Canadian Mining Journal

Feature

What to consider when engaging an EPCM

Companies can’t afford to leave cash on the table when it comes to major capital projects in today’s capitally-constrained mining and metals sector. Effective major capital project execution is imperative. Over the last two years,...


Companies can’t afford to leave cash on the table when it comes to major capital projects in today’s capitally-constrained mining and metals sector. Effective major capital project execution is imperative. Over the last two years, we’ve already seen a number of highly publicized mega projects being canceled, with others delivered late, over budget or not meeting specification. And recent research of major projects showed nine out of ten experienced cost overruns — and that overruns of 50-100% or higher were common. Those numbers can’t be ignored. They can have a profound impact on a company’s profitability, growth prospects, social license to operate and overall financial health.

Canadian mining and metals companies must put the people and processes in place to ensure major capital project success. But often times they lack the skill or capacity to act as a prime contractor themselves. That’s where engineering, procurement, and construction management (EPCM) teams come into play. These teams offer the right kind of experience, leading practices and technology to deliver projects on schedule and budget.

FINDING THE RIGHT EPCM TEAM

Choosing the right EPCM team for a major capital project begins by comparing the full spectrum of your companies’ skills, strengths and needs against what the EPCM team has to offer. It’s about finding the right fit. The following are a number of factors Canadian mining and metals companies should consider before choosing their EPCM team:

A TRACK RECORD OF SUCCESSFULLY COMPLETED PROJECTS

It is important to understand the EPCM’s track record on projects of similar scope and scale, focusing on root causes and lessons learned behind successes as well as reasoning for successes.

WILLINGNESS TO ENGAGE IN A COLLABORATIVE PARTNERSHIP

A successful project begins with a collaborative team. A teaming mindset should exist throughout the lifecycle of any project. The entire team needs to understand the definition of success with alignment of goals, as well as understanding what a “win” means for all team members.

PAST EXCELLENCE IN HEALTH, SAFETY AND ENVIRONMENTAL AND INNOVATION

Due to the inherent risks of major capital projects, particularly on construction sites, health, safety and environmental programs are a critical piece of any capital project. The EPCM needs to have a culture of safety, with programs, targets and assurance with demonstrable successes.

TRAINED RESOURCES AND EFFECTIVE SOLUTIONS TO INCREASE TO RESOURCE BASE AS NEEDED

The already tight labour market in North America is set to shrink even further over the next 10 years. A lack of skilled resources is one of the primary reasons for project cost overruns — issues with staffing the engineering or project execution often results in project extensions. An EPCM should have an effective program of assurance around obtaining and retaining the appropriately trained personnel, as well a defined program for increasing and reducing staff as needed, with demonstrable past successes.

BEST-IN-CLASS SYSTEMS AND PROCESSES

Since for most companies, construction is not focus, the EPCM selected should have best-in-class systems and processes, to assist the company to effectively manage and execute the project, with proven track records on assistance in transparent reporting and satisfied clients.

EFFECTIVE LOW-COST SOURCING CAPABILITY

Whether the EPCM will be utilizing the companies preferred supplier list, or if part of their role is to utilize their own preferred vendors to the advantage of the company, they should have a clearly defined supplier program, with documented advantages to the company including rebates, preferred pricing, and schedule benefits. Due to the fact that the EPCM typically works with suppliers on a consistent basis, they should pass those savings on to the company.

GLOBAL EXPERIENCE AND REPUTATION

Mining is a global industry and companies stand to benefit by partnering with an EPCM with a global reach. Consider future projects and whether a global scale will enable success down the road.

The stakes are high when it comes to major capital projects. Choosing an EPCM is no easy decision but when the right considerations are taken into account and companies identify the best fit for their needs, projects can come in on time and budget.


Visit EY.com/ca/mining and follow on Twitter @EYCANADA.


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