When building a mine, the ‘engineer, procure, construct’ (EPC) model passes responsibility to a single, large contractor, reducing risk but providing less influence over standards. Those wanting greater control may choose to ‘engineer, procure, construct and manage’ (EPCM), with various contractors carrying out building work.
The huge daily costs make delays the biggest enemy, and with incredible levels of complexity and scale, strong project management and fast decision-making is imperative, aided by real-time management information systems. Cultural sensitivities are extremely important, and if unaddressed, can hold up progress.
Managing commercial terms and cash flow
Where work deviates from the initial contract, mining companies cannot risk disputes that could slow down construction, so may pay the contractor upfront and subsequently reclaim any overspend. Having spent billions of dollars over the development period, owners want to earn revenue as soon as possible, so must confirm the mine is operational, to benefit from ‘take and pay’ arrangements with customers or major suppliers. This requires inspections and certification, with any delay causing cash flow shortages or even loan defaults.
Helping you survive in the fast lane
With extensive global experience, KPMG’s construction and engineering specialists can evaluate potential contractors’ competence, capacity and financial stability. Our forensic ‘contract doctors,’ help owners adapt to changes in scope and validate and enforce agreements, avoiding disruptions and optimizing payments to suppliers and from customers.