More than two years ago, Carly Leonida and I explored capital development projects in mining and metals.
Jason Fearnow is a global commercial professional with more than 20 years of contracting and procurement experience within the mining and metals industry. He founded Prime Contract Solutions in 2016 after serving in roles such as Director, Project Commercial, for Goldcorp Inc. and Senior Manager, Prime Contracts and Project Execution for Newmont Mining Corp.
More specifically, we took a dive into how projects work, what execution models are often utilised, and where, specifically, as an industry, we often go off track.
We then looked at a more holistic approach to capital projects, one where the focus was on people, and understanding how people work in hopes of delivering more predictable outcomes.
Personally, I really enjoyed the conversation with Carly, the article she eloquently stitched together and the responses from you, the readers.
When reflecting back, most, if not all, of the challenges we discussed still haunt us today.
Not that I expected them to miraculously disappear, that would be crazy, but hey, as Seal pointed out in his chart-topping hit song…
"We're never gonna survive unless, we are a little, crazy".
And sometimes that's exactly the way I feel in this business – crazy…
It seems as if we're stuck in a vicious cycle of repeating the same mistakes over and over.
The reality is that we are repeating the same mistakes again and again.
But why?
It's a great question, and one I hope to shed some light on today.
Most boards members haven't worked on projects
Earlier this month, I was having a conversation with a like-minded project executive when he sighed with exacerbation:
"…what I wish boards knew about project delivery…"
And it dawned on me…
There is a major disconnect between the folks who work on projects and those who choose to invest in them.
More specifically, the board of directors (BODs) who approve them.
Don't get me wrong, I'm not here to oust mining BODs.
Clearly, these individuals are highly intelligent and intellectual people.
Most are at the top of their game.
But that doesn't make them projects people.
And herein resides the rub.
Think about it…
How many BOD members do you know that have executed a major project?
If you're like me, your answer is probably pretty low, if not, zero.
Personally, I can think of only one.
Instead, mining boards are typically comprised of individuals from areas of expertise like:
- Mining and geology
- Finance
- Legal and regulatory
- Environmental and sustainability
- Risk management and safety
- Technology and innovation
- Community and stakeholder engagement, etc.
But not projects.
This puts them in the difficult situation of approving large sums of money in a function where they lack significant experience.
Closing the knowledge gap
Which leads me to the topic at hand – what do I wish boards knew about project delivery?
Below is my top seven hit list:
- Management consulting firms won't solve all problems
I'm just going to come out and say it…
The 'Big 4' aren't experts in project execution.
Far too often, I'll hear that a mining company is working with a top management consulting firm to 'optimise performance' on project execution.
Firms that make statements like:
"We help industry leaders make bold strategic decisions in this dynamic, complex environment"
Or,
"We perform a top-down diagnosis to assess the potential impact of following best practices and validate value at stake with illustrative analyses"
First of all… what!?! 😳
Second of all… no!
Don't fall victim to fancy tongue twisters, corporate speak, and hyperboles!
These approaches almost never work.
Now don't get me wrong, this isn't an attack on management consulting firms. They certainly have their place within the industry
And not dissimilar to mining BODs, they are highly intelligent and intellectual individuals.
But they don't know projects… Which is why they don't speak projects.
- Risk: to transfer or not to transfer?
I spend a large part of my professional life negotiating contracts for capital projects.
And one area that comes up on every single contract is the concept of risk transfer.
Simply put, risk should reside with the party best suited to manage it.
Therefore, attempted risk transfers from mining companies to contractors are more illusion than reality.
I think Edward W. Merrow says it best in his well-researched book Contract Strategies for Major Projects:
"When I work with some owner lawyers on contracting for projects, I am struck by their belief that contracts change reality. For example, if we assign risk for the timely delivery of critical equipment to the contractor, we will no longer have to worry about the equipment arriving late. Although it is true that transferring the risk may cost the contractor money, at the end of the day the project is still late, which means that our cash flow is late, and the customers who were promised product are still unhappy with us, not the contractor. The consequences of risks in projects will eventually come back to the owner whenever the risks are not effectively managed regardless of risk assignment."
When owners and contractors are able to respect and accept their differences, then a project has a chance to be successful. Image: Unsplash
- Owners and contractors: embrace and respect your differences
It could be said that owners are from Mars and contractors are from Venus.
Therefore, when owners and contractors are able to respect and accept their differences, then a project has a chance to be successful.
It may be easiest to think about the assets of each group, and how each makes a living.
Owners extract valuable minerals, metals, and other resources from the Earth (assets) and sell them on the market to make money.
On the flip side, through their people (assets), contractors provide services and activities related to the planning, design, and construction of projects.
These are two very different business models, and their differences need to be understood and accounted for in order to be effective.
- Different industries have different delivery models
When I first started in projects, one of the very first lessons I learned is that different industries have different cultures, and therefore have different industry practices (ways of behaving).
For example, in the power industry, lump sum turnkey delivery models are commonplace.
Whereas in mining and metals, the cost reimbursable engineering, procurement, construction, management (EPCM) model represents the lion's share of deliveries.
As a result, when you are speaking to someone from power, they have a certain perception or experience with projects that's different than mining and metals.
In order to be effective, it's important to understand the lens people are using to view the project.
- Are we wrong?
This one I stole (borrowed) from a seasoned project executive.
His greatest desire is for BOD members not to ask themselves "what happens if we are right?", but rather "what happens if we are wrong?".
By shifting the focus to what could go wrong, we open ourselves up to look at the project from a different vantage point.
This alternative perspective allows us to see potential challenges that will arise and, therefore, put mitigation strategies in place to manage the risk.
Stage-Gate is a standard process used to shepherd a capital project through its lifecycle, and it's there for a reason. Skipping stages or ignoring the process can end in disaster. Image: Unsplash
- People build projects!
People build projects.
I've said this so many times I'd be better off getting it tattooed across my forehead.
In all seriousness, regardless of how many times I've uttered these words, it's still as true as ever.
People build projects.
- Not ChatGPT, Bard, or any other AI-driven system.
- Not a digital twin.
- Not a 3D model.
- Not autonomous electric trucks.
- Not even your neighbour's adorable dog, Spot.
- People
In order to influence results on projects, we need to be able to influence people.
And we do this by understanding how people work, and what influences them to behave in certain (desired) ways.
- Stage-Gate is there for a reason
For most mining companies, there is a relatively universal process for shepherding a project through its lifecycle – most refer to this process as 'Stage-Gate'.
An overly simplistic way to describe Stage-Gate is that it's like a series of checkpoints (gates) that a project must pass through before it can move to the next stage.
At each gate, decisionmakers assess the project's progress to determine whether it's ready to proceed to the next stage or not.
This process is in place for a reason, and when it's circumvented or ignored, it typically leads to disaster.
Here, it's important to appreciate that planning is progress and that 'ready, fire, aim' is not a strategy that lends itself to positive outcomes.
Working together for better results
With a deeper understanding of the top seven hit list, bridging the gap between the folks who build projects and the folks that approve them is possible.
And with the gap closer, the more effectively we, as an industry, can produce favourable results.
If you'd like to continue the conversation with Jason you can connect with him on LinkedIn or at Prime Contract Solutions
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