An alliance between a contractor and Owner can be most successful when their approach is based on team work, risk sharing, problem solving and reward transparency, cooperation and joint success.
By Ron Douglas, Executive Vice President, Global Project Delivery
Traditional project contracting in the Mining industry is generally based on single assignment contracts. The solutions provider (contractor) and project owner often invest significant resources to develop the relationship which at completion of the assignment is often terminated as the subsequent tranches of work are bid in a competitive manner. If this happens, the institutional knowledge/expertise of the solutions provider is lost, costing the owner time and resources.
A solution to the waste created by this approach is to form an alliance with a contractor who has the experience, geographic footprint, processes and capacity to work closely with the Owner. Like all partnerships, strategic alliances are governed by contracts, and are most successful when the parties create an approach based on team work, risk sharing, problem solving and reward transparency, cooperation and joint success.
In a market environment where the requisite skills and experience to ensure efficient and value enhancing project delivery is at times scarce and expensive, an alliance arrangement is a contracting solution that should be considered. With an alliance, the right people are available, the technical, operational and institutional knowledge is housed within the team and all are aligned within the pre-agreed structure working towards common delivery goals.
Our previous strategic alliance experience has confirmed that through unlocking an alliance’s synergies, value is created for all stakeholders.
What has your experience been with alliance agreements?
Lihir Alliance example
In 2012, Ausenco signed a multi-year alliance agreement with Newcrest to support improvements at its Lihir operation in Papua New Guinea. Newcrest required program management, study development, and Engineering, Procurement, and Construction Management (EPCM) solutions in support of new and sustaining capital projects. This alliance was founded on a long term successful association with Lihir.
Since the signing of the alliance, Ausenco has completed feasibility study work for a flotation plant upgrade which led into project delivery and a project to increase the size of the Carbon in Leach circuit to maintain gold recovery at a higher throughput. Throughout this work, Ausenco provided management solutions that included safety, risk, schedule, cost, procurement, expediting, and logistics components for Lihir.
This illustrates how forming a multi-year, multi-scope alliance has delivered a win-win for the parties in the alliance, and unlocked significant shareholder value.
For more information on alliance contracts, contact Ron or one of our Experts.
Simon is the leader of Ausenco's minerals and metals and project delivery business in the Americas. He has 20+ years experience in the mining industry and has held a number of Operations, Project and Corporate Leadership positions.