Project Development and Construction Management

J Luxford1

ABSTRACT The extent of engineering design, costing and scheduling

detail in the feasibility study will vary depending upon each
Successfully managing project development and construction has often
been a challenge in the mining industry. This is reflected in the number of project owner’s policies and the urgency with which they want to
projects that have taken longer to build, exceeded their budgets and then get the project into production. Major mining houses that are
struggled to achieve the performance targets so confidently predicted increasingly risk averse may complete at least 50 per cent of the
beforehand. engineering design for the project prior to signing off on the
This paper outlines the fundamental elements of project management feasibility study. On the other hand, when a project is being fast
necessary to deliver mining projects on time and on budget, and tracked, engineering may only be completed to general
performing as originally intended. It looks at areas such as the study arrangement levels without any detailed design.
process, project planning, team selection and structure, project controls, The study process has several steps from the initial ore
types of contracts used and approaches to contract management. discovery to the final approval to proceed with the project. These
steps, in order of increasing duration, cost and level of
INTRODUCTION confidence, usually include:
Delivering projects on time and budget that also work as • scoping study to determine if the project appears to be
intended has challenged the mining industry since time feasible and to generate options for further study,
immemorial. History is littered with projects that ran over time • prefeasibility study to evaluate options and determine which
and budget and either never quite achieved their targets, or took mining and metallurgical treatment processes are best for the
years to achieve them. project, and
Rather than focus on the reasons for project shortcomings, this • feasibility study to optimise the mining and metallurgical
paper instead outlines what needs to be done to ensure those process design and complete basic engineering and
shortcomings do not arise. The key areas examined are: infrastructure design.
• studies and project approval, The scope, duration and cost of each phase will depend on the
• establishing the project team, size of the potential project and the project’s owner. At one
extreme, small mining companies with low tonnage projects may
• project execution planning,
select the options during the scoping study and eliminate the
• engineering, prefeasibility study step. If the project is equity funded, there
• procurement and contracting, may be no external review at all. If the project is debt funded, the
debt providers will commission an independent expert review of
• project controls, the study to verify that the project will repay the debt funding.
• construction management, At the other end of the spectrum, a major global mining house
• commissioning, and may spend a year or more on both the prefeasibility and
feasibility stages, with major internal reviews of each phase to
• handover to operations. independently verify the validity and robustness of the inputs to
Space does not permit a discussion of particular project the study and the conclusions drawn from it.
mishaps that have eventuated when these fundamentals were Major mining companies have investment process manuals
overlooked. However, the reader can be assured that there are detailing all aspects of feasibility studies. These companies can
many tales of woe that have befallen project managers who produce feasibility studies running to 20 volumes or more. On
neglected these fundamentals. the other hand, small mining companies and their financiers may
be satisfied with a feasibility study comprised of only a few
FEASIBILITY STUDIES AND APPROVAL volumes.
The ultimate aim of the study process, once technical and
The first stage in the life of any project is the feasibility study, financial feasibility has been demonstrated, is to produce a base
followed by project approval and funding commitment. In order line project execution plan (PEP) that defines, scopes, schedules
to establish the financial, technical, social and environment and budgets the project. The schedules and budgets must be in a
feasibility of a project, the study process must produce: format that the project execution team can use to manage the
project. If they are not, the team will either struggle to control the
• bankable ore reserves that satisfy the project financiers;
project, or more likely, develop their own schedules and budgets.
• mining, process plant and infrastructure designs that deliver When this happens, it will be difficult if not impossible to
the required saleable quantities of product at the correct reconcile project outcomes back to the original study,
specification; particularly if the project has run over time and budget and the
• procurement and construction budgets and schedules that are scope has changed.
realistic and contain adequate contingency;
• cash flows that are attractive to financiers; and PLANNING AND ESTABLISHMENT
• social, environmental and community impacts that are Implementation strategy options
acceptable to all stakeholders.
Once a mining project has been approved, there are a number of
options open to the project’s owner when it comes to taking the
1. FAusIMM, Principal, Luxford Mine Management, PO Box 1190, project from an approved study to a producing mining operation.
Booragoon WA 6154. Email: [email protected] The options include:

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1. engaging a project management or engineering, procurement contractors and the issues and most importantly, knowing
and construction management (EPCM) contractor to manage what the contractors are, and conversely are not entitled to
all of the engineering, procurement, and construction; contractually; and
2. dividing the project into areas, with some managed by the • mining project management – knowing how to plan and
owner’s team and other areas managed by an EPCM manage mining projects, especially the eternal triangle of
contractor; or time, cost and quality.

3. managing the entire EPCM process with the owner’s team. Critical situations will inevitably arise where the project
manager must bring all three of the above skill sets to bear in
The EPCM option is currently the most common project order to make effective decisions that minimise the:
implementation approach taken by major mining companies in
Australia. • time and costs of delays,
According to Manchanda (2006), Newcrest took the Option 2 • risks of contractual disputation, and
approach recently with the construction of the Telfer project. The • risks of compromising the quality expected of the project.
Telfer project involved a very large process plant which was
In situations where the project manager lacks skills and
managed by an EPCM contractor while Newcrest managed the
experience in one or more of these critical areas, it is vital that
mine development and various infrastructure packages.
appropriate support and coaching is available to the project
The best example of Option 3 was Placer Development who manager. If this support is not available when needed, the
developed one of the best ‘in house’ major mining project probability of time and cost overruns are very high.
development teams that the author is aware of. This team
managed all aspects of Placer’s project development around the In addition to the above management, technical and practical
world over a long period of time and had one of the best records skills, there are a wide range of ‘people management’ skills and
in the industry for delivering projects on time and budget. attributes that a project manager must possess. These will
normally develop as a successful manager progresses through
BHP Billiton’s Cannington mine development project in the
operational and project management roles.
late 1990s is another example of the Option 3 approach. In this
case, there were separate teams managing the underground mine The author observed one particular mine development project
development and the surface construction areas, albeit with where the project manager came from a project engineering
teams comprised of individuals or small teams on contract to background with no experience in, or understanding of, mine
Cannington. development. When geotechnical problems arose, they were not
In the past, most Australian mining companies managed their effectively dealt with, which resulted in years of litigation.
mining projects with their own salaried employees. The current
trend is for mining companies to employ the project director as a Selecting the project owner’s team
salaried staff member and also the statutory mine manager if it is The project owner’s team members may be employed or
a mine development project. Other than these key positions, contracted directly by the mining company or through a labour
many of the other key project team roles will be filled by hire company or a project management or engineering service
specialists from outside the mining company. providing company. If the project does not have a mining
component and only involves civil, mechanical and electrical
Creating the owner’s team work, the entire project team, except for the project director, may
be provided by a specialist project management company.
There are a number of common threads in all the successful
projects observed by the author over time. They all revolve Requirements for project team selection include:
around people and include: • knowledge and experience in what is to be designed and built,
• a strong project director, or project managers reporting to the • demonstrated track record in similar projects,
director, with extensive project management experience who • honesty and integrity,
understand what is being designed and constructed and
provide effective leadership to the project; • intellectual and practical ability, and
• simple team structures and clear authority and accountability • ability to work well in a team.
for all team members; While many project management texts specify an extensive
• competent engineers and supervisors on both the mining range of criteria that team members should possess and how they
company’s and the contractors’ teams; and should be recruited, the reality is that many successful project
• good working relationships based on mutual respect and trust managers have a loyal team that follow the manager from one
between the project team and the contractors to the project. project to the next. While the individuals within this team may
sometimes not be of the highest calibre, they have collectively
demonstrated over time that they can work together to
Selecting a project manager successfully deliver projects.
Anyone who manages major mine development and construction
projects, especially in the underground environment, will be Owner’s team size
called up to exercise judgment in the following areas:
The owner’s team size required to successfully deliver a mining
• mining and mine management – knowing how things get project will vary with the size of the owner and the project. Large
done in the mining environment, understanding the culture, mining companies can sometimes create large project
knowing what can go wrong, especially in the geotechnical, management bureaucracies that impede rather than assist project
groundwater and ventilation areas and especially management. Conversely, companies of all sizes can fall into the
understanding the safety and statutory requirements, issues trap of under-resourcing project management teams. This is most
and how to manage them; often seen in the management of mine development projects,
• contract administration – knowing how both mining and especially single entry declines where the owner’s team may
construction contractors work in the mining environment, the consist of as few as one engineer and a clerk. The author visited
issues they face and how to manage the relationship with the one major overseas underground mining project where the

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owner’s team managing the mine development project consisted While most of the front end loading process occurs within the
of a manager and a contracts engineer. That particular project feasibility study process, it culminates with the project execution
subsequently experienced major cost and time overruns and plan (PEP). The PEP links all aspects of project implementation
quality management problems. together in one document that explains how the project scope,
While there is no hard and fast rule for the optimum size of an specifications, budgets and schedules will be delivered without
owner’s project management team, it must have sufficient harm to people or the environment.
members to address the following issues: The PEP is the ‘what, why, how, when and who’ of the project
• work planning and budgeting; that explains to those outside the project team how the project
will be managed. Owner’s team members must be able to refer to
• tender preparation and contract awarding; it and understand the performance requirements, what they need
• scope, cost, time and quality control; to do and how their role supports the overall team objectives.
• reporting at all levels; A typical PEP would address the following issues:
• engineering management; • project objectives;
• construction supervision; and • user requirements specification;
• safety and risk management. • definitive estimate that includes:
An EPCM contractor, when employed, will have direct • scope of work;
contractual responsibility for these functions. However, the • work breakdown structure;
owner’s team must still possess sufficient resources to adequately • schedule;
monitor the functions in order to ensure that the project is on
time and budget. • budget;
• procurement;
Need for a separate team on brownfields projects • logistics;
Owners occasionally fall into the trap of using their operational • contract administration;
managers to manage projects in addition to their ongoing • licenses, permits and approvals;
production responsibilities. The author can vouch from personal
experience that this approach is fraught with danger. The reality • organisation charts for the owner’s team and contractors;
is that, despite what ever edicts come down from top • authority levels for owner’s team members;
management, production will always come before project work. • position descriptions for owner’s team members;
Therefore, it is far safer to establish a separate team dedicated to
managing the project and provide them with their own labour • contractors project management plans;
and equipment resources with which to execute the project. • engineering and constructability;
• construction;
Single point accountability • commissioning;
Owners must ensure that one person is accountable for the • project controls:
direction of the project. This person should then be responsible
for decisions on implementation and fulfilling the submission • quality assurance (QA);
promises upon which the project was approved in the first place. • scope, cost and schedule;
When accountabilities and responsibilities are not clear, it is very • change management;
likely that important tasks will be overlooked – with costly
consequences to the project. • document control;
• progress reporting;
Continuity of key people • key performance indicators (KPIs);
Continuity of key people is an important factor in successful • temporary facilities;
mining projects, preferably with involvement in both the study • health, safety, environment and community relations (HSEC);
and implementation phases. Where turnover in key project staff
occurs, projects can be disrupted while new people take time to • site security;
understand the project. Sometimes, when a project is in • risk management;
difficulty, changing direction is necessary. However, unless the • insurances;
change in direction is carefully managed, more problems and
delays can be created that far outweigh the originally intended • external relations management;
saving. • financial administration;
• project review and auditing; and
Front end loading by creating the project • project close-out (the end).
execution plan
Each of these topics within the PEP would address or
Front end loading is the process of scope definition and planning reference the following documents as appropriate:
carried out prior to commencing the project implementation
• board approval conditions,
phase. The period prior to implementation is when the greatest
influence can be made upon, and benefit received from, • feasibility study,
optimising the strategy for executing the project and the • company project standards,
associated plan and schedule for delivering this strategy. Once
project implementation has commenced and contractors have
• company HSEC policies and procedures, and
been mobilised, changes become very costly. • detailed execution plans and procedures to be adopted.

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Temporary facilities Basis of design

Planning for temporary facilities is another area that is often The first task in managing the engineering phase is to prepare a
inadequately addressed in the PEP. Temporary facilities for the basis of design document setting out the owner’s requirements in
site implementation phase may include: detail. The document will form the project specification baseline
and define the user requirement specifications and minimum
• construction power and distribution;
design requirements for each phase of the project.
• compressed air distribution and reticulation systems;
• laydown areas; Engineering management
• refuse removal; A key task for the owner’s team in managing the engineering
• waste management; phase is to agree the following with the engineering contractor:
• ablution facilities and sewage treatment; • list of deliverables,
• borrow pits; • schedule for deliverables handover,
• fire-fighting facilities; • engineering team staffing,
• project store and warehousing; • design office control systems,
• radioactive materials storage; • design office procedures and workflows,
• fuel storage; • design standards,
• maintenance facilities; • drawings and specifications format,
• security fencing, gates and offices, access systems; • drawing and equipment numbering,
• water supplies; • CAD systems, and
• communication facilities; • design office and operations interface.
• construction offices for the owner’s team and implementation The critical item in the above list is defining the list of
contractor; deliverables and the schedule for their handover. Major projects
have been known to suffer severe overruns when the engineering
• site access infrastructure; deliverables were not adequately defined and scheduled.
• camp; and Depending on the size of the project, the owner’s engineering
• furniture and equipment. team may take up residency in the engineering contractor’s office
and may need to review, audit and monitor the engineering
Projects will almost inevitably be disrupted and delayed if functions to ensure the contractor complies with their
temporary facilities are not properly planned for in the PEP. commitments under the items listed above.
Temporary facilities that will cause problems if inadequate In order for the engineering contractor to achieve their target,
include: the owner’s engineering team must in a timely manner:
• poor camp facilities causing labour unrest, • provide user requirement specifications,
• insufficient camp rooms delaying contractor build-up, • examine and approve concepts and designs,
• inadequate communications facilities disrupting all aspects • review and approve equipment selections, and
of the project,
• approve standards.
• lack of suitable material from borrow pits affecting earthworks,
If the owner’s team is not disciplined in its approach to
• lack of water supply limiting many activities, defining the user requirement specifications and design concepts
• inadequate workshops affecting contractor performance and for each aspect of the project, there may be significant
safety, and re-working of engineering designs until the owner’s team works
out what it actually wants.
• dry-weather roads preventing site access in wet periods.
In addition to timely reviews and approvals, the owner’s
In the past, if temporary facilities were found wanting, they engineering team is responsible for:
could be quickly augmented to overcome the problem. In the
current boom conditions, this is no longer the case because none
• delivering the agreed scope in compliance with user
requirements,
of these facilities are readily available and have long lead times
to procure. For example, if a project is established with • document control,
insufficient camp accommodation rooms, it will be facing a wait • commissioning support,
of perhaps six months to obtain additional rooms. Similarly, if
the water supply is inadequate, there may well be a wait of three • engineering project controls and work flows, and
to six months to obtain a drill rig to drill more water bores. The • reviewing and approving as-built drawings and maintenance
consequences of poor planning for temporary facilities will be manuals.
cost overruns and delays.
Engineering deliverables
ENGINEERING Deliverables from the engineering phase may include:
The extent of engineering required after the project has been • final concept design and option selection,
approved will depend on how far the engineering was taken • design calculations and sketches,
during the feasibility study. Depending on the particular
company and the project, engineering could be anywhere from • piping and instrumentation diagrams,
20 per cent to 50 per cent complete. • single line electrical drawings,

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• general arrangement drawings, expended plus fixed overheads and margins. In boom conditions
when contractors are in great demand, cost plus arrangements
• detailed drawings, tend to be used widely.
• bills of material,
• standard and detailed specifications, Fixed price
• risk assessments, Fixed price contracts are used for equipment supply and may be
• hazard and operability studies, used for plant construction where the owner provides the design
if contractors are willing to tender on that basis. Many owners
• hazard analysis studies, are finding that contractors will not bid for construction work on
• as-built drawings, and fixed prices and will only accept cost plus arrangements.
• maintenance manuals.
Schedule of rates
Project – operations interface Schedule of rates contracts were the most frequently used form
It is the owner’s team’s responsibility to ensure that all interested of contract for surface and underground mining prior to the
parties, ie, operations personnel, area project managers, etc are current boom. As with construction contracting in the current
involved in the design process throughout the various phases of boom, mining contractors are increasingly unwilling to enter into
concept, prefeasibility and feasibility. This input for operability fixed prices or schedule of rates contracts.
should be downgraded at the completion of the feasibility study
and should not be allowed to continue into the project Contracting strategy and management
implementation phase as this may lead to serious time and cost
The contracting plan prepared as part of the project execution plan
overruns on the project.
will have detailed the contractual strategies and structures to be
employed to deliver the project. In particular, it will have defined
PROCUREMENT AND CONTRACTING the scope of work for the owner, implementation contractor(s),
vendors, construction contractors, and the contractual and
Contracting options commercial interrelationships between each participant.
Within the project delivery strategies previously discussed, there The contracting plan must take account of the following
are a range of options available to both EPCM contractors and project aspects:
owners for procuring individual parts of a major project. The • scope of work for the project and identifiable work packages;
most popular options are described below. • level of accuracy of the design criteria and existing engineering
information;
Build, own and operate (BOO) and transfer (BOOT)
• overall risk profile of the project;
The supplier totally funds, designs, constructs, commissions and • key commercial terms that are important to the owner (eg
operates the asset. In BOO contracts, the supplier retains lump sum, cost reimbursable, unit rates, indemnities and
ownership of the asset and in BOOT contracts, the supplier warranties, performance testing);
typically will own and operate the asset for ten to 20 years then
transfer title to the owner. Such contracts are usually based on • time frame for the project and the need for ‘overlap’ between
take or pay for the product. This arrangement has been used for engineering, procurement, construction and commissioning;
power stations on remote mine sites with payment based on unit • method required to finance the project during the execution
rates for electricity supplied. and operations phases; and
• skills and experience of the owner’s team (eg managing
Turnkey interfaces).
The implementation contractor provides total process and At a detailed level, the contracting plan must specify criteria to
engineering design, construction and commissioning of the guide the owner’s team in deciding whether commitments should
project to requirements specified by the owner. This arrangement be made by way of:
has been used for process plants where the process risk is low. To • purchase orders,
the author’s knowledge, it has only been used once for the
delivery of a base metals mine and process plant. The contractor • services agreements,
is paid a fixed amount subject to satisfactorily completing • formal contracts for:
performance tests. • equipment supply,
Engineering procurement and construction (EPC) or • equipment supply and install, and
design and construct (D&C) • construction or mine development.
EPC and D&C contracts are similar in that the owner provides If the owner does not have company standards for each of
the process design and the implementation contractor undertakes these documents, then the owner’s team must compile them prior
the design, procurement and construction of the project. The to commencing project implementation, along with defining the
contractor is paid a fixed price progressively for work completed; criteria under which each will be used.
with final payment on satisfactory completion of performance
tests. Risk allocation
Allocating contractual risk between the owner and the
Cost plus – partnering and alliancing contractors has been a difficult task for many projects – which is
The contractor provides some or all services required to deliver reflected in contractual disputes. Owners are well advised not
the project and is paid for all personnel and equipment hours place contractual risk on a contractor unless they are sure that:

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• the scope is well defined, • notice to proceed,

• risks are clearly defined and understood, • performance control of:
• liabilities can be met, and • safety,
• a fall back position exists for the owner in the event of • QA and non-conformances,
non-performance. • progress,
Owners should accept the risks that they can control – and • financial controls,
structure their contract accordingly. These risks typically may • claims and variations control and settlement,
involve:
• document control and record keeping, and
• metallurgical processes,
• contract closeout.
• operations interfaces,
• site interfaces with other contractors, Logistics
• geotechnical and hydrological conditions, Logistics is defined by Dictionary.Com as ‘The overall
• heat and ventilation conditions in deeper mine developments, management of the way resources are moved to the areas where
they are required’. In the project management context, this
and
relates to managing the movement of items from where they are
• severe impacts on the business revenue. manufactured to the job site where they will be used. The key
steps in managing this process include:
Contract preparation • purchase order raising;
Poor contract documentation often leads to poor contract • expediting;
management and outcomes. Good contract documents: • marine and transport insurance;
• are clear and concise documents using standard form general • customs clearance on imported items;
conditions and a minimum number of special conditions; • transport to site; and
• accurately record what has to be done and provided by each • receipt, storage and issuance on site.
party, when it has to be done and how it will be paid for; and
The logistics plan developed during preparation of the project
• include all the documents that the contractor must rely on or execution plan will have addressed each of these issues. This
comply with such as drawings, geotechnical and hydrological becomes critically important when constructing projects in
reports. remote areas.
Owners should get the best advice they can from experienced
construction litigation lawyers and insurance brokers. In each PROJECT CONTROLS
case, owners should request advice and assistance to prepare In the author’s experience with underground project
contract conditions that are most likely to deliver successful management, the absolutely critical project delivery success
project outcomes. Good litigation lawyers will recommend drivers revolve around controlling scope, schedule and cost.
documents that embody the risk allocation and contract These can only be controlled during the construction phase if
preparation points above and are fair to both parties. they were rigorously addressed in the project execution plan
When the owner requests a contract that best protects their through an iterative process of scope definition, designing,
position to the detriment of the contractor, they increase their risk constructability reviewing, scheduling and budgeting to arrive at
of contractual difficulties. Owners must remember that the the baseline schedule and estimate. The tool that integrates these
damages they will be able to recover from a contractual dispute critical aspects of the definitive estimate is the work breakdown
are far outweighed by the downstream effect of a project structure (WBS).
under-performing.
Work breakdown structure
Contract management The WBS is a hierarchical, coded framework illustrating how the
entire project scope will be executed. This framework is
More often than not, projects are late starting and there are large normally presented in the form of a project schedule derived
pressures to make up time. Owner’s teams must resist the from one of the popular scheduling software packages. Each
temptation to commence work before contracts are signed, WBS element must relate to a ‘doing’ activity represented by a
especially where the owner’s company procedures are onerous scope of work and estimate statement defining what is to be
and time consuming. The confusion and complications that can performed, when it is to be performed, and what its value is.
arise will far outweigh the time saved initially. The level of the WBS where singular responsibility is
The owner should have dedicated contractor management assigned, commonly called a ‘package’, could typically have a
packages and systems ready to use before any contractors arrive range of value of $100 000 to $20 M or $30 M or more in larger
on site to commence work. These systems must be clear and projects, and will often, but by no means always, be aligned with
simple and actually provide the tools necessary to do the job. a single contract.
This can be a significant challenge if the owner’s team has The WBS is the primary reference framework for the project
inherited or developed documents that do not actually give the to which other recording systems, such as filing and cost codes
tools they need to manage the contract and contractor. are related.
Contract management planning must also allow for the
possibility that despite the owner’s best intentions, contractual Baseline schedule and estimate
disputes and claims can still arise. Therefore, it is prudent to seek When preparing the baseline schedule and estimate, the owner’s
advice from expert claims consultants when establishing contract team takes the schedules and budgets from the feasibility study
management systems and then to audit site systems and and iteratively reviews the scope, designs, constructability,
administration and advise on claims handling. Elements of a schedules and budgets to arrive at an optimised baseline
contract management system will include: document that underpins the project.

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In the case of underground mine development and construction • civil work – cubic metes poured, and
projects, the process involves stepping through the mine
development and construction program week by week to identify • mechanical and electrical work – incremental milestones.
conflicting activities, flaws in the mine design, problems with It is vital that these activities are tracked on a regular basis,
drainage, ventilation or vehicle movements and any other usually weekly, and that the overall project schedules are updated
constructability issues. When done properly, this process monthly so that any slippage in completion dates can be
minimises the likelihood of encountering unexpected problems identified and corrective action implemented. The great danger
during the project which would otherwise cause delay and extra in this process is using subjective assessments of progress based
cost. The same process is equally applicable to other forms of on ‘gut feel’. Hard verifiable physical quantities or deliverables
construction projects. must be used to input actual progress to the schedule updates.
Major underground mine development projects may involve Underground mine development is notoriously difficult to
the development of say ten levels, several shafts, numerous bored accurately and realistically schedule: usually because of the
raises for ventilation and ladderways, multiple service and assumptions made or the tools used to update the schedule. In the
drainage hole networks and major excavations for ore crushing author’s experience, once the baseline schedule has been
and handling, workshops, pump stations, etc along with the optimised, the schedule is then best tracked in a spreadsheet that
construction of infrastructure in those excavations. Mine is manually updated with actual advances each week.
production activities may be commencing at the same time. With In addition to tracking actual against forecast progress in
all this activity, very detailed planning and scheduling is critical spreadsheets, it is very useful to plot lateral development advance
to establishing realistic baseline schedules and budgets that can cut by cut on large scale wall plans in a central part of the site
be used to control the project. project office. Lateral development is the one activity over all
The recent development of powerful, user-friendly 3D mine else that will determine whether or not a project finishes on time
planning and mine scheduling software has made the mine and budget because everything else is usually dependent upon it.
development scheduling process much faster, but has not reduced Scheduling is probably the most difficult and poorly executed
the need for careful analysis of all the interactions and issues task undertaken by projects, especially underground mining
mentioned above. projects. It is critical that the project manager pays particular
There are a number of powerful scheduling packages available attention to the schedule and drives key staff to familiarise
for developing the detailed project construction schedules, to themselves with, and contribute to the schedule development.
which the mine development schedules can be linked. These
scheduling tools allow all the resources required for the project Cost forecasting and control
activities to be included – from which they can generate detailed
The forecasting component of the cost control process is to
cost estimates for every aspect of the project.
regularly recalculate the final cost of each activity and of the
total project. This will allow corrective action to be taken in a
Scope control timely manner should it become apparent that costs are
The first step in the planning process was to define the scope and increasing above what has been approved for the project.
it is also the first vital step in the project control process. The cost control component involves controlling commitments
It is important to ensure that both the schedule and budget for by ensuring they do not deviate from what has been approved for
each activity incorporated into the project baseline control that activity, purchase or contract relating to the commitment.
document include contingency appropriate to the amount of It is vital for cost control to employ project orientated cost
engineering completed for that activity. Following compilation of control software rather than the common financial accounting
the baseline, it is then important to ensure that engineering is systems used by mining companies. The dedicated project
then sufficiently advanced prior to commencing that activity to control systems used by the construction industry allow
ensure that the scope is adequately fixed. If there is insufficient commitments to be tracked and costs to be related to project
contingency to start with or the scope is not fixed prior to activities. These systems are well integrated with the project
commencing work, then overruns are likely. schedules and budgets and link all components into the project
reporting process.
Once the project is underway, it will be a constant challenge to
prevent scope creep. Typical examples are metallurgists looking Escalation is one element of cost forecasting that has not been
for more bells and whistles in the process plant or mining an issue in the low inflation environment applying prior to the
engineers adding more excavations to the mine design. Scope current boom. However, it is now rapidly increasing and must be
creep can be prevented by implementing a strict change control considered separately to contingency when setting project base
process where the scope cannot be altered without formal line budgets. It will be a matter of judgement at the time as to
approval from the project manager. The project baseline should what is allowed. The author has heard anecdotally that some
then be updated with approved scope changes. projects are currently experiencing annual rates of ten to 15 per
cent escalation.
Schedule control
Progress reporting
Controlling time, ie the schedule, is the single most important
thing a project manager can do to bring a mining project in on Mining projects will usually issue daily, weekly and monthly
time and budget. In the author’s experience over numerous mine progress reports. Daily reports are one page documents
development and construction projects, if time is controlled then summarising safety and physical performance numbers.
costs will usually be within budget. Ongoing schedule control over Weekly reports will include the key performance data along
the course of a project is based on tracking actual physical with explanations and comments on progress, major issues,
quantities of work achieved on a weekly basis against the baseline highlights and a look ahead for the following week.
schedule. Typical physical quantities to be tracked may be:
The monthly report will be a comprehensive document
• mine development – linear metres, including sections on all key areas of the project summarising
• vertical development – linear metres, progress to date together with deviations from budget, issues,
concerns and corrective actions and a look ahead to the next
• major excavations – cubic metres, month. In addition to tables that summarise key data, the
• pipelines – linear metres, monthly report will include a range of S curves that graphically

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J LUXFORD

depict committed and actual costs and progress to date against The construction phase involves managing:
their baseline budgets and schedules. • planning, scheduling and reporting;
The project reporting process must ensure that:
• safety and security;
• there are no surprises,
• QA non-conformances;
• the current status is validated,
• site establishment;
• trends are explained, and
• construction execution;
• final costs and completion date forecasts are updated.
• cost control and reporting;
Contingency • procurement and logistics;

There are two ways of managing contingency – either on a • contracts administration;

package basis or in one combined pool. Irrespective of which • field engineering;
method is adopted, the contingency should be clearly shown in • environment;
the cost reports to support final forecast costs and to provide
traceability. There is a third method, which is to hide the • industrial relations;
contingency in the estimates where it cannot be seen by cost • site administration;
cutting owners.
• camp messing and accommodation; and
The advantage of the pool approach is that it minimises the
temptation to spend money that remains unspent in a budget • access control.
item. It can be very difficult at times to prevent particular scopes Depending on how the project is structured, some of these
from expanding to the value of the allocated budget, particularly functions will be managed by the owner’s team and some by the
when it is the owner’s general manager wanting to gold-plate implementation contractor. It is important that both teams
something because there is surplus money available in that item. possess adequate resources for the tasks they have to accomplish
A key aspect of contingency management is setting and that systems and procedures are in place to manage each of
appropriate contingencies in the baseline budget to start with. the functions in accordance with the owner’s requirements.
There are some high risk areas, particularly in underground
mining, that demand very high contingency levels. Activities that COMMISSIONING AND HANDOVER
have done great damage to the author’s contingency pool in the
past include declining through the weathered zone immediately The commissioning phase involves construction completion,
below the portal, and raise boring in weak rocks – in each case no-load commissioning, mechanical completion, handover,
because of ground control problems. commissioning and commencement of operations. It involves
extensive planning to address safety, environmental, contractual
Document control and operational requirements. Given the critical nature and extent
of this phase, a full time commissioning manager is usually
Document control is an important aspect of any project control appointed as early as practicable during the construction phase.
system. Mancanda (2006) stated that the Telfer construction Construction completion involves completing installation and
project generated 50 000 documents. Document control entails erection work. The phase is complete when all components of
the management of all relevant project-related documentation the completed system have successfully passed inspection and
either issued or received by the owner’s team in a way that testing to verify they comply with the contract. The only
ensures that material is readily available for ongoing decision equipment operation at this point is to check motor rotation.
making and that the history of events and issues is recorded.
No-load commissioning involves testing and verifying that all
Typical project documentation includes directions, diaries, equipment is ready to run, followed by operation of all
letters, faxes, emails, memos, reports, manuals, drawings and file equipment under zero load conditions. At the completion of this
notes received or issued by the owner’s team in relation to the phase, the plant has achieved mechanical completion and is
project in either hard copy or digital format. Current document ready for commissioning. The plant is ready for handover and is
management scanners and software make it possible to store all accepted by the owner. At this point, ownership is usually
project documentation in an easily retrieved format. In this transferred to the owner and the defects liability period
system, the original hard copy is kept in one chronological commences.
master file. Wet commissioning then follows with the introduction of loads
to the plant. In the case of a process plant this would involve the
CONSTRUCTION MANAGEMENT loading of process media and introduction of ore followed by:
Construction management is the critical phase of any project. • adjustments and minor modifications,
While all the prior studies and planning activities are necessary • process guarantee performance testing,
precursors to a successful project, most project costs will be
incurred during the construction phase. If this phase is not well
• completion of as-built documentation, and
managed, excessive delays, cost overruns and subsequent • final punch list completion.
performance problems may result. Final acceptance of the plant follows successful wet
The skills and experience required by the senior owner’s team commissioning.
members was discussed earlier. These individuals are the key to Specific allocation of responsibilities for the commissioning
successful construction management. While the systems and phases will vary depending upon the particular circumstances.
procedures are important, they cannot compensate for With turnkey, D&C or EPC contracts, the contractor may be
weaknesses in this area. Unless the project director and managers responsible for the entire process through to final performance
can provide effective leadership and decision making when testing. With process plants constructed under an EPCM
required, the project will suffer. A key role that they play is in the contract, the contractor will complete no-load commissioning.
mentoring and developing of younger engineers and supervisors Operations then takes responsibility for wet commissioning
to develop them into the next generation of project leaders. assisted by the contractors and owner’s team.

104 Melbourne, Vic, 16 - 18 October 2006 International Mine Management Conference

 PROJECT DEVELOPMENT AND CONSTRUCTION MANAGEMENT

THE END – HANDOVER TO OPERATIONS • the owner’s team is well led and adequately resourced;
Once construction and commissioning are finished, all that • competent staff, consultants and contractors are engaged who
remains is to complete the project close out activities. These will know the industry and understand what is being designed and
include: constructed;
• verifying that the project complies with the user requirement • the baseline budget and schedule is realistic;
specifications, • the levels of contingency and escalation are realistic;
• completing all QA checks, • the degree of front end loading is sufficient;
• ensuring warranty claim procedures are in place, • a thorough project execution plan is prepared;
• completing as-built drawings, • construction and commissioning plans are in place;
• completing operating and maintenance manuals, • effective project procedures are in place;
• settling and closing final accounts and all cost codes, • project control systems are appropriate;
• compiling the as-constructed schedule, • procurement is based on fair contracts;
• completing punch list items, • competent contractors are engaged;
• completing contractual obligations, • contracts are managed firmly but fairly;
• completing commissioning documentation, • thorough site investigation is done;
• completing operations acceptance documentation, • temporary facilities are adequate; and
• completing compilation into one final report of: • if contractors are in JVs, their systems are compatible.
• monthly reports,
• drawings and specifications, REFERENCES
• close-out activity description, Manchanda S, 2006. Presentation to AusIMM Perth Branch, 11 September.

• final cost and financial reports,

BIBLIOGRAPHY
• file and document index,
Australian Institute of Project Management (AIPM), 1995. Project
• asset register: Management Guide (Australian Institute of Project Management:
• completing the project close-out report, and Sydney).
Lock, D, 1996. Project Management, sixth edition (Gower: London).
• archiving project records. McCarthy, P, 1997. Management of feasibility studies, Workshop Course
No 141/97, Australian Mineral Foundation, Sydney.
KEY SUCCESS FACTORS Project Management Institute (PMI) Standards Committee, 1996. A
Guide to the Project Management Body of Knowledge (Project
Based on the project mishaps either directly experienced or Management Institute: Newtown Square).
observed by the author during his time in the mining industry, Stallworth, E A and Kharbanda, O P, 1983. Total Project Management
projects that thoroughly address the following issues are far more (Gower: London).
likely to be completed on time and budget and work as intended: The Australasian Institute of Mining and Metallurgy, 1997. International
• there is continuity of key staff through the project; Conference on Mine Project Development (ed: E Barnes) (The
Australasian Institute of Mining and Metallurgy: Melbourne).
• there is single point accountability for project delivery; Van Rooyen, B R, 1980. Negotiating a new mine, in The Black Mountain
• the ore processing and mine designs are adequate; Project Symposium, South African Institute of Mining and Metallurgy,
Johannesburg.

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