This review explains Engineering, Procurement, and Construction Management (EPCM) contracts as they are used in the mining industry. It explains in detail the different aspects to EPCM and describes several mining projects where EPCM has been used to successfully develop a mining operation. Links to several books, consulting and contracting companies specializing in EPCM are also given.
Engineering, Procurement, and Construction Management is widely used in the mining industry. From detailed feasibility studies to coordinating equipment and materials to get to a site, a company that offers a full suite of EPCM services is often an integral part in getting a project from exploration to operation.
While some companies only offer Engineering, Procurement and Construction, other companies do all of the above as well as construction management. The difference between EPC and EPCM is best explained on the Prodigy Engineering Group site:
'EPC means the company is contracted to provide engineering, procurement and construction services. Think Design & Construct style contracts, where the project is largely Contractor managed and the cost risk and control are weighted towards the Contractor and away from the Owner.
EPCM means the company is contracted to provide engineering, procurement and construction management services. Other companies are contracted by the Owner to provide construction services and they are usually managed by the EPCM contractor on the Owner's behalf. Think professional services contracts, where the project is largely Owner managed and the cost risk and control is weighted towards the Owner.'
Here are some advantages of each from Prodigy:
- Lower Overall Cost
- Staff's Sense of Ownership
- More Control over Process
- Better for less defined projects with anticipated changes to scope of supply
- Less Legal Litigation (Identify issues early and remedy situation before larger problems arise)
- Owner's Financing Flexibility
- One Stop Shopping "One point of Contact"
- "Hands off" approach to project
- Minimal Staffing Requirements
- Minimal Legal Risk
- Best for well defined projects with Detailed Engineering Complete before EPC Contractor selected (Minimal Unknowns).
The online article, "Worlds Apart: EPC and EPC Contracts: Risk Issues and Allocations" by Phil Loots and Nick Henchie, is also an excellent description of the differences between EPC and EPCM contracts and goes into great detail about how these contracts work.
EPCM contracts vary from project to project and the range of services that is tendered in each project is never the same. Below is a closer look at the individual aspects of EPCM and how each can impact a mining operation.
Every mining project requires hours of engineering to move from exploration to production to a successful reclamation. A company offering EPCM services for a proposed mine will start with a conceptual mining plan and conceptual design of the facilities. For many projects, a preliminary economic assessment and a pre-feasibility study will be required before the project can receive financial backing from a bank to proceed with a bankable feasibility study. Hours of engineering go into these studies, as they cover everything from the proposed plant layout to a detailed analysis of the mine design. The next step, a bankable feasibility study requires the company providing the EPCM for the project to design the open pit/underground mine, solution mining facilities, process optimization and flowsheets, mine/mill expansions, piping and electrical layout, instrumentation and control engineering, and cost estimation. The engineering design teams must be able to execute the full range of design and specification of equipment within the mine and milling complex. All of these designs must be completed to a level of accuracy of +/-15%.
PROCUREMENT AND LOGISTICS
After the engineering phase of a project is completed, it is crucial to every project to develop a procurement strategy. Procurement is the link between the design and engineering and the installation or construction phases of a project. This often involves international purchasing and expediting. As well as, coordinating any required source inspections, and all logistics and travel functions that might be associated with the procurement of equipment and bulk materials that will be needed. Some other areas of procurement and logistics are recommending qualified bidders for construction projects, preparing and issuing RFP (request for proposal) packages, bid analysis, and purchase preparations and recommendations. If the company involved is also in charge of the overall management of the project, the next steps will be preparing and awarding the purchase orders, expediting suppliers' data submissions, and then inspecting equipment and material before making sure all freight documentation is correctly filled out so that there will be no delays. Depending on the size and scope of the project, the logistics and procurement segment of a project can be a daunting task. Now that the engineering part of the project is done, deadlines to project commencement must be met and there can be many delays or hurdles that must be overcome in order to keep the project on time.
Any company that offers procurement and logistic services must have good relationships with equipment suppliers and freight companies to ensure that equipment and materials will be delivered safely and on schedule. In addition, risk management of the overall project is high at this stage, so anyone working on the logistics phase of a project must have contingency plans ready. Managing the logistics services rounds out the procurement activities.
Project management is the application of knowledge, skills, techniques, and tools to a broad range of activities to in order to meet the requirements of a particular development. Team building, risk, business, legal, and time management skills are essential to ensure a successful completion of any project. The EPCM project manager is accountable for the outcome of the project in terms of all deliverables, usually stated as performance, time, costs, and scope. It is the project manager that will ensure that the project is executed with due care and diligence and within the contractual definition of the required deliverables. Below is a chart showing the hypothetical structure of the organization of a project management team.
In many projects, the construction management and project management are done together. Many companies offer this service to their client. As they have been involved with the engineering and procurement and logistics, they are the logical choice to be in charge of the construction of the facilities, while overseeing the project management of the entire project. An EPCM company will offer construction management and supervision as part of their overall project management. Management and supervisory services range from initial preconstruction planning to construction and installation, to plant commissioning, start-up assistance and operational phase accompanied by contract management, cost control, and quality checks. A post implementation review is also part of the project management.
SUCCESSFUL EPCM PROJECTS
Many mining operations have used EPCM consulting companies to guide a mine from conception to operation. Below is a few of the larger projects and companies involved in delivering EPCM services to the industry.
Diavik Diamond Project
SNC-Lavalin provided EPCM services to Rio Tinto for the development of the Diavik Diamond mine, which is located in the Northwest Territories about 500 km south of the Arctic Ocean. The mine was completed in 2002 at a cost of 1.13 billion. Extreme care was taken to build this mine in the pristine Arctic north. The mine involved the development of an open pit diamond mine located beneath a major lake, which was an extreme challenge given the frigid conditions of the north. Mining the diamonds was only made possible by the construction of an innovative dike structure, which permitted mining by isolating the diamond-bearing kimberlite pipes from the surrounding lake. The mine's remote permafrost location and the purity of the water in Lac de Gras placed severe environmental constraints on the project.
The award winning innovative design of the dike ensured that there was no environmental damage to the project's ecologically sensitive area. Components of the Diavik diamond project include an open pit diamond mine, a process plant, kimberlite containment dikes and the associated infrastructure. Other parts of the project are roads, a power generation plant, fuel storage, airstrip, accommodation, water supply and other services and facilities. The Diavik diamond mine development includes a 3 km long, 25 meter high water retaining dike to permit dewatering and development of the diamond mine. The mine is expected to produce 1.5 million tons of kimberlite material. The project was completed ahead of schedule and under budget.
Mt. Milligan Copper-Gold Project
Wardrop, a Tetra Tech company, was awarded the EPCM contract for the Mt. Milligan copper-gold project, located in British Columbia. Wardrop completed the feasibility study for the mine before being awarded the EPCM contract. Mt. Milligan will be a conventional truck-shovel open pit mine and will have a 60,000 tpd copper flotation process plant. Mt. Milligan was also a very environmentally sensitive project that involved extensive consultation with the First Nations groups in the area and the affected communities. As a result, the mine will have a very small footprint of approximated 4 km x 3 km.
Wardrop has provided EPCM services for many companies all across the globe. Wardrop's expertise extends from exploration, through development (geological resource models, scoping to feasibility studies, detailed design, EPCM), production, closure, and environmental services.
In mining, the definitive book is EPCM(C): Managing Capital Projects for Mining
by Dan Mackie. The (C) stands for Commissioning. As the blurb notes, these are some of the people involved in a mining project who may want to know more about EPCM: engineers, estimators, purchasing agents, senior managers, company presidents, and anyone who is responsible for some portion of a project and wants to know how it all fits together. The book is an easy read focusing primarily on first principles.
Process plant engineers may be interested in the Handbook for Process Plant Project Engineers by Peter Watermeyer. The electronic version is available on-line. It is worth looking at the discussion of the mechanics and legalities of EPCM contracts in the book.
CONSULTANTS & CONTRACTORS
A full list of the EPCM consultants and contractors can be found on InfoMine at this link
Here are some of the larger companies:
AMEC has several results on their site for EPCM. Information ranges from presentations to awards, to oil and gas contracts.
Ausenco Minerals (part of the Ausenco group of companies) specializes in EPC and EPCM, commissioning and operations services, with projects in the Americas, Australasia, Africa and Asia.
Fluor provided EPCM services to mines from oil sands Alberta to heap leach pads in Chile. They also have released this publication which elaborates further on their EPC services.
Jacobs Engineering is working for Syncrude and Suncor on many a project, and for others worldwide.
TWP is an African based EPWM & EPC company that services the mining and minerals industries as well as a range of civil engineering projects.
InfoMine offers a peer-reviewed course from the professional development program of the Canadian Institute of Mining, Metallurgy and Petroleum (CIM)
entitled Mineral Project Management.
This course is excellent for anyone involved in a mining project and wanting a better understanding of how it all works together. The course is described as follows:
". . .course addresses the most important aspects of project management, including planning and scheduling, estimating, cost-control, change forecasting, procurement, contracts, reporting, and administration, as well as when and how to work with consultants. Problems that often lead to delays and cost overruns are examined, as are the best methods to avoid them."
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