By Nancy J. Perry

(FORTUNE Magazine) – IT'S THE CORPORATE conundrum of the Nineties: how to do more work with fewer people, while improving quality and customer service. Fluor Corp., the engineering and construction services giant, has an answer. Since 1990, Fluor's mining and metals unit has seen its quarry of engineering projects grow 230% -- from $300 million to over $1 billion -- with only a 25% increase in the work force. What's the trick? Three years ago the mining and metals operation, which contributes up to 15% of Fluor's revenues, took enough time off from designing steel mills and copper smelters to reengineer itself. Investing heavily in training and technology, it has learned to stretch its management talent in ways that many a wide-ranging multinational could emulate. The resulting efficiencies, plus a stronger global copper market, have boosted profits 400%, says Victor Medina, general manager of the mining and metals division. And that's without raising prices. Says PaineWebber analyst Mark Altman: ''Mining and metals has certainly been a bright spot for Fluor.'' While the company won't break out the profit, analysts think the business earned roughly $25 million last year. The mother lode of the mining and metals business -- contributing about 40% of revenues -- lies in Chile, where Fluor built Escondida, the second-largest copper mine in the world. (Chile's state-owned Chuquicamata is No. 1.) Fluor , manages the expansion of Escondida, a joint venture among BHP of Australia, RTZ of Britain, and a Japanese consortium led by Mitsubishi, as well as projects scattered throughout the U.S., Canada, Australia, and Indonesia. Before the reorganization, each local office operated autonomously, with its own team of engineering, procurement, marketing, and operations managers responsible for the bottom line at its site. Besides adding overhead, this setup kept the offices from cooperating and sharing talent. Today one team of mobile managers, who communicate constantly via fax, phone, and E-mail, presides over all the offices, moving work and technical talent among sites as needed. Says Medina: ''We are conscious of the fact that we're in the business to run projects. We're not in the business to run offices.'' Through electronic work-sharing, engineers in New Orleans are preparing drawings for a copper mine expansion on the Indonesian island of Irian Jaya. Similarly, the Vancouver office has done structural engineering work for Fluor's Quebrada Blanca project -- a challenging copper mine being built 14,000 feet up in the Andes. The Vancouver engineers used to be fully utilized about 40% of time; now it's 90%. Fluor's mining and metals unit is following a company-wide strategy of placing the client at the center of its universe. This is somewhat revolutionary in an industry where the contractor typically tries to make the most money possible, and the client tries to spend the least. Fluor has engineered three major projects for Alcan Rolled Products in the past five years, helping it save $100 million on an aluminum mill in Kentucky. Says President Robert Ball: ''All their projects started up in a way much superior to any of our startups in the past.'' Believing that man-hour contracts, which Fluor and the rest of the industry typically operate under, discourage productivity increases, Fluor's chairman, Les McCraw, is trying to persuade clients to start paying for performance. A few have agreed. Medina says Freeport-McMoRan, which owns the Indonesian copper mine, gives Fluor a quarterly report card, rating it on a scale of one to ten on such measures as scheduling, cost, and safety. If the overall score is five, the company receives 50% of its incentive fee; a ten merits 100%. So far the unit has been scoring sevens and eights. With potential worldwide projects worth an additional $1 billion, Medina and his team are aiming for perfect tens.