Project Development and Construction Management
J Luxford1
ABSTRACT
Successfully managing project development and construction has often
been a challenge in the mining industry. This is reflected in the number of
projects that have taken longer to build, exceeded their budgets and then
struggled to achieve the performance targets so confidently predicted
beforehand.
This paper outlines the fundamental elements of project management
necessary to deliver mining projects on time and on budget, and
performing as originally intended. It looks at areas such as the study
process, project planning, team selection and structure, project controls,
types of contracts used and approaches to contract management.
INTRODUCTION
Delivering projects on time and budget that also work as
intended has challenged the mining industry since time
immemorial. History is littered with projects that ran over time
and budget and either never quite achieved their targets, or took
years to achieve them.
Rather than focus on the reasons for project shortcomings, this
paper instead outlines what needs to be done to ensure those
shortcomings do not arise. The key areas examined are:
• studies and project approval,
• establishing the project team,
• project execution planning,
• engineering,
• procurement and contracting,
• project controls,
• construction management,
• commissioning, and
• handover to operations.
Space does not permit a discussion of particular project
mishaps that have eventuated when these fundamentals were
overlooked. However, the reader can be assured that there are
many tales of woe that have befallen project managers who
neglected these fundamentals.
FEASIBILITY STUDIES AND APPROVAL
The first stage in the life of any project is the feasibility study,
followed by project approval and funding commitment. In order
to establish the financial, technical, social and environment
feasibility of a project, the study process must produce:
• bankable ore reserves that satisfy the project financiers;
• mining, process plant and infrastructure designs that deliver
the required saleable quantities of product at the correct
specification;
• procurement and construction budgets and schedules that are
realistic and contain adequate contingency;
• cash flows that are attractive to financiers; and
• social, environmental and community impacts that are
acceptable to all stakeholders.
1. FAusIMM, Principal, Luxford Mine Management, PO Box 1190,
Booragoon WA 6154. Email: jluxford@luxford.com.au
International Mine Management Conference Melbourne, Vic, 16 - 18 October 2006
The extent of engineering design, costing and scheduling
detail in the feasibility study will vary depending upon each
project owner’s policies and the urgency with which they want to
get the project into production. Major mining houses that are
increasingly risk averse may complete at least 50 per cent of the
engineering design for the project prior to signing off on the
feasibility study. On the other hand, when a project is being fast
tracked, engineering may only be completed to general
arrangement levels without any detailed design.
The study process has several steps from the initial ore
discovery to the final approval to proceed with the project. These
steps, in order of increasing duration, cost and level of
confidence, usually include:
• scoping study to determine if the project appears to be
feasible and to generate options for further study,
• prefeasibility study to evaluate options and determine which
mining and metallurgical treatment processes are best for the
project, and
• feasibility study to optimise the mining and metallurgical
process design and complete basic engineering and
infrastructure design.
The scope, duration and cost of each phase will depend on the
size of the potential project and the project’s owner. At one
extreme, small mining companies with low tonnage projects may
select the options during the scoping study and eliminate the
prefeasibility study step. If the project is equity funded, there
may be no external review at all. If the project is debt funded, the
debt providers will commission an independent expert review of
the study to verify that the project will repay the debt funding.
At the other end of the spectrum, a major global mining house
may spend a year or more on both the prefeasibility and
feasibility stages, with major internal reviews of each phase to
independently verify the validity and robustness of the inputs to
the study and the conclusions drawn from it.
Major mining companies have investment process manuals
detailing all aspects of feasibility studies. These companies can
produce feasibility studies running to 20 volumes or more. On
the other hand, small mining companies and their financiers may
be satisfied with a feasibility study comprised of only a few
volumes.
The ultimate aim of the study process, once technical and
financial feasibility has been demonstrated, is to produce a base
line project execution plan (PEP) that defines, scopes, schedules
and budgets the project. The schedules and budgets must be in a
format that the project execution team can use to manage the
project. If they are not, the team will either struggle to control the
project, or more likely, develop their own schedules and budgets.
When this happens, it will be difficult if not impossible to
reconcile project outcomes back to the original study,
particularly if the project has run over time and budget and the
scope has changed.
PLANNING AND ESTABLISHMENT
Implementation strategy options
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
project from an approved study to a producing mining operation.
The options include:
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1. engaging a project management or engineering, procurement
and construction management (EPCM) contractor to manage
all of the engineering, procurement, and construction;
2. dividing the project into areas, with some managed by the
owner’s team and other areas managed by an EPCM
contractor; or
3. managing the entire EPCM process with the owner’s team.
The EPCM option is currently the most common project
implementation approach taken by major mining companies in
Australia.
According to Manchanda (2006), Newcrest took the Option 2
approach recently with the construction of the Telfer project. The
Telfer project involved a very large process plant which was
managed by an EPCM contractor while Newcrest managed the
mine development and various infrastructure packages.
The best example of Option 3 was Placer Development who
developed one of the best ‘in house’ major mining project
development teams that the author is aware of. This team
managed all aspects of Placer’s project development around the
world over a long period of time and had one of the best records
in the industry for delivering projects on time and budget.
BHP Billiton’s Cannington mine development project in the
late 1990s is another example of the Option 3 approach. In this
case, there were separate teams managing the underground mine
development and the surface construction areas, albeit with
teams comprised of individuals or small teams on contract to
Cannington.
In the past, most Australian mining companies managed their
mining projects with their own salaried employees. The current
trend is for mining companies to employ the project director as a
salaried staff member and also the statutory mine manager if it is
a mine development project. Other than these key positions,
many of the other key project team roles will be filled by
specialists from outside the mining company.
Creating the owner’s team
There are a number of common threads in all the successful
projects observed by the author over time. They all revolve
around people and include:
• a strong project director, or project managers reporting to the
director, with extensive project management experience who
understand what is being designed and constructed and
provide effective leadership to the project;
• simple team structures and clear authority and accountability
for all team members;
• competent engineers and supervisors on both the mining
company’s and the contractors’ teams; and
• good working relationships based on mutual respect and trust
between the project team and the contractors to the project.
Selecting a project manager
Anyone who manages major mine development and construction
projects, especially in the underground environment, will be
called up to exercise judgment in the following areas:
• mining and mine management – knowing how things get
done in the mining environment, understanding the culture,
knowing what can go wrong, especially in the geotechnical,
groundwater and ventilation areas and especially
understanding the safety and statutory requirements, issues
and how to manage them;
• contract administration – knowing how both mining and
construction contractors work in the mining environment, the
issues they face and how to manage the relationship with the
98 Melbourne, Vic, 16 - 18 October 2006
contractors and the issues and most importantly, knowing
what the contractors are, and conversely are not entitled to
contractually; and
• mining project management – knowing how to plan and
manage mining projects, especially the eternal triangle of
time, cost and quality.
Critical situations will inevitably arise where the project
manager must bring all three of the above skill sets to bear in
order to make effective decisions that minimise the:
• time and costs of delays,
• risks of contractual disputation, and
• risks of compromising the quality expected of the project.
In situations where the project manager lacks skills and
experience in one or more of these critical areas, it is vital that
appropriate support and coaching is available to the project
manager. If this support is not available when needed, the
probability of time and cost overruns are very high.
In addition to the above management, technical and practical
skills, there are a wide range of ‘people management’ skills and
attributes that a project manager must possess. These will
normally develop as a successful manager progresses through
operational and project management roles.
The author observed one particular mine development project
where the project manager came from a project engineering
background with no experience in, or understanding of, mine
development. When geotechnical problems arose, they were not
effectively dealt with, which resulted in years of litigation.
Selecting the project owner’s team
The project owner’s team members may be employed or
contracted directly by the mining company or through a labour
hire company or a project management or engineering service
providing company. If the project does not have a mining
component and only involves civil, mechanical and electrical
work, the entire project team, except for the project director, may
be provided by a specialist project management company.
Requirements for project team selection include:
• knowledge and experience in what is to be designed and built,
• demonstrated track record in similar projects,
• honesty and integrity,
• intellectual and practical ability, and
• ability to work well in a team.
While many project management texts specify an extensive
range of criteria that team members should possess and how they
should be recruited, the reality is that many successful project
managers have a loyal team that follow the manager from one
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
successfully deliver projects.
Owner’s team size
The owner’s team size required to successfully deliver a mining
project will vary with the size of the owner and the project. Large
mining companies can sometimes create large project
management bureaucracies that impede rather than assist project
management. Conversely, companies of all sizes can fall into the
trap of under-resourcing project management teams. This is most
often seen in the management of mine development projects,
especially single entry declines where the owner’s team may
consist of as few as one engineer and a clerk. The author visited
one major overseas underground mining project where the
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 PROJECT DEVELOPMENT AND CONSTRUCTION MANAGEMENT

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
Planning for temporary facilities is another area that is often
inadequately addressed in the PEP. Temporary facilities for the
site implementation phase may include:
• construction power and distribution;
• compressed air distribution and reticulation systems;
• laydown areas;
• refuse removal;
• waste management;
• ablution facilities and sewage treatment;
• borrow pits;
• fire-fighting facilities;
• project store and warehousing;
• radioactive materials storage;
• fuel storage;
• maintenance facilities;
• security fencing, gates and offices, access systems;
• water supplies;
• communication facilities;
• construction offices for the owner’s team and implementation
contractor;
• site access infrastructure;
• camp; and
• furniture and equipment.
Projects will almost inevitably be disrupted and delayed if
temporary facilities are not properly planned for in the PEP.
Temporary facilities that will cause problems if inadequate
include:
• poor camp facilities causing labour unrest,
• insufficient camp rooms delaying contractor build-up,
• inadequate communications facilities disrupting all aspects
of the project,
• lack of suitable material from borrow pits affecting earthworks,
• lack of water supply limiting many activities,
• inadequate workshops affecting contractor performance and
safety, and
• dry-weather roads preventing site access in wet periods.
In the past, if temporary facilities were found wanting, they
could be quickly augmented to overcome the problem. In the
current boom conditions, this is no longer the case because none
of these facilities are readily available and have long lead times
to procure. For example, if a project is established with
insufficient camp accommodation rooms, it will be facing a wait
of perhaps six months to obtain additional rooms. Similarly, if
the water supply is inadequate, there may well be a wait of three
to six months to obtain a drill rig to drill more water bores. The
consequences of poor planning for temporary facilities will be
cost overruns and delays.
ENGINEERING
The extent of engineering required after the project has been
approved will depend on how far the engineering was taken
during the feasibility study. Depending on the particular
company and the project, engineering could be anywhere from
20 per cent to 50 per cent complete.
100 Melbourne, Vic, 16 - 18 October 2006
Basis of design
The first task in managing the engineering phase is to prepare a
basis of design document setting out the owner’s requirements in
detail. The document will form the project specification baseline
and define the user requirement specifications and minimum
design requirements for each phase of the project.
Engineering management
A key task for the owner’s team in managing the engineering
phase is to agree the following with the engineering contractor:
• list of deliverables,
• schedule for deliverables handover,
• engineering team staffing,
• design office control systems,
• design office procedures and workflows,
• design standards,
• drawings and specifications format,
• drawing and equipment numbering,
• CAD systems, and
• design office and operations interface.
The critical item in the above list is defining the list of
deliverables and the schedule for their handover. Major projects
have been known to suffer severe overruns when the engineering
deliverables were not adequately defined and scheduled.
Depending on the size of the project, the owner’s engineering
team may take up residency in the engineering contractor’s office
and may need to review, audit and monitor the engineering
functions to ensure the contractor complies with their
commitments under the items listed above.
In order for the engineering contractor to achieve their target,
the owner’s engineering team must in a timely manner:
• provide user requirement specifications,
• examine and approve concepts and designs,
• review and approve equipment selections, and
• approve standards.
If the owner’s team is not disciplined in its approach to
defining the user requirement specifications and design concepts
for each aspect of the project, there may be significant
re-working of engineering designs until the owner’s team works
out what it actually wants.
In addition to timely reviews and approvals, the owner’s
engineering team is responsible for:
• delivering the agreed scope in compliance with user
requirements,
• document control,
• commissioning support,
• engineering project controls and work flows, and
• reviewing and approving as-built drawings and maintenance
manuals.
Engineering deliverables
Deliverables from the engineering phase may include:
• final concept design and option selection,
• design calculations and sketches,
• piping and instrumentation diagrams,
• single line electrical drawings,
International Mine Management Conference

• general arrangement drawings,
• detailed drawings,
• bills of material,
• standard and detailed specifications,
• risk assessments,
• hazard and operability studies,
• hazard analysis studies,
• as-built drawings, and
• maintenance manuals.
Project – operations interface
It is the owner’s team’s responsibility to ensure that all interested
parties, ie, operations personnel, area project managers, etc are
involved in the design process throughout the various phases of
concept, prefeasibility and feasibility. This input for operability
should be downgraded at the completion of the feasibility study
and should not be allowed to continue into the project
implementation phase as this may lead to serious time and cost
overruns on the project.
PROCUREMENT AND CONTRACTING
Contracting options
Within the project delivery strategies previously discussed, there
are a range of options available to both EPCM contractors and
owners for procuring individual parts of a major project. The
most popular options are described below.
Build, own and operate (BOO) and transfer (BOOT)
The supplier totally funds, designs, constructs, commissions and
operates the asset. In BOO contracts, the supplier retains
ownership of the asset and in BOOT contracts, the supplier
typically will own and operate the asset for ten to 20 years then
transfer title to the owner. Such contracts are usually based on
take or pay for the product. This arrangement has been used for
power stations on remote mine sites with payment based on unit
rates for electricity supplied.
Turnkey
The implementation contractor provides total process and
engineering design, construction and commissioning of the
project to requirements specified by the owner. This arrangement
has been used for process plants where the process risk is low. To
the author’s knowledge, it has only been used once for the
delivery of a base metals mine and process plant. The contractor
is paid a fixed amount subject to satisfactorily completing
performance tests.
Engineering procurement and construction (EPC) or
design and construct (D&C)
EPC and D&C contracts are similar in that the owner provides
the process design and the implementation contractor undertakes
the design, procurement and construction of the project. The
contractor is paid a fixed price progressively for work completed;
with final payment on satisfactory completion of performance
tests.
Cost plus – partnering and alliancing
The contractor provides some or all services required to deliver
the project and is paid for all personnel and equipment hours
International Mine Management Conference Melbourne, Vic, 16 - 18 October 2006
PROJECT DEVELOPMENT AND CONSTRUCTION MANAGEMENT
expended plus fixed overheads and margins. In boom conditions
when contractors are in great demand, cost plus arrangements
tend to be used widely.
Fixed price
Fixed price contracts are used for equipment supply and may be
used for plant construction where the owner provides the design
if contractors are willing to tender on that basis. Many owners
are finding that contractors will not bid for construction work on
fixed prices and will only accept cost plus arrangements.
Schedule of rates
Schedule of rates contracts were the most frequently used form
of contract for surface and underground mining prior to the
current boom. As with construction contracting in the current
boom, mining contractors are increasingly unwilling to enter into
fixed prices or schedule of rates contracts.
Contracting strategy and management
The contracting plan prepared as part of the project execution plan
will have detailed the contractual strategies and structures to be
employed to deliver the project. In particular, it will have defined
the scope of work for the owner, implementation contractor(s),
vendors, construction contractors, and the contractual and
commercial interrelationships between each participant.
The contracting plan must take account of the following
project aspects:
• scope of work for the project and identifiable work packages;
• level of accuracy of the design criteria and existing engineering
information;
• overall risk profile of the project;
• key commercial terms that are important to the owner (eg
lump sum, cost reimbursable, unit rates, indemnities and
warranties, performance testing);
• time frame for the project and the need for ‘overlap’ between
engineering, procurement, construction and commissioning;
• method required to finance the project during the execution
and operations phases; and
• skills and experience of the owner’s team (eg managing
interfaces).
At a detailed level, the contracting plan must specify criteria to
guide the owner’s team in deciding whether commitments should
be made by way of:
• purchase orders,
• services agreements,
• formal contracts for:
• equipment supply,
• equipment supply and install, and
• construction or mine development.
If the owner does not have company standards for each of
these documents, then the owner’s team must compile them prior
to commencing project implementation, along with defining the
criteria under which each will be used.
Risk allocation
Allocating contractual risk between the owner and the
contractors has been a difficult task for many projects – which is
reflected in contractual disputes. Owners are well advised not
place contractual risk on a contractor unless they are sure that:
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• the scope is well defined,
• risks are clearly defined and understood,
• liabilities can be met, and
• a fall back position exists for the owner in the event of
non-performance.
Owners should accept the risks that they can control – and
structure their contract accordingly. These risks typically may
involve:
• metallurgical processes,
• operations interfaces,
• site interfaces with other contractors,
• geotechnical and hydrological conditions,
• heat and ventilation conditions in deeper mine developments,
and
• severe impacts on the business revenue.
Contract preparation
Poor contract documentation often leads to poor contract
management and outcomes. Good contract documents:
• are clear and concise documents using standard form general
conditions and a minimum number of special conditions;
• accurately record what has to be done and provided by each
party, when it has to be done and how it will be paid for; and
• include all the documents that the contractor must rely on or
comply with such as drawings, geotechnical and hydrological
reports.
Owners should get the best advice they can from experienced
construction litigation lawyers and insurance brokers. In each
case, owners should request advice and assistance to prepare
contract conditions that are most likely to deliver successful
project outcomes. Good litigation lawyers will recommend
documents that embody the risk allocation and contract
preparation points above and are fair to both parties.
When the owner requests a contract that best protects their
position to the detriment of the contractor, they increase their risk
of contractual difficulties. Owners must remember that the
damages they will be able to recover from a contractual dispute
are far outweighed by the downstream effect of a project
under-performing.
Contract management
More often than not, projects are late starting and there are large
pressures to make up time. Owner’s teams must resist the
temptation to commence work before contracts are signed,
especially where the owner’s company procedures are onerous
and time consuming. The confusion and complications that can
arise will far outweigh the time saved initially.
The owner should have dedicated contractor management
packages and systems ready to use before any contractors arrive
on site to commence work. These systems must be clear and
simple and actually provide the tools necessary to do the job.
This can be a significant challenge if the owner’s team has
inherited or developed documents that do not actually give the
tools they need to manage the contract and contractor.
Contract management planning must also allow for the
possibility that despite the owner’s best intentions, contractual
disputes and claims can still arise. Therefore, it is prudent to seek
advice from expert claims consultants when establishing contract
management systems and then to audit site systems and
administration and advise on claims handling. Elements of a
contract management system will include:
102 Melbourne, Vic, 16 - 18 October 2006
• notice to proceed,
• performance control of:
• safety,
• QA and non-conformances,
• progress,
• financial controls,
• claims and variations control and settlement,
• document control and record keeping, and
• contract closeout.
Logistics
Logistics is defined by Dictionary.Com as ‘The overall
management of the way resources are moved to the areas where
they are required’. In the project management context, this
relates to managing the movement of items from where they are
manufactured to the job site where they will be used. The key
steps in managing this process include:
• purchase order raising;
• expediting;
• marine and transport insurance;
• customs clearance on imported items;
• transport to site; and
• receipt, storage and issuance on site.
The logistics plan developed during preparation of the project
execution plan will have addressed each of these issues. This
becomes critically important when constructing projects in
remote areas.
PROJECT CONTROLS
In the author’s experience with underground project
management, the absolutely critical project delivery success
drivers revolve around controlling scope, schedule and cost.
These can only be controlled during the construction phase if
they were rigorously addressed in the project execution plan
through an iterative process of scope definition, designing,
constructability reviewing, scheduling and budgeting to arrive at
the baseline schedule and estimate. The tool that integrates these
critical aspects of the definitive estimate is the work breakdown
structure (WBS).
Work breakdown structure
The WBS is a hierarchical, coded framework illustrating how the
entire project scope will be executed. This framework is
normally presented in the form of a project schedule derived
from one of the popular scheduling software packages. Each
WBS element must relate to a ‘doing’ activity represented by a
scope of work and estimate statement defining what is to be
performed, when it is to be performed, and what its value is.
The level of the WBS where singular responsibility is
assigned, commonly called a ‘package’, could typically have a
range of value of $100 000 to $20 M or $30 M or more in larger
projects, and will often, but by no means always, be aligned with
a single contract.
The WBS is the primary reference framework for the project
to which other recording systems, such as filing and cost codes
are related.
Baseline schedule and estimate
When preparing the baseline schedule and estimate, the owner’s
team takes the schedules and budgets from the feasibility study
and iteratively reviews the scope, designs, constructability,
schedules and budgets to arrive at an optimised baseline
document that underpins the project.
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In the case of underground mine development and construction
projects, the process involves stepping through the mine
development and construction program week by week to identify
conflicting activities, flaws in the mine design, problems with
drainage, ventilation or vehicle movements and any other
constructability issues. When done properly, this process
minimises the likelihood of encountering unexpected problems
during the project which would otherwise cause delay and extra
cost. The same process is equally applicable to other forms of
construction projects.
Major underground mine development projects may involve
the development of say ten levels, several shafts, numerous bored
raises for ventilation and ladderways, multiple service and
drainage hole networks and major excavations for ore crushing
and handling, workshops, pump stations, etc along with the
construction of infrastructure in those excavations. Mine
production activities may be commencing at the same time. With
all this activity, very detailed planning and scheduling is critical
to establishing realistic baseline schedules and budgets that can
be used to control the project.
The recent development of powerful, user-friendly 3D mine
planning and mine scheduling software has made the mine
development scheduling process much faster, but has not reduced
the need for careful analysis of all the interactions and issues
mentioned above.
There are a number of powerful scheduling packages available
for developing the detailed project construction schedules, to
which the mine development schedules can be linked. These
scheduling tools allow all the resources required for the project
activities to be included – from which they can generate detailed
cost estimates for every aspect of the project.
Scope control
The first step in the planning process was to define the scope and
it is also the first vital step in the project control process.
It is important to ensure that both the schedule and budget for
each activity incorporated into the project baseline control
document include contingency appropriate to the amount of
engineering completed for that activity. Following compilation of
the baseline, it is then important to ensure that engineering is
then sufficiently advanced prior to commencing that activity to
ensure that the scope is adequately fixed. If there is insufficient
contingency to start with or the scope is not fixed prior to
commencing work, then overruns are likely.
Once the project is underway, it will be a constant challenge to
prevent scope creep. Typical examples are metallurgists looking
for more bells and whistles in the process plant or mining
engineers adding more excavations to the mine design. Scope
creep can be prevented by implementing a strict change control
process where the scope cannot be altered without formal
approval from the project manager. The project baseline should
then be updated with approved scope changes.
Schedule control
Controlling time, ie the schedule, is the single most important
thing a project manager can do to bring a mining project in on
time and budget. In the author’s experience over numerous mine
development and construction projects, if time is controlled then
costs will usually be within budget. Ongoing schedule control over
the course of a project is based on tracking actual physical
quantities of work achieved on a weekly basis against the baseline
schedule. Typical physical quantities to be tracked may be:
• mine development – linear metres,
• vertical development – linear metres,
• major excavations – cubic metres,
• pipelines – linear metres,
International Mine Management Conference Melbourne, Vic, 16 - 18 October 2006
PROJECT DEVELOPMENT AND CONSTRUCTION MANAGEMENT
• civil work – cubic metes poured, and
• mechanical and electrical work – incremental milestones.
It is vital that these activities are tracked on a regular basis,
usually weekly, and that the overall project schedules are updated
monthly so that any slippage in completion dates can be
identified and corrective action implemented. The great danger
in this process is using subjective assessments of progress based
on ‘gut feel’. Hard verifiable physical quantities or deliverables
must be used to input actual progress to the schedule updates.
Underground mine development is notoriously difficult to
accurately and realistically schedule: usually because of the
assumptions made or the tools used to update the schedule. In the
author’s experience, once the baseline schedule has been
optimised, the schedule is then best tracked in a spreadsheet that
is manually updated with actual advances each week.
In addition to tracking actual against forecast progress in
spreadsheets, it is very useful to plot lateral development advance
cut by cut on large scale wall plans in a central part of the site
project office. Lateral development is the one activity over all
else that will determine whether or not a project finishes on time
and budget because everything else is usually dependent upon it.
Scheduling is probably the most difficult and poorly executed
task undertaken by projects, especially underground mining
projects. It is critical that the project manager pays particular
attention to the schedule and drives key staff to familiarise
themselves with, and contribute to the schedule development.
Cost forecasting and control
The forecasting component of the cost control process is to
regularly recalculate the final cost of each activity and of the
total project. This will allow corrective action to be taken in a
timely manner should it become apparent that costs are
increasing above what has been approved for the project.
The cost control component involves controlling commitments
by ensuring they do not deviate from what has been approved for
that activity, purchase or contract relating to the commitment.
It is vital for cost control to employ project orientated cost
control software rather than the common financial accounting
systems used by mining companies. The dedicated project
control systems used by the construction industry allow
commitments to be tracked and costs to be related to project
activities. These systems are well integrated with the project
schedules and budgets and link all components into the project
reporting process.
Escalation is one element of cost forecasting that has not been
an issue in the low inflation environment applying prior to the
current boom. However, it is now rapidly increasing and must be
considered separately to contingency when setting project base
line budgets. It will be a matter of judgement at the time as to
what is allowed. The author has heard anecdotally that some
projects are currently experiencing annual rates of ten to 15 per
cent escalation.
Progress reporting
Mining projects will usually issue daily, weekly and monthly
progress reports. Daily reports are one page documents
summarising safety and physical performance numbers.
Weekly reports will include the key performance data along
with explanations and comments on progress, major issues,
highlights and a look ahead for the following week.
The monthly report will be a comprehensive document
including sections on all key areas of the project summarising
progress to date together with deviations from budget, issues,
concerns and corrective actions and a look ahead to the next
month. In addition to tables that summarise key data, the
monthly report will include a range of S curves that graphically
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depict committed and actual costs and progress to date against
their baseline budgets and schedules.
The project reporting process must ensure that:
• there are no surprises,
• the current status is validated,
• trends are explained, and
• final costs and completion date forecasts are updated.
Contingency
There are two ways of managing contingency – either on a
package basis or in one combined pool. Irrespective of which
method is adopted, the contingency should be clearly shown in
the cost reports to support final forecast costs and to provide
traceability. There is a third method, which is to hide the
contingency in the estimates where it cannot be seen by cost
cutting owners.
The advantage of the pool approach is that it minimises the
temptation to spend money that remains unspent in a budget
item. It can be very difficult at times to prevent particular scopes
from expanding to the value of the allocated budget, particularly
when it is the owner’s general manager wanting to gold-plate
something because there is surplus money available in that item.
A key aspect of contingency management is setting
appropriate contingencies in the baseline budget to start with.
There are some high risk areas, particularly in underground
mining, that demand very high contingency levels. Activities that
have done great damage to the author’s contingency pool in the
past include declining through the weathered zone immediately
below the portal, and raise boring in weak rocks – in each case
because of ground control problems.
Document control
Document control is an important aspect of any project control
system. Mancanda (2006) stated that the Telfer construction
project generated 50 000 documents. Document control entails
the management of all relevant project-related documentation
either issued or received by the owner’s team in a way that
ensures that material is readily available for ongoing decision
making and that the history of events and issues is recorded.
Typical project documentation includes directions, diaries,
letters, faxes, emails, memos, reports, manuals, drawings and file
notes received or issued by the owner’s team in relation to the
project in either hard copy or digital format. Current document
management scanners and software make it possible to store all
project documentation in an easily retrieved format. In this
system, the original hard copy is kept in one chronological
master file.
CONSTRUCTION MANAGEMENT
Construction management is the critical phase of any project.
While all the prior studies and planning activities are necessary
precursors to a successful project, most project costs will be
incurred during the construction phase. If this phase is not well
managed, excessive delays, cost overruns and subsequent
performance problems may result.
The skills and experience required by the senior owner’s team
members was discussed earlier. These individuals are the key to
successful construction management. While the systems and
procedures are important, they cannot compensate for
weaknesses in this area. Unless the project director and managers
can provide effective leadership and decision making when
required, the project will suffer. A key role that they play is in the
mentoring and developing of younger engineers and supervisors
to develop them into the next generation of project leaders.
104 Melbourne, Vic, 16 - 18 October 2006
The construction phase involves managing:
• planning, scheduling and reporting;
• safety and security;
• QA non-conformances;
• site establishment;
• construction execution;
• cost control and reporting;
• procurement and logistics;
• contracts administration;
• field engineering;
• environment;
• industrial relations;
• site administration;
• camp messing and accommodation; and
• access control.
Depending on how the project is structured, some of these
functions will be managed by the owner’s team and some by the
implementation contractor. It is important that both teams
possess adequate resources for the tasks they have to accomplish
and that systems and procedures are in place to manage each of
the functions in accordance with the owner’s requirements.
COMMISSIONING AND HANDOVER
The commissioning phase involves construction completion,
no-load commissioning, mechanical completion, handover,
commissioning and commencement of operations. It involves
extensive planning to address safety, environmental, contractual
and operational requirements. Given the critical nature and extent
of this phase, a full time commissioning manager is usually
appointed as early as practicable during the construction phase.
Construction completion involves completing installation and
erection work. The phase is complete when all components of
the completed system have successfully passed inspection and
testing to verify they comply with the contract. The only
equipment operation at this point is to check motor rotation.
No-load commissioning involves testing and verifying that all
equipment is ready to run, followed by operation of all
equipment under zero load conditions. At the completion of this
phase, the plant has achieved mechanical completion and is
ready for commissioning. The plant is ready for handover and is
accepted by the owner. At this point, ownership is usually
transferred to the owner and the defects liability period
commences.
Wet commissioning then follows with the introduction of loads
to the plant. In the case of a process plant this would involve the
loading of process media and introduction of ore followed by:
• adjustments and minor modifications,
• process guarantee performance testing,
• completion of as-built documentation, and
• final punch list completion.
Final acceptance of the plant follows successful wet
commissioning.
Specific allocation of responsibilities for the commissioning
phases will vary depending upon the particular circumstances.
With turnkey, D&C or EPC contracts, the contractor may be
responsible for the entire process through to final performance
testing. With process plants constructed under an EPCM
contract, the contractor will complete no-load commissioning.
Operations then takes responsibility for wet commissioning
assisted by the contractors and owner’s team.
International Mine Management Conference

THE END – HANDOVER TO OPERATIONS
Once construction and commissioning are finished, all that
remains is to complete the project close out activities. These will
include:
• verifying that the project complies with the user requirement
specifications,
• completing all QA checks,
• ensuring warranty claim procedures are in place,
• completing as-built drawings,
• completing operating and maintenance manuals,
• settling and closing final accounts and all cost codes,
• compiling the as-constructed schedule,
• completing punch list items,
• completing contractual obligations,
• completing commissioning documentation,
• completing operations acceptance documentation,
• completing compilation into one final report of:
• monthly reports,
• drawings and specifications,
• close-out activity description,
• final cost and financial reports,
• file and document index,
• asset register:
• completing the project close-out report, and
• archiving project records.
KEY SUCCESS FACTORS
Based on the project mishaps either directly experienced or
observed by the author during his time in the mining industry,
projects that thoroughly address the following issues are far more
likely to be completed on time and budget and work as intended:
• there is continuity of key staff through the project;
• there is single point accountability for project delivery;
• the ore processing and mine designs are adequate;
International Mine Management Conference Melbourne, Vic, 16 - 18 October 2006
PROJECT DEVELOPMENT AND CONSTRUCTION MANAGEMENT
• the owner’s team is well led and adequately resourced;
• competent staff, consultants and contractors are engaged who
know the industry and understand what is being designed and
constructed;
• the baseline budget and schedule is realistic;
• the levels of contingency and escalation are realistic;
• the degree of front end loading is sufficient;
• a thorough project execution plan is prepared;
• construction and commissioning plans are in place;
• effective project procedures are in place;
• project control systems are appropriate;
• procurement is based on fair contracts;
• competent contractors are engaged;
• contracts are managed firmly but fairly;
• thorough site investigation is done;
• temporary facilities are adequate; and
• if contractors are in JVs, their systems are compatible.
REFERENCES
Manchanda S, 2006. Presentation to AusIMM Perth Branch, 11 September.
BIBLIOGRAPHY
Australian Institute of Project Management (AIPM), 1995. Project
Management Guide (Australian Institute of Project Management:
Sydney).
Lock, D, 1996. Project Management, sixth edition (Gower: London).
McCarthy, P, 1997. Management of feasibility studies, Workshop Course
No 141/97, Australian Mineral Foundation, Sydney.
Project Management Institute (PMI) Standards Committee, 1996. A
Guide to the Project Management Body of Knowledge (Project
Management Institute: Newtown Square).
Stallworth, E A and Kharbanda, O P, 1983. Total Project Management
(Gower: London).
The Australasian Institute of Mining and Metallurgy, 1997. International
Conference on Mine Project Development (ed: E Barnes) (The
Australasian Institute of Mining and Metallurgy: Melbourne).
Van Rooyen, B R, 1980. Negotiating a new mine, in The Black Mountain
Project Symposium, South African Institute of Mining and Metallurgy,
Johannesburg.
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