FMG plans to limit contracts to 10pct
2011-08-05 09:19:26 [Print]
It is reported that a limit will be placed on the work that individual contractors can win on Fortescue Metals Group's AUD 8.4 billion expansion project, as the iron ore exporter seeks to protect itself against cost and scheduling blowouts.
Mr Peter Thomas Fortescue's project director for port and rail said the company had developed several tactics to safeguard the budget, including a policy of giving no individual contractor more than 10% of work on the project.
He said that ''The advantage of that is if a contractor is not performing because costs usually come down to productivity on site we do have the ability to eject that contractor.”
Mr Thomas said it would be harder to eject a poorly performing contractor if that company was tied to large amounts of the project, so dividing the spoils between more suppliers gave Fortescue flexibility. He added that ''That is one big reason why we are very confident about our capital costs.”
Mr Thomas said the 10% limit was a guideline rather than a rigidly enforced number. While there had been no serious contracting problems to date in the expansion project, the company would not hesitate to eject underperformers.
The entire plan is designed to raise export capacity to 155 million tonnes a year by 2013.
Analysts have long been skeptical that Fortescue can complete its expansion aimed at almost tripling its iron ore production by 2013 within the AUD 8.4 billion budget. The severe inflationary environment in Western Australia has already forced other companies to revise their costs upwards.
Mr Peter Thomas Fortescue's project director for port and rail said the company had developed several tactics to safeguard the budget, including a policy of giving no individual contractor more than 10% of work on the project.
He said that ''The advantage of that is if a contractor is not performing because costs usually come down to productivity on site we do have the ability to eject that contractor.”
Mr Thomas said it would be harder to eject a poorly performing contractor if that company was tied to large amounts of the project, so dividing the spoils between more suppliers gave Fortescue flexibility. He added that ''That is one big reason why we are very confident about our capital costs.”
Mr Thomas said the 10% limit was a guideline rather than a rigidly enforced number. While there had been no serious contracting problems to date in the expansion project, the company would not hesitate to eject underperformers.
The entire plan is designed to raise export capacity to 155 million tonnes a year by 2013.
Analysts have long been skeptical that Fortescue can complete its expansion aimed at almost tripling its iron ore production by 2013 within the AUD 8.4 billion budget. The severe inflationary environment in Western Australia has already forced other companies to revise their costs upwards.
