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MAKING THE MOST OF OUR

RESOURCESDELIVERING EFFICIENCY, SUPPORTING ENGAGEMENT AND MINIMISING RISK INDUSTRY DISCUSSION PAPER

Resourcing Australia is a discussion paper produced by Consult Australia’s Resources Roundtable, and made possible through the leadership provided by the following Consult Australia member firms:

Consult Australia thanks the following individual members of the Consult Australia Resources Roundtable for their generous contributions and authorship:

• Richard Fechner, Global Technical Leader - Energy & Resources, GHD

• Tessa Ogle, General Manager – Oil and Gas Division, Parsons Brinckerhoff

• Tim Wilkinson, Managing Director – Minerals & Industry, AECOM

• Paul Davis, Sector Managing Director – Resources, Hyder Consulting

• Sally Knox, People Manager, Global Mining & Metals, Sinclair Knight Merz

• Brent Woolgar, Managing Director, Lambert & Rehbein

• Patrick Fogarty, Director, Norman Disney & Young

• Jonathan Russell, Senior Advisor Policy & Government Relations, Consult Australia

The Paper was further peer reviewed by representatives of the following Consult Australia member firms: Arup, KBR, Opus, SMEC, Wave International, WorleyParsons Services.

Resourcing Australia is published by Consult Australia. It represents collective viewpoints for consideration by governments, community and industry stakeholders. The information contained herein does not necessarily represent the views of individual contributors or their respective firms.

© Consult Australia

Version 1.0 May 2014

Cover image: Pluto LNG Pluto LNG onshore gas plant courtesy of Woodside

Contents

A. Executive summary 2

1. Introduction 4

2. Securing better returns 6

2.1 Efficiency 7

2.2 Engagement 11

2.3 Risk 15

3. A discussion starter 19

About Consult AustrAliA

Consult Australia is the industry association that represents the business interests of consulting firms operating in the built and natural environment.

Our member firms provide design, project management, engineering, environmental, scientific, architectural, technology, legal, surveying and EPCM (Engineering, Procurement and Construction Management) services.

We represent an industry comprising about 48,000 firms across Australia, ranging from sole practitioners through to some of Australia’s top 500

firms. Collectively, our industry is estimated to employ over 240,000 people, and generate combined revenue exceeding $40 billion a year.

Almost a quarter of this revenue is in the resources (mining, oil and gas) sector.

Consult Australia is sought-after by policy makers who recognise the vital role of professional consulting firms in the built and natural environment sector, their contribution to the nation’s productivity, future prosperity, and standard of living.

Consult Australia’s advocacy work is supported by long-standing, productive relationships with business leaders, federal and state parliamentarians and the public service. Offering our members’ expertise and unique perspective, we are not just responsive to the business and political agenda, but set the agenda.

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AexeCutive summAry

This paper is for project owners, operators, and consultants in the mining, oil and gas resources sector.

It is a primer for discussion on three key factors:

• Efficiency.

• Engagement.

• Risk.

There is a wide range of global and local factors that affect the resources sector and these three factors above are the core that the consulting sector is set up to address.

Smarter procurement and new technologies can drive shorter-term efficiency. Long term gains will be won when there is cross-industry planning, construction, management and use of infrastructure. Labour is relatively scarce and its costs are high in Australia, so long term planning of projects in consultation with other users of labour—especially governments—are a big issue and one that will deliver huge cost-of-labour dividends. Achieving all of this is not easy, but the rewards make it worth striving for. The following are some questions we raise to provoke reflection on how the resources sector is meeting efficiency goals:

• Is the Australian workforce properly trained to manage complex projects?

• Is innovation really embedded in day-to-day operations?

• What would it take for resource and public infrastructure projects to be planned in tandem?

• Are owners prepared to sacrifice full control of infrastructure to ensure it gets built?

Community engagement to win the social licence to operate is one of the most important factors to securing better, and more stable, returns on investment. There is real value in taking a thoughtful, evidence-based approach to engagement and many resources companies are already very good at this. It is easy, however, to stumble when faced with coordinated opposition and once a social licence to operate is lost, it is hard to regain. The science and emotion of each project need to be balanced in messages to communities as they use this and other information sources to make informed decisions about what is in their best interests. There are some hard questions to be asked if we are to keep community engagement on a positive path:

• How do we recover unconventional gas in markets destroyed through ineffective community engagement?

• Why is debate on resources projects so emotional?

• Is NIMBY-ism a valid community policy?

• What works, and what has gone wrong, with the sector’s community messaging?

The minimisation of risk builds confidence in the potential for good returns on investment from resources projects. The many players can ‘go it alone’ or choose to instead share risks—and rewards—with several partners. Trust and the freedom to take calculated risks together will win out over the long term when companies communicate sooner, align incentives to perform, and create collaborative contracting partnerships. We must, however, ask ourselves:

• To what extent do producers, constructors and consultants trust each other?

• Is collaborative contracting just hype?

These are the issues that are raised over the following pages, and the issues that resources owners, operators and consultants are encouraged to discuss together.

Left: Goodwyn Platform Goodwyn A gas platform, North West Shelf Project, Western Australia courtesy of Woodside

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Pluto LNG Loading jetty, Pluto LNG onshore gas plant courtesy of Woodside

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1introduCtion

Consulting firms have a profound effect on the industries they serve, the communities they work in and the environment.

This paper is for project owners, operators, and consultants in the mining, oil and gas resources sector.

Although mineral production is often separated from oil and gas production both in economic discussions and corporate structures, both parts of the sector are focused on finding ways to safely and sustainably exploit Australia’s natural resources, and hence there are similar models that could be applied to each sector.

With our collective experience across a wide range of built environment projects, Consult Australia’s members are uniquely placed to partner with owners and operators to identify new opportunities to add value to existing projects as well as support the creation of new markets for investment.

For this to happen, we need to all work together. This doesn’t mean relinquishing control of projects and long-term strategies, but is an encouragement to owners and operators to bring all stakeholders together under one tent so that the best minds have the opportunity to demonstrate their expertise.

It is in the interests of all Australians to have a strong resources sector. It directly employs over two per cent of the nation’s workforce,i a figure that increases markedly when secondary employment is considered. In 2011/12, the sector provided over 60 per cent of all exports.ii It is a massive contributor to public revenue, stimulates regional growth and employment and drives advances in research and technology.

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A turbulent decade

The decade to 2013 was one of the most turbulent business environments since the Great Depression. During this period, Australia’s resources sector experienced unprecedented demand for output, extreme growth and investment in operations, which was followed by a sharp slowdown driven by economic and regulatory uncertainties, demand slumps and commodity price reductions. This turbulence was exacerbated by an unusually strong Australian dollar, slowing productivity, input cost rises and escalating regulatory, royalty and tax burdens.

It appears that we have marked the peak of the current mining ‘boom,’ with gas in its various forms as the commodity most likely to pull the resources sector through, not withstanding several significant challenges such as regulatory uncertainty and securing a social licence to operate. These and other global and local factors that affect asset productivity are described in figure 1 and discussed throughout this discussion paper.

Competitionfor Capital

Post GFCEconomics

Social Licenceto Operate

OperationalEfciencyDrivers

Global Commodity

Pricing

Global LabourPricing

Regulation

Asset Productivity

Figure 1: Asset productivity factors (provided by GHD)

A potted history of AustrAliA’s resourCes

Mining

Colonial Australia used coal from its earliest days and the gold rush of the 1850s was the country’s first ‘mining boom,’ bringing the first great influx of people dreaming of riches into Australia. For the 100 years following the gold rush, the mining sector was relatively quiet, though it did begin producing tin, copper, silver, lead and zinc and some iron ore. BHP, one of the best known Australian mining companies, was incorporated in 1885.iii

Geoscience Australia notes that there was a decline in mining activity in the first half of the 20th century, and that it was the lifting of wartime iron ore export controls in the early 1960s that sparked the development of the Pilbara Region’s iron ore deposits that kicked off the modern ‘mining boom’. Together with exploitation of new discoveries—bauxite, nickel, tungsten, rutile, uranium, oil and natural gas—production and export increased until Australia became the global resources power it is today.iv

Oil and gas

Australian petroleum was first discovered in Victoria in 1839, but it was not until 1886 that it was first sold from oil shale in the NSW Blue Mountains. Like mining, the industry developed slowly for about 100 years until the 1960s when production shot up.

In the 1960s, significant gas finds were made in the Surat Basin near Roma in Queensland, in the Cooper Basin in the north of South Australia, and in the Amadeus Basin west of Alice Springs in the Northern Territory. Barrow Island off the Western Australia coast, home of the Gorgon gas project, was off-limits to exploration due to atomic tests nearby, but bans were lifted in 1963 and oil production had begun by the end of that decade. The most significant production of the 1960s was in the Gippsland Basin off the coast of Victoria.

The 1970s saw new discoveries off the north west coast of Western Australia, and the 1980s and ‘90s brought discoveries throughout Australia, especially offshore Western Australia, in the Timor Sea and Cooper Basin.v

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2seCuring better returns

Despite the storm of issues that challenge businesses globally—the Global Financial Crisis (GFC), a slowdown in demand from China, reduction in levels of public investment, and uncertainty within the overall economic environment—the consulting sector is adapting to meet the needs of clients looking for new solutions. It has helped the resources industry remain a world leader in exploration, construction and production through a focus on efficiency, engagement and risk.

In 1964, writer Donald Horne described Australia as the “lucky country” in an ironic reference to the nation enjoying riches and stability despite a lack of effort, innovation or enterprise. Since then, Australia has worked hard to make something of that natural and historical luck. The current decade marks a new period where Australia can again either ‘rest on its laurels’ or take advantage of the changing global economic and political landscape to create new opportunities within Australia and abroad.

Australia may be minerals rich, but there are challenges for the continued operation and expansion of the resources sector. Some are external factors that are hard to predict or control: post-GFC economics and global commodity pricing being the most removed from our influence.

Others, while affected by and interconnected with global factors, are things that Australian businesses are able to influence:

• Operational efficiency drivers and innovation.

• Community engagement and the social licence to operate.

• Competition and risk.

Top: The Northern Missing Link portion of the Goonyella to Abbot Point Expansion

Project courtesy of CoalConnect alliance

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2.1 efficiency

Discussion questions:

Is the AustrAlIAn workforce properly trAIned to mAnAge complex projects?

Is InnovAtIon reAlly embedded In dAy-to-dAy operAtIons?

whAt would It tAke for resource And publIc InfrAstructure projects to be plAnned In tAndem?

Are owners prepAred to sAcrIfIce full control of InfrAstructure to ensure It gets buIlt?

As capital for new projects or upgrades dries up, organisations are constantly looking at ways of cutting costs—both operationally and in capital expenditure.

Smarter procurement

The experience of our membership has shown that best practice procurement leads to the best project outcomes, with the benefits enjoyed by all parties. These benefits can generally be realised through improved measures of cost, quality, time, innovation and risk and with lower levels of disputation.

There is, in general, a need for better training for managers to achieve the full potential of best practice procurement. One attempt to address this need was the 2012 establishment of the John Grill Centre for Project Leadership at the University of Sydney. It was set up to address Mr. Grill’s—former Chief Executive of Worley Parsons, and benefactor of the Centre—belief that the “track record of delivering [large projects] against the primary objectives of schedule, cost and quality is not good,” and that “the availability of appropriately skilled and experienced senior managers is a critical factor to improving project outcomes.”

There are a number of different elements to moving towards best practice procurement. Central to all of them is the level of involvement of the client, including the people responsible for procuring consulting services. The Scope for Improvement series of reports by Blake Dawson highlighted the importance of having the right skills in procurement teams. The best skills and experience mix would include a solid understanding of technical factors, insurance implications and good contracting. There must of course be a commitment to effective communication across all parties.

Disputes or cost increases often result from under-developed scoping briefs or background information that is provided to tenderers. Similarly, good consultant proposals can go a long way to alleviating this concern. The bottom line is that all parties should work together to avoid poor quality documentation that can lead to conflicting assumptions. Where extra consideration is given to the quality and content of project briefs, better quality services are provided.

Other issues that may lead to less desirable outcomes typically arise from the contracting phase of procuring work. An inappropriate delivery model is often used because it may have worked on a previous project or because it is incorrectly perceived to be a better way to allocate and manage risk. The project management and contracting model can be considered on a project-by-project basis.

The recently released AustRoads/ APCC Building and Construction Procurement Guide is one example of a general guide to help clients determine the appropriate delivery model for each project, although Consult Australia cautions that its use must be accompanied by proper understanding of the project in question, its unique requirements, and the ramifications of each decision made in regard to the procurement and delivery process.

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Aggressive contracting practices may, on face value, appear to deal with risk by allocating it to another party. However, aggressive contracting behaviour creates a circumstance more conducive to one party not participating in risk evaluation and management due to lack of ownership over the outcome. This is turn means less collaboration happens throughout the life of the project and also often serves to create uninsurable risks. All of these factors will lead to less desirable project outcomes.

New technologies

The increasing use of ‘innovation’ as a buzz-word means that we should carefully consider the definition of the word in the context of resource sector projects. It has a myriad of definitions but, in its simplest form, innovation is when original ideas are turned into new, commercially viable products or processes. This process is critical to the value that consulting firms are able to add to the delivery of products and services.

There are also caveats that apply to innovation. With innovation comes risk so, for innovation to be applied, the risks need to be understood and managed. Innovation also needs to be appropriate to the outcome sought, and client needs will determine when innovative solutions are valued.

As a nation, Australia has a mixed experience with innovation. The Global Innovation Index 2013 ranks the country at 11th for innovation inputs, but just 32nd for innovation outputs (with an overall ranking of 19), and an innovation efficiency ratio that puts us at 116th in world. In other words, as a nation, we are well set-up to be innovation leaders, but miss a lot of opportunities to capitalise on this foundation.

This gap between input and output is an opportunity for Australian companies to fill. The real driver is the pursuit of market leadership and dominance.

There is strong evidence that companies that pursue innovation do better. According to the Department of Industry’s Australian Innovation System Report – 2012, compared to businesses that don’t innovate, innovative Australian businesses are also:

• 42 per cent more likely to report increased profitability.

• Three times more likely to export and 18 times more likely to increase the number of export markets targeted.

• Four times more likely to increase the range of goods or services offered.

• More than twice as likely to increase employment.

• More than three times more likely to increase training for employees.

• More than three times more likely to increase social contributions such as community enhancement projects.

Resources companies are strong innovators in their own right and collaborating with consultants and others in their project pipelines will have a multiplier effect. The secret is to build very long term relationships with trusted consultant companies and provide the space to experiment on the way to innovate.

Building infrastructure

Companies are driven by their vested interests, which at times makes it harder to share and collaborate across infrastructure creation and access. Common infrastructure solutions such as power and rail that are often promoted by consultants are not of great interest unless they materially improve the asset owner’s position, and can leave owners without the control they need to make investment decisions.

There may be a division of views between large and small resource firms. Small companies would want there to be more sharing of resources (i.e., build a railway line and let lots of companies use it) whereas larger companies (or the ones who get in first) would often prefer to have sole use of such infrastructure.

The process to create a White Paper on Developing Northern Australia is an opportunity to set a new framework that encourages public and private infrastructure investment in the region to carry the resources sectors forward.

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Long term planning

The age of the mega project is upon us. These projects are popularly identified by being worth more than $1 billion. They are complex and require the intersection of private sector, government and the community at scales rarely seen. Managing such projects takes a special skill set, and Australian companies are poised to take advantage of resources mega projects across the world.

Recent mega projects like Gladstone LNG (GLNG) or Gorgon gas project, and iron ore projects like BHP Billiton’s Rapid Growth Project 5 (RGP5) or Roy Hill, highlight more challenges. The skills needed are hard to find and their reliance on overseas providers encompassed trades and labourers as well as high-end scientific, design and other technical consultancy services.

Mapping out the mega-projects of the next decade and next generation will help project owners and service providers to plan ahead. The right mix of resources and non-resources projects will keep the workflow smooth, rather than pushing up peaks of unsustainable demand that are followed by troughs of joblessness, economic slowdown and significant downsizing of organisations and associated loss of skills. Such peaks and troughs also add significant costs during growth periods due to the burdens associated with recruiting and training a new workforce all over again.

Project owners need to be able to respond to market conditions, and governments to infrastructure needs, and there is an opportunity to map the short, medium and long term needs of each. This would aid workforce planning, especially with regard to training, recruitment and temporary skilled migration needs.

Regulatory hurdles: supporting the project pipeline

Regulation is red tape if it is inefficient or leads to perverse outcomes. Industry has a role to play in informing governments of ways to improve regulatory processes. For resources projects, the most pressing is environmental regulation. The industry agrees that regulation is essential, but in its current form it tends towards red tape (which more recently is frequently referred to as green tape). Industry can help untangle the regulations to ensure that the environment is protected through robust and efficient regulation whilst permitting sustainable and well-founded projects to proceed with minimum up-front cost and time investment.

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Case study: pacific national nebo train maintenance facility, nebo, Queensland

Pacific National operates bulk and intermodal services throughout Australia and, in 2010, the company proposed the construction of a provisioning and maintenance facility for trains approximately 10 kilometres south of Nebo. This facility is purpose-built to support the operations of locomotives and rolling stock.

Features and innovations

With the capacity to service up to 25 coal trains over a year, the new facilities enable the provisioning and maintenance of Pacific National trains to ensure reliable and efficient operation, including refuelling, routine inspections and wagon and locomotive maintenance work.

The facility’s remoteness, coupled with its requirement for access to water for proper functioning, posed a significant design challenge. The consulting team designed a water treatment and reuse system that enables approximately 85 per cent reused grey and black water and results in the facility being fully self-sufficient for its water requirements. This outcome has been both environmentally and financially advantageous.

The remote location also provided the impetus for the development of a fully integrated 3D Building Information Model (BIM) which included modelling and information from all team members. The common model enabled the design of all aspects of the project from the alliance offices in Brisbane. It was fully geo-referenced which enabled the team to provide data sets to the site for the placement of elements of the project on site via GPS technology, removing the need for traditional on-site setting out and calculations. The result was a significant improvement in accuracy, delivery speed and coordination.

A nexus of advanced procurement strategy, broader exploitation of the innovative DNA of resources sector players, and longer term planning and collaboration for major infrastructure development—all wrapped in a clear and stable regulatory framework—is a goal worth striving for. If achieved, there will be a transformational improvement in sector-wide efficiency of operations.

Pluto LNG Loading jetty, Pluto LNG onshore gas plant courtesy of Woodside

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Discussion questions:

how do we recover unconventIonAl gAs In mArkets destroyed through IneffectIve communIty engAgement?

why Is debAte on resources projects so emotIonAl?

Is nImby-Ism A vAlId communIty polIcy?

whAt works, And whAt hAs gone wrong, wIth the sector’s communIty messAgIng?

Although in significant production since the 1960s, oil and gas is popularly seen as a new market. The unconventional gas subsector, especially in Queensland, is the major development in resources. It could be for NSW as well if the regulatory, scientific, community and extraction arms of the resources sector work together to develop sustainable policy structures based on sound scientific principles. In Western Australia, the increasing water depth at offshore field locations, or the high cost of developing marginal, shallow water fields, are significant hurdles.

Oil and gas companies face the new challenge of developing the technical aspects of onshore oil and gas whilst building the case for development with local communities. Their support will enable the other key pieces to fall into place: public policy and regulation will be based on science rather than emotion, and land access will be achieved collaboratively.

Social licence to operate

A ‘social licence to operate’ is the elusive, new ‘must have’ in corporate environments. There is no accepted single definition and it is often expressed in relation to other terms such as ‘corporate social responsibility’, ‘community acceptance’ and ‘reputation’. However, ‘social licence to operate’ is rapidly becoming a widely recognised and used term, understood as an imperative to long term business continuity and profitability. A social licence to operate is difficult to obtain and maintain and yet easy to lose and, once lost, almost impossible to regain.

The concept of having a social licence to operate stems from the need for social aspects of a project to have a form of return on investment to compete with other boardroom and community considerations.

Juxtaposed against the clarity of technical absolutes, consultation covers the more intangible elements of a project: political sensitivities, community and stakeholder opinion, potential impacts and so forth. Companies are finding that they meet traditional risk mitigation measures relating to financial loss, legal obligation and personnel safety, but their projects are also being questioned on a social level. Companies must now prove their social mettle and reduce their social risk by gaining the acceptance and support of the communities impacted by their project. Local communities have the ability to hinder, delay or, in severe cases, stop programs from happening.

2.2 engagement

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Infrastructure initiatives across the power, energy, water and mining industries have wide consequences for the local community in which they occur and can incite powerful responses from it if they do not gain community blessing. An example is unconventional gas development in NSW. To guarantee successful project delivery, it is imperative to gain a social licence.

Valuing better engagement: supporting the social licence to operate

Engagement is the process by which government, organisations, communities and individuals connect in the development and implementation of decisions that affect them. Engagement is used as a tool to achieve outcomes, develop understanding, educate and/or agree to solutions on issues of concern.

More than ever, members of our society expect to be engaged on matters that impact them or in which they hold an interest. Engagement activities that are specifically tailored for the project from its earliest stages through to completion are essential to minimise the potential impact of stakeholder objection to projects. An example could be the better integration of stakeholder engagement into the environmental approvals process. To enable this, engagement must be an appropriately resourced and integrated part of project management with the support of senior managers from across the project disciplines.

Failure to manage stakeholder expectations can bring projects to a grinding halt.

There is no ‘one size fits all approach’ to engagement. Achieving effective engagement is about tailoring the approach to the situation at hand. Engagement services take a number of forms including but not limited to: technical review and advice, planning, delivery, issues management, strategic communication, capacity building, reputation management, evaluation and monitoring, training, facilitation and other support functions.

Ultimately, effective engagement aims to add value and provide better outcomes in relation to policies, programs, services and projects.

Top: LNG tanker at loading terminal LNG (liquefied natural gas) tanker at the Karratha gas plant loading

terminal, Western Australia courtesy of Woodside

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Case study: CoalConnect’s Responsible Rail Construction in Central Queensland vi

A combination of strategic and sincere stakeholder engagement was required to overcome the challenges faced by rail infrastructure project, CoalConnect. Involving the construction of 69 km of new rail line through grazing land and upgrades to the existing line that passed through the regional town of Collinsville, the project affected many stakeholders.

Collinsville was already raising concerns about train noise, dust and vibration and the existence of fly-in fly-out (FIFO) workers in their community. CoalConnect’s project would ultimately increase the number of trains and labour shortages meant a predominantly FIFO workforce was required.

CoalConnect gained stakeholder support and made Collinsville a ‘home away from home’ by:

- speaking first-hand to stakeholders to understand and manage project impacts

- providing timely information

- engaging adjacent landholders in design and construction decisions, benefiting their property operations and the project

- ensuring commitments to stakeholders were documented and fulfilled

- putting in place regional employment and investment policies

- implementing a community and environment program that was guided by the community.

CoalConnect’s success is evidenced by:

- maintenance of the project’s social licence to operate contributing to on time project delivery

- landholder agreement that CoalConnect’s promises had been fulfilled

- positive community feedback about CoalConnect and the legacy projects that would continue to benefit the community

- absence of negative media coverage

- client’s satisfaction

- pride the project team holds in its achievements.

The CoalConnect project alliance comprised of Aurizon, Leighton Contractors, GHD and KBR.

Modern communities are better connected to the issues that affect them, and have access to more information, than ever before. This empowers them to make informed decisions about what is in their best interests, and it is up to the resources sector participants to recognise, respect and respond to this changed dynamic.

Left: Western Legend Western Legend seismic exploration vessel courtesy of Woodside

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2.3 risk

Discussion questions:

to whAt extent do producers, constructors And consultAnts trust eAch other?

Is collAborAtIve contrActIng just hype?

No single organisation or industry can provide all the intellectual capital or labour to match speciality skills or peak labour demand in what is now a truly global market. In this market, collaboration is critical.

Sharing knowledge, risk and reward

The consulting sector recognises the value of working closely with infrastructure owners. Our experience shows that arrangements where consultants are embedded in client delivery teams encourage knowledge sharing and cooperative efforts, and this allows benefits to flow between delivery components (e.g. design, procurement, construction).

A shared delivery timeline, that considers market requirements, aligns incentives and encourages value management. Appropriate time spent on planning and design can significantly improve constructability, providing engineering and delivery services that reduce the whole-of-project costs.

Aligned incentives result in overall project cost reductions that can be shared between client and consultant if each party is sufficiently engaged, motivated and contractually obliged to seek a best-for-project outcome.

Dusk shiploader photo courtesy of Woodside

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Collaboration between consultants and clients

Resources companies continue to look for cost reductions and, now more than ever, are demanding excellent value for money from their investments. There are two main aspects of achieving this: asset lifecycle cost and project delivery cost.

There is a perception from industry that projects are too often delivered late, over budget and not to quality standards. Observations suggest there has been limited change in recent years and the area is ripe for improvement.

The boom exploded costs

There is a view in the broader resources sector that Australian consultants have become inflexible and relatively expensive, in comparison to a traditional reputation for flexibility and aptitude.

Skills shortages and a resources sector-wide willingness to pay a high price for those skills created financial incentives for professionals to move quite swiftly from employer to employer. As well as extraordinary wage costs, this led to a good broadening of, but loss of depth in, experience and capability.

Cooler business environments are an opportunity for employers to regain control. Consultancies and those who work in them are now combining their breadth of experiences with competitive vigour to regain a reputation for flexibility.

Defining and delivering success

Defining success for a project crystallises priorities and strategic drivers. It forms the basis of conversations about shareholder value, program performance, and what it takes to meet targets.

Across industries and sectors, there are common themes to what drives success:

• Investing in projects that deliver on a defined business need.

• Effective use of capital.

• Efficient use of capital.

• Delivering new capability and capacity to meet future demands.

• Balancing project types (maintenance and investment).

• Measuring benefits and increased shareholder value.

To manage their portfolio of projects, owners must ensure that the right infrastructure investment decisions are made, the timing of those investments is justified and programs are optimised and delivered efficiently so that the planned benefits are realised.

There is a renewed focus on portfolio management, project delivery and asset management, especially by using innovative contracting strategies.

Portfolio management is about enabling better decision-making by monitoring, tracking and recording the benefits realised from the operation of past projects, and using this information to prioritise opportunities.

With their multi-disciplinary knowledge and experience, consulting companies are well positioned to provide portfolio management and project delivery advice. They also contributes to this phase of the asset lifecycle by identifying possible risks and establishing mitigation strategies.

Developing tailor-made partnerships to add value

Developing capability and capacity to sustain an industry is a medium to long-term activity. This requires several factors to be addressed, including the education and training of both professional and trade based resources. The ability for those resources to work in the industry and develop and maintain skills, and the sustaining of that human capital are critical to meeting long-term skills needs.

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As with developing the intellectual capital in any business, all companies in the resources sector require project and operational support outside of their own staff payroll to sustain and grow their businesses. There are several typical ways that this has been undertaken:

• Engaging contract staff for filling short term positions.

• Engaging delivery teams to deliver growth projects (e.g. via EPC and delivery contractors).

• Outsourcing operations to service providers.

• Engaging consultants to support growth or operations tasks.

Each of these resourcing strategies can provide a varying range of benefits, but the best solutions are provided where project and operational knowledge is not only transferred by documentation and systems, but supported longer term by local knowledge and availability of ongoing support.

Best project delivery and sustainment methodologies are great starting points, but sustainable practices will only come when they can be applied and tailored to match each organisation’s culture and requirements.

Best value can come from working with clients to test their real infrastructure and operational needs, audit the performance of their assets and determine the optimal needs-based solution. Professional engineers need to ensure that short term operational constraints do not limit future operational flexibility by running to ‘failure mend’ and ‘make do’ attitudes.

Collaborative contracting

Collaborative contracting is the generic title given to contracting practices whereby the parties work together to achieve a common goal. Owners want flexible approaches and this is one structure for sharing knowledge to developing tailor-made partnerships—especially when there is limited owner capacity or high risk.

North Rankin A Platform courtesy of Woodside

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Consult Australia has long supported and promoted the use of relationship or collaborative contracting as a method to avoid common project pitfalls, and as a valuable tool to deliver projects to the benefit of all participants. We respect the principles on which relationship contracting has been built, and has evolved to be an increasing component of our industry’s business over the last fifteen years.

Alliance contracting is just one form of collaborative contracting which has been taken up successfully in Australia in recent years leading to more efficient project delivery, effective risk management and less disputation. It must be acknowledged that alliance contracting is not a cure-all—and is just one method of delivering value for money on projects—but must be tailored for the project at hand.

These principles should not be restricted to any one type of contracting however, and opportunities to reduce the adversarial nature of ‘design and construct’ contracting should also be considered by legal experts advising clients in contract law.

Traditional design and construct contracting in Australia is often inherently adversarial and competitive with high levels of disputation and associated increased costs and delays. With increasing project complexity and the use of tools and systems such as Building Information Modelling (BIM) and Integrated Project Delivery (IPD), it is increasingly important to build collaborative arrangements between all parties to a project.

This is not about owners relinquishing control, but emphasis should shift from defensive risk allocation, to strategies for fair risk allocation, and shared goals for mutual advantage. In part, collaboration and trust in traditional contracting can be built through fairer contract terms, but improved communication, early engagement and best-practice procurement generally all will support a less adversarial contracting environment. This improved collaborative environment will work to the benefit of all parties to a contract, and not just the consultant.

Photo courtesy of Woodside

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3A disCussion stArter

This Consult Australia discussion paper has presented a range of issues and questions that we recommend the wider resources sector considers together.

Natural resources are extracted by companies that make enormous investments and take great risks, and there are emerging opportunities and challenges, and more ways to add value to operations.

We end with a reinforcement of the consulting sector’s central message: if viewed as a collaboration—and collaboration is the essential ingredient—between resource owners, operators and consultants, the future is bright for the resources sector.

Consult Australia invites you to join it as the issues are explored and promoted. We will do this in public forums, private discussions and partnered advocacy. Our aim is to build a message that speaks clearly and with authority to meet the challenges and take the opportunities of the next decade.

The Northern Missing Link portion of the Goonyella to Abbot Point Expansion Project courtesy of CoalConnect alliance

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References

i Australian Workforce and Productivity Agency, Resources Sector Skills Needs, Report 2012, Common-wealth of Australia, p13, and Australian Bureau of Statistics, 6202.0 - Labour Force, Australia, May 2012.

ii Bureau of Resources and Energy Economic, Resources and Energy Statistics, Annual 2012, Contribution to Australian total exports, by sector Balance of payments basis, Commonwealth of Australia, p6.

iii BHP Billiton, BHP Chronology. Available at: http://www.bhpbilliton.com/home/aboutus/ourcompany/Docu-ments/2013/BHP_Chronology_March%202013.pdf.

iv Geoscience Australia, History of Australia’s Minerals Industry. Available at: http://www.australianminesatlas.gov.au/history/index.html.

v Victorian Department of Environment and Primary Industries, History of Petroleum Exploration in Victoria. Available at: http://www.dpi.vic.gov.au/earth-resources/oil-gas/history.

vi Case study provided by Cindy Hammill, Stephanie Williams and Rebecca Dewar at KBR.

Natural resources are extracted by companies that make enormous

investments and take great risks, and there are emerging opportunities and challenges, and more ways to

add value to operations.

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