. If you are looking for a chance to prove yourself in a high-visibility environment, this type of role could be right for you.

Mike McCannDirector, Human Capital DevelopmentB&W Human Resources

B&W Operational Excellence is a certifying body that is able to grant Lean Six Sigma certifi cations upon completion of the established criteria.

All of the certifi cations require practical demonstration of the Lean Six Sigma tools by completing a project with validated business impact. This ensures the certifi cation process positively aff ects the business and is more than just an academic experience.

Detailed certifi cation requirements available upon request.

B&W OpEx Certifi cations:

Master Black Belt

Black Belt

Green Belt

Yellow Belt

Yellow Belt Instructor

As a Champion, I was aff orded the opportunity to directly witness how these principles can be applied to solve complex issues. At the outset of my project, I was a bit skeptical but we were able to systematically step through our process and successfully reach our primary objective. B&Ws OpEx initiative has proven to be a successful program in reducing costs.

Marc LefebvreEngineering Manager & OpEx Project ChampionB&W PGG Fossil Power Division

OpEx Certifi cation

OpEx Personnel

OpEx Steering CommitteeTodd Brown, B&W NOGEileen Competti, B&W PGG, Diamond Power International, Inc.Mike Lees, B&W CanadaMike McCann, B&W Human Capital DevelopmentRick Thomas, B&W PGGRoss Thomas, B&W TSG

OpEx DirectorsTerry Albright, B&W PGG, Operations Mark Bunton, B&W PGG, Diamond Power International, Inc.Doug Cook, B&W NOGKathy Cullen, B&W Human Resources Steve Hanlin, B&W Construction Co., Inc.Eric Jennings, B&W Information Technology Service Center John Monacelli, B&W PGG, B&W Service Company Mitch Perod, B&W PGG, Fossil Power DivisionRoss Thomas, B&W TSGChristine Wilson, B&W Canada

OpEx Finance Representatives*Tina Black, B&W PGG, OperationsNancy Chen / Corrie Wagner, B&W CanadaCameron Frymyer, B&W PGG, Fossil Power DivisionSteve Gehring, B&W NOGNicole Kennen, B&W CorporateTerry Lanham, B&W Service Center Cy Macko, B&W PGG, B&W Service Company Larry Minnick, B&W TSG Louis Petit, B&W Construction Co., Inc.Diana Wilson, B&W PGG, Diamond Power International, Inc.* Additional fi nance personnel are trained on the OpEx savings codes.

B&W OpEx TeamAlan Nethery, Director, B&W OpExMatt LeVasseur, Manager and Master Black Belt, B&W OpExChristy Walker, Project Manager and Master Black Belt, B&W OpEx Anne Wirth, Project Manager and Black Belt, B&W OpEx

These projects yield measurable, indisputable results.

Brandon Bethards Chief Executive Offi cer The Babcock & Wilcox Company

Additional information available on the OpEx page on the B&W portal.

800 Main Street z Lynchburg, VA 24504 z www.babcock.com