Page 49 - Vol 28 Issue 29 2019

legislation mining

A second pivotal factor is ensuring that there was increased market activity in by opposing legal teams and are often
the most appropriate form of contract the construction sector. The current lengthy to conclude.
is used. Often in-house contracts are climate is tense and worsening. Several FIDIC’s standard form contract requires
adversarial and provisions for issues and large contractors are in business rescue extensive amendment and is also lengthy
change management are inaccessible. In and contractors are still dealing with the to conclude. NEC3 has been marketed as a
the event of unresolved issues, they tend fallout of a Competition Commission partnering contract as it provides payment
to provide for archaic dispute resolution findings of collusion from 2013-2016 that options which support collaborative
measures which are often in different resulted in penalties of R3 billion. Share working. It includes secondary options for
countries and therefore extremely costly. prices of listed contractors have crashed. the payment of funds for early completion
Finally, a support structure is required The combined effect is constrained cash and payments relating to KPIs. NEC 4
that enhances a collaborative culture flow, low morale and ultimately, poor has gone a step further and includes a
between the various parties. project delivery. standalone alliance contract.
A South African perspective Employers are also in trouble. Not only The UK’s PPC 2000 is a project partnering
are they facing economic headwinds, they
At MDA, we have worked on a number of are exposed to construction defects and contract that goes into great detail. It takes
a multi-party approach and is managed
collaborative contracts in the coal sector delays. Construction guarantees are being
using FIDIC contracts, as well as various called in at an unprecedented rate and by the core group. All parties commit to
shared goals which could be related to
shaft sinking projects with generally good disputes are rising.
results. innovation, efficiency, human capital,
Other territories reduced waste or health & safety. There
are team incentives and shared benefits,
These problems are not unique to South and an integrated and inclusive design,
Africa. UK’s Carrillion PLC, liquidated
Collaborative contracts in 2018, was the largest ever trading construction and supply process. The
contractor and specialists provide input
in South Africa include liquidation in the UK and resulted in over before any work commences and supply
AngloGold’s TauTona 2000 of its suppliers and sub-contractors chain partnering is made possible by open
project, which involved a being liquidated. Other examples are CMC book pricing and the ability to use volume
technically challenging sub- di Ravenna, an Italian company which was supply agreements that benefit all. There
involved in Kenyan water projects, Natelco
vertical shaft. The contract Corp (US) and Al Hassan Engineering Co are no time bars or liquidated damages.
utilised the employer’s in- (Oman).
house conditions and target Limitations of collaborative contracting
cost based on the bill of Because incentives are central
quantities. Initial feedback While there are many benefits, to successful collaborative
from the employer was that collaborative contracting is not suitable contracting, they cannot
for all projects. It is not appropriate
the effort required to properly in public sector procurement because simply be added to a standard
administer the contract had of regulations, for example. Certain contract.
been underestimated. relationships are working well and the
JBCC building contract is well understood.
In this context, significant technology or Any good contract considers what each
Anglo Platinum conducted a mining price benefits are unlikely. party wants, and this even more important
partnering study which subjected several Key players need to be incentivized. in collaborative contracting. It needs to
contractors to pre-qualification and Mining, construction and O&G are steer clear of ‘us and them’ thinking but
concluded a non-binding framework technically challenging. Improving be clear about each party’s priorities.
agreement. Although this was shelved on collaboration could streamline interfaces, Flexibility may be required to align these
the platinum price’s decline, the concept with significant time and cost savings objectives on the understanding that if
was adopted in other divisions. made possible just by sharing design and there is an opportunity, there must be
Anglo Coal used agreed target cost technology. access to incentives.
contracts to execute various projects In addition to sharing efficiencies, It is also important to understand that
using the same contractors. Initially transparency among parties and change takes time and commitment.
there were significant cost reductions, building long-term relationships will help Of course, that requires acceptance of
which ultimately led to cost certainty employers to gain insight into cost models change and well considered incentives. It
and improved market conditions as and how to cost future projects. won’t be an easy ride, but I have no doubt
contractors secured more work. that collaborative contracting is worth the
Interest in collaborative contracting What contracts can be used? effort.
waned about 10 years ago, a time when Bespoke contracts are purpose-drafted

AFRICAN POWER Mining & Oil Review Vol 28, Issue 29, 2019 | 49