Epcm versus consultants

The lines between the fabricator, erector,

consultancy, finance, operational and project

management companies are definitely

becoming less defined. Much of this is driven

by different client circumstances and needs. It

is also the case that EPCM contractors

recognise that they do not have to perform the

customer’s entire project delivery phases

themselves and will bring other specialist

contractors into a project to carry out specific

technical work as and when required. As

such, there is often a very close synergy

between consultants and contractors.

Digby Glover at TWP comments: “There is acontinuum of options from the wellestablished

client, who want a large degree of

control and who only need specific consultancy

input – right through to the newer player, who

does not have capital, who requires a company

to finance design, build and operate a mine.

TWP, and its parent company Basil Read, have

strategically positioned themselves to provide

most of these services along this continuum.

Our clients have the flexibility to pick their

required services, or to use all of them.”

Bennett at MDM comments: “There is a

relationship between these groups where the

EPC/EPCM contractor will sub-contract certain

skills in a study like the EIA, tailings dam

design, resource and geology statements, mine

plan and schedule; and on actual projects we

will often sub-contract the SX-EW portion of

the plant, for example. We do find some of

these groups blurring the lines as some of

them take on whole studies but do not do the

plant design for example and some of these

groups do small jobs but come to us for the

bigger or main project, so they may try and

built a pilot plant but cannot do the main

project/plant.”

Should a consultancy be sub-contracted by

the main EPCM contractor to carry out a

particular part of the project such as bringing

In a raise boring specialist, the relationship

between EPCM/EPC companies and the

consultant is one of subcontracting for the

best competencies at the best price to the

mining customer, with a single and simplified

line of responsibilities and communication

between the customer and the prime

contractor.

A spokesperson at AMEC commented: “A

challenge for all EPCM projects is to clearly

define and communicate the scope and

objectives to all project participants, and build

a cooperative, well-functioning team. This is

critical to managing the complexity and

multiple interfaces of any sizeable project.”

They added: “The components most usually

missing in other EPCM providers are the earth

and environmental sciences, and capabilities in

resource geology, and typically they or the

owner would contract other specialist firms for

these service components.”

Tendering process

Capability and capacity are considered.

Generally a strong track record is required in

the specific market area to demonstrate

capability. Price will always be a factor, but this

Is often a secondary factor, particularly in the

front end loading phases of a project.

Leon Uys, Managing Director at DRA

MIneral Projects, comments: “The tendering

process for projects has remained much the

same with companies bidding mainly on

factors such as price, capability and track

record. However, this is not the case when

DRA offers a ‘total solution’. In this instance

the company will open its books to the client

and agree up front on key aspects such as

profit margins and incentives.”

A spokesperson at Jacobs Engineering

comments: “In general, there can be a prequalification

process to identify a short-list of

the most qualified companies prior to the

formal bid process. Companies are expected to

present a complete response to a customer’s

formal Invitation to Tender, which typically will

include the proposed project team, a detailed

scope of work, cost estimates and overall

project execution programme that relate directly

to that scope of work. Previous references are

very important to demonstrate a company’s

ability to undertake the work. Often, these

include specific examples of previous project

experience in a particular geography or mineral

that relate to the customer’s project.”Chinese influence

Major Chinese mining groups generally have

some EPCM capability and are currently mainly

operating in regions such as Australia/Asia

Pacific and South America. Therefore, there is

increasing competition in particular for projects

owned by Chinese customers or utilising

Chinese investment funds. Julien Denegre at

Technip comments: “Chinese investors have

more success getting Australia's mining sector

investment approved in the future because

they now understand how to navigate the

process. China's commercial ties with Australia

have been marred by controversy, with

Canberra rejecting some takeover bids by

Chinese state-owned firms. Chinese investors,

in turn, have complained of confusion over the

foreign-investment regime. The total

investment over the last three years out of

China into Australia is huge across a range of

commodities, from magnetite to coal, to

uranium and LNG. Australia has been the

biggest target for Chinese investment over the

past five years, with direct investments worth

more than A$16 billion, according to

Australia's Treasury Department.”

Chinese groups are used to working in

partnership with EPC Chinese engineering and

construction firms to design and build project

facilities, not only to enhance international

competitiveness but also to effectively reduce

planning and material sourcing risk.

Cluroe at Hatch adds: “There’s no doubt

that country players are making moves,

especially in their home markets. The Chinese

design institutes have a lot of local knowledge,

and obviously local connections, so they’re

playing an increasingly important role too. We

often work with these local players and these

joint ventures can be a powerful combination

to execute projects that deliver value to the

client. And that’s our ultimate objective.”