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Avoiding Cost Blow-outs on Mining and Capital Projects

Contributor: Megan Edwards and Jacquie Bran
Posted: 10/18/2011  12:00:00 AM EDT  |  0
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Tags: mega project | major project | mining project | capital project | project cost | project budget

Cost blow outs seem to be accepted as inevitable in mega projects around the world – and for any size mining project in fact. The scale and remoteness of many mining projects in feasibility and construction phases right now of course bring additional problems with them, including cost of workforce, supply of equipment, escalating materials cost, energy prices and sources. Anyone who works in the sector knows the seemingly never ending list of problems that can, and will, crop up during a project. Many of these are accepted as unavoidable – so if you can’t avoid them, what can you do to help minimise their impact? Mining IQ has researched around and come up with the following tips for managing cost blow outs:

  1. Having the design team flow in to construction phase – a seemingly obvious solution: ensuring continuation of project team. However, not one many choose to employ, due to cost, availability of team or a lack of understanding of the dangers of disconnect between staged teams.
  2. Genuinely treating your project as unique and individual – one size fits all rarely works in any business approach, so why risk it when you’re running a billion dollar plus project? Learning from other projects is of course a valuable opportunity, but carbon copying over technology, designs, plans, or forecasts is a recipe for disaster.
  3. Creating a true project leader – many projects can fail, or under deliver because no one person is accountable – or truly driving the project. Identifying a leader from the start who can control, manage and execute the project from start to finish is a vital part of ensuring success.
  4. Ensuring you follow the correct project phase methodologies – many companies (in Australia at least) are now skipping the pre-feasibility study stage, moving straight from scoping to definitive feasibility study. A lot of the important data acquisition, analysis and dissemination happens during the pre-feasibility stage, meaning much of this is overlooked when it is done alongside much of the technical engineering element. Cutting any corners in a project of this scale will inevitably lead to unpleasant surprises.
  5. Apply caution and rationale before changing scope of project –whilst some specific project changes may be impossible to unforeseen, making knee jerk, reactive decisions to hugely altering the scope of a project can be devastating with cost blow outs. Work your way back from the new proposed scope to a reasonable compromise between that and the original plan.
  6. Expanding upon the risk management assessment of your project – whilst there is a plethora of general risks that will go across all mining projects – every project will have their own unique risk areas, e.g. remote Western Australia and having a reliable energy source. Conducting a proper risk assessment early on will help you identify unique problems that could crop up with your project.
  7. Avoiding delays in the project due to regulatory reasons – don’t leave your social licence to operate considerations until too late in the project! Most jurisdictions around the world now pay a lot of attention to miners’ environmental and social awareness assessments, and any doubt in the mind of the regulatory body can lead to long delays in projects being approved. Adequately plan and incorporate this assessment into your project from day one – and have your true leader drive this.
  8. Ensuring Project Team Alignment – Ensure that all parties engaged in the project are aligned behind project goals, expectations, rationale and KPIs. This will enable you to ensure that your project is efficient, productive, lean, streamlined and, most importantly, delivers above business as usual expectations.Drive a culture that supports this behaviour.
  9. Embracing Innovation and Initiative – Innovation has the potential to deliver unexpected benefits and value to any project. Innovation could mean you deliver the project quicker than expected or that you achieve outstanding outcomes above business as usual. Sometimes a new perspective can be the difference between meeting and exceeding expectations.
  10. Create a watertight business case and applying stringent procurement analysis – Make sure that you consider not only ‘how’ a project is to be delivered but also ‘why’ it is being delivered.

Found this article interesting? Here's a couple of suggestions:

  1. Check out the upcoming Contracting Excellence Summit - the focus of the event is doing more for less and improving efficiency and productivity
  2. Check out this discussion on LinkedIn for more opinions, thoughts and suggestions:

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