Getting Down to Business

Charting a new course for Capital Projects in Australian Mining and Energy

1

ContentsIntroduction 2

About this Research 5

Executive Summary 7

Key findings 9

1. Australia is attractive for capital investment, but the current regulatory environment could undermine its natural advantages 10

2. Labour costs and availability are the biggest threats to today’s projects and tomorrow’s investments 13

3. Project leads are preoccupied with workforce management issues 17

4. Aggressive growth targets, increasing demand and high labour costs are driving efficiency 22

5. Standard internal KPIs—while heavily in use—may not be the right KPIs to give boards true measures of capital project effectiveness 25

Implications 29

Recommendations for Government: Building a sustainable environment for capital investment 30

Recommendations for Industry: Run capital projects like businesses 33

Moving to an integrated capital project business model: Six areas for high performance in capital projects 36

Front-end loading project planning 44

Conclusion 48

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Ground-breaking is the most accurate description of the Australian capital projects operating environment. Australia’s mining and energy industries have never experienced the level of investment, complexity, innovation and scrutiny now required to bring new projects to operation. The industry is not alone in trying to navigate this new landscape. For the first time on this scale, Australia’s State and Federal Governments are being challenged to create a regulatory framework that balances future growth and employment with the needs of the environment and community.

Australian capital projects themselves are unparalleled. They are larger and more complex than ever before—in Australia, or in many cases, anywhere. Technical innovation is enabling access to new resources in even more challenging locations, and Joint Venture Partnerships

(JVPs) are increasingly necessary for cost and risk sharing, demanding new governance arrangements between unnatural partners.

Capital investment in the Australian mining and energy industries is not just large, but unprecedented. The total capital expenditure (capex) of the 94 advanced projects in the minerals and energy sector in Australia at the end of April 2011 was a record $173.5 billion1, an increase of 31 percent from October 2010. On top of this, there are more than 300 less advanced projects in the pipeline with a potential capex of more than $256 billion.2 The word ‘project’ barely seems relevant for the immense size and complexity we are seeing, and increasingly, these projects behave—and need to be run—like large-scale businesses, with a vision, clear, targeted outcomes and KPIs that drive high performance.

Many companies are making twenty- and thirty-year investments in the ‘lucky country’3, showing confidence for the long term. There is much to be optimistic about: Australia’s open democracy and OECD status creates comfort among investors; resources are abundant and of high quality; workers are skilled and strategic markets close by.

With so much investment, so many expectations and so many firsts, what does the future hold for capital projects in Australia? What are the challenges and threats facing companies investing here? What should mining, oil and gas leaders do today to safeguard their operating future for tomorrow? And what can governments do differently to foster sustainable development?

This report addresses these questions and provides an insight into the issues, ideas and innovations shaping the way capital projects are being managed in Australia today.

Introduction

• First floating Liquefied NaturalGas (LNG): Royal Dutch Shell hasapproved Prelude, its world firstfloating LNG project off WesternAustralia, at an estimated capitalcost of up to $11.8 billion to allowaccess to major gas deposits hundredsof kilometres from the coast.4

• New size and complexity, combinedwith innovation: The $43 billionGorgon project, operated by Chevronin a joint venture with ExxonMobiland Shell, is one of the world's largestnatural gas projects and the largestsingle resource project in Australia'shistory. The complexity and sheer scaleof Gorgon is unmatched. The Gorgonproject has also been recognised bythe Carbon Sequestration LeadershipForum (CSLF) for its Carbon DioxideInjection Project, which aimsto reduce the Gorgon project’soverall greenhouse gas emissionsby approximately 40 percent.5

• Queensland’s first LNG exports:Approvals have been given to proceedwith Queensland’s first export LNGplants. Three of the eight proposalsoriginally announced have beenawarded state and federal governmentenvironmental approvals to proceedwith their projects. The eightproposals, at full capacity, wouldrepresent a potential LNG exportmarket for the state of about 50million tonnes per annum.6

• Immense expansion: BHP Billitonplans to expand its Olympic Damoperation in Southern Australia on adramatic scale. Olympic Dam is theworld's largest uranium deposit anda leading copper and gold resource.Planned expansion will generate up to6,000 new jobs during construction,a further 4,000 full-time positionsat the expanded open pit mine andan estimated 15,000 new indirectjobs. Independent economic analysissuggests that the project will add

more than $45 billion to South Australia’s Gross State Product over the life of the mine.7

• Integrated mining on a newscale for Australia: Rio Tinto isexpanding iron ore production inthe Pilbara region (of Australia)from 225 million tonnes per annum(Mt/a) to 333 Mt/a by 2015, adramatic increase in capacity. Thiswill be the largest integrated miningproject in Australian history.8

A catalogue of firsts: Capital projects in Australia are breaking new ground

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Figure 1: Advanced minerals and energy projects, April 2011.9

capital city

Mine/platform

Legend

Capital expenditure

$ 0 – 100 m$ 101 – 500 m$ 501 – 1000 m$ > 1000 m

proposed gas pipelineProcessing facility

$ 0 – 100 m$ 101 – 500 m$ 501 – 1000 m$ > 1000 m

This data does not include the following major capital projects which have recently reached Final Investment Decision:APLNG (QLD) – pipeline/processing > $1000m (July 2011)Wheatstone (WA) – mine/platform > $1000m (October 2011)

Perth

Darwin

Brisbane

Sydney

CanberraMelbourne

Adelaide

Hobart

Wollert to Euroa gas pipeline

South West Queensland Pipeline (stage 2 and 3) gas pipeline

Moomba to Sydney gas pipelineRoma to Brisbane gas pipeline

Goonyella to Abbot Point coal infrastructure

Western Australian iron ore infrastructureWestern Australian iron ore infrastructure

6

9

18

1112

16 13 14

2

519

1

4

15

17

3

7

882

83

10

2021

22

2430

31

39

25

2335

33

38

26

3637

27

32

34 28

29

84

40

41

42

81

79

80

78

43

48

50

72

73

76

67

45

74

77

44

49

51

57

46

53 70

75

56

47

525455

58 5961

62

64 6566

6869

71

6360

85

4

Mine/platform

Queensland

1 Abbot Point coal infrastructure

2 Newlands Northern Underground coal expansion

3 Hay Point Phase 3 coal infrastructure

4 Broadmeadow coal

5 Burton coal

6 Integrated Isaac Plains Project coal

7 Queensland Curtis Island Project LNG

8 Gladstone LNG

9 Rocklands to Kabra rail duplication coal Infrastructure

10 Oaky Creek coal

11 Blackwater System Power Upgrade coal infrastructure

12 Curragh coal

13 Ensham underground coal

14 Middlemount (stage 1) coal

15 Kestrel coal

16 Lake Vermont coal

17 Daunia coal

18 GSE 140 coal infrastructure

19 Moranbah ammonium nitrate

20 George Fisher lead, zinc & silver

21 Black Star Opencut Deeps lead, zinc & silver

22 Ernest Henry underground copper

New South Wales

23 Narrabri stage 2 coal

24 Wilpinjong coal

25 Bengalla expansion stage 1 coal

26 Mt Arthur RX1 project coal

27 Ravensworth North coal

28 Kooragang island coal terminal expansions

29 Newcastle exporter terminal coal infrastructure

30 Kooragang island ammonia

31 Metropolitan longwall coal

32 Cadia East gold

33 Rasp Mine lead-zinc

34 Ulan West coal

35 Boggabri opencut coal

Victoria

36 Turrum gas

37 Kipper (stage 1) gas

38 BassGas (Yolla Mid Life Enhancement) natural gas

39 Woods Point gold

South Australia

40 Honeymoon uranium

41 Kanmantoo copper

42 Ankata copper

Western Australia

43 Mt Marion lithium

44 Ravensthorpe nickel

45 Spotted Quoll nickel

46 Koolyanobbing iron ore

47 Karara Project iron ore

48 Extension Hill DSO iron ore

49 Windimurra vanadium

50 Mt Magnet gold

51 Western Turner Syncline iron ore

52 Jimblebar iron ore

53 Brockman 4 iron ore

54 Sino Iron Project iron ore

55 Macedon gas

56 Coniston oil

57 Dampier Port Expansion iron ore infrastructure

58 Gorgon LNG

59 Pluto LNG

60 NWS CWLH oil and gas

61 NWS North Rankin B LNG

62 Cape Lambert Iron ore infrastructure

63 Reindeer gas field, Devil Creek gas processing plant

64 Port 55-155 Mtpa iron ore infrastructure

65 WAIO inner harbour iron ore infrastructure

66 WAIO optimisation iron ore infrastructure

67 Nullagine gold

68 Rapid Growth 5 iron ore

69 Chichester hub 95 iron ore

70 Marandoo iron ore

71 Hope Downs 4 iron ore

72 Leonora gold

73 DeGrussa copper

74 Talc redesign nickel

75 Tropicana Joint Venture Project gold

76 St Ives (Athena underground) gold

77 Mt Weld rare earths

78 Argyle diamonds

79 Montara/Skua oil

80 Kitan oil

Northern Territory

81 Cosmo Deeps gold

Processing facility

82 Yarwun alumina refinery expansion - QLD

83 Boyne Island smelter aluminium - QLD

84 Dandenong Micro LNG plant - VIC

85 Worsley Refinery Efficiency & Growth Project alumina - WA

Research Methodology

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About this Research

This report is based on primary research conducted by GA Research on behalf of Accenture. GA Research conducted 24 in-depth interviews with leaders from the Australian mining, oil and gas industries between May and July 2011.

Participants interviewed included project leads, as well as those with strategic and operational oversight of large capital projects. Most were responsible for multiple projects. Project sizes ranged from just under $1 billion through to $30-$50 billion. The majority of participants were from companies which were owner/operators (88 percent) and there was a mix of Australian, Global and Joint Venture organisations.

Note: All dollar figures referenced in this report are expressed in Australian Dollars (AUD) unless otherwise indicated.

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Figure 2: Project size (n=24) Figure 3: Project Stage Figure 4: Project Sector

Under $1bn $1-5bn

$5-30bn Over $30bn

16.7%

45.8%8.3%

29.2%

Scoping Pre-FID Post-FID

Construction

16.7%

20.8%

12.5%8.3%

41.7%

All

Oil and Gas Mining

Infrastructure

33.3%

54.2%

12.5%

Participant demographics:

Note: n=24 for all graphs and charts in this report relating to participant responses.

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Executive summary

Australia is attractive for long-term capital investment, according to participants in this study. There are strong motivating factors for doing business in Australia: high-quality workers, abundant natural resources, proximity to key Asian markets—and all of this against a backdrop of political stability in the broadest sense. Companies ‘know where they are’ with Australia and are making long-term commitments to sourcing and skilling future workers and building infrastructure. In addition, local content requirements are contributing to skill building and embedding operations within communities.

However, in contrast to this long-term optimism is a sense of frustration among participants with the demands imposed on them today. Regulation is seen as complex and fluid, the threat of new taxes is affecting planning and budgeting, and a lack of integration between government departments is adding significant slippage to

timelines. On top of this, labour and equipment costs are soaring, productivity is sub-optimal, and managing diverse sets of stakeholders can be problematic. Australia also presents major workforce challenges—skills are scarce, training needs are high as people rotate from one industry player to another, and loyalty is low.

Is this frustration enough to push capital investment out of Australia or halt existing projects? Respondents were divided. Some believe labour availability may jeopardise future projects; others observe that projects have not actually slowed down or been stopped due to this issue—and for some, automation and remote operation are already providing alternatives. Some say the length and unpredictability of the approvals process is a significant threat to project sustainability; others understand the value of, and need for, all the process steps.

What they did agree on is the need for industry to take ownership of these issues and find ways to work together—instead of in competition—to increase the labour pool, build skills, develop local content and improve relations with government and the community. Already, some companies are proactively introducing new workforce management initiatives and increasing their focus on training, technology and supplier relations. Many are deeply engaged with local communities and are going beyond government requirements on environmental compliance.

While there are many good practices cited in this report, there remains a fundamental reliance on standard capital project management practices. Respondents admit project costs and schedules are frequently missed—and independent data confirm that major capital projects frequently fail to deliver on budget, schedule and performance plans.10

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So what needs to change?

Accenture believes these immensely large and complex undertakings increasingly need to be managed like businesses—and capital project executives must think and act like business owners—not project managers. According to this research, it seems participants agree. They repeatedly highlight the generic business issues of workforce management, defining and measuring success, stakeholder relations, planning, monitoring and governance—issues that need to be addressed effectively to enable robust decision making on multi-decade projects.

Accenture believes capital projects should behave like businesses by focusing on six areas for high performance that align with the capital project lifecycle. With many of Australia’s capital projects at an early stage, the timing is right to start with the end in mind, and front-end load project planning to improve outcomes and avoid costly retro-fitting later.

Capital project ‘businesses’ need a vision, strategy, Key Performance Indicators (KPIs) that reflect target outcomes, the right technology to support those outcomes, and a stakeholder management strategy to facilitate the right decisions—in the small window of opportunity when they should be taken.

The discipline and value put into engineering plans and the build of the asset must be replicated in the early preparation of the supporting organisational structures, processes, technologies and business applications— with stronger reference to industry and non-industry good practice. Without a holistic view of the end state—and transparency across all the steps required to get there—assets will not reach their full potential in a timely and cost-efficient manner. As one participant put it, “We believe, based on industry benchmarks, that the front end is where the value is created and the back end is where it’s destroyed.”

“We need to be more thoughtful and perhaps think differently when we’re saying these are all the projects we want to deliver in a particular space of time. How long is that going to take?

What’s the doability? I think that’s the area that needs a fair bit of work. We always seem to underestimate how long it takes to get stuff done. We say we’ll do that in six months and it ends up taking nine.

Well, why is that?”

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Key findings

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1 Australia is attractive for capital investment, but the current regulatory environment could undermine its natural advantages

Multiple factors make Australia an attractive location for capital projects. Participants gave Australia’s resource availability and its general political status as the top two advantages of its operating environment.

Australia has the resources…

Seventy-one percent of participants spoke about Australia’s abundant resources as a natural advantage. As global demand for resources increases, Australia is gaining a reputation among international companies not only for its wealth of resources, but their diversity, quality and accessibility. As one respondent said, “At the end of the day, it’s the quality of the project that means you can take the risks, whatever they may be. Clearly the quality of the projects in Australia is bringing some high quality companies in.”

Participants mentioned a range of commodities, including gas, iron ore and coal, all perceived to be desirable. Australia’s location helps, with many participants citing proximity to large Asian LNG markets, reducing transportation costs and time to deliver compared with producers such as Qatar.

Twenty-one percent of participants raised the issue of remoteness of Australian resources and projects, although some explained that remoteness of resources was actually a universal issue in their industry: “The infrastructure issues are a challenge in every place. By that I mean that ports and rail are a challenge in Australia just as they are in the US and China.”

And you ‘know where you are’ with Australia…

Australia is perceived to be open and democratic: 71 percent of respondents mentioned Australia’s OECD status, its safe and stable political and economic landscape as major factors in investment decisions. Participants feel confident about making basic assumptions for the lifetime of their projects: “If you had exactly the same deposit in one place versus another, the fact that sovereign risk is lower in Australia is probably the most important aspect. If you were going to put a dollar into Australia or Africa, you’d be saying, ‘Well at least I know what I’m going to get in Australia, whereas in Africa, I’m not quite sure’.”

Some even comment that political unrest in other countries heightens awareness of Australia’s stability and may provide short-term commercial

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advantage: “The instability in the Middle East allows you to contrast a little bit more with the political stability in Australia. If I want to sell LNG, then customers are going to look at us and say, ‘I’d rather buy your gas than the gas coming out of the Persian Gulf’.”

This feeling of ‘knowing where you are’ with Australia was mentioned by a number of participants, who also feel they understand relevant industry standards and what compliance looks like in Australia. Almost a third (29 percent) believe that state/territory governments, in particular those of Western Australia, Queensland and the Northern Territory, recognise the importance of the mining industry and strive to balance the industry’s interests with those of the community.

But the current regulatory context is perceived to be an issue…

From the top four difficulties identified with the Australian operating environment, two relate to the regulatory and approvals context: 42 percent of participants mentioned the shifting nature of Australia’s regulatory environment and 38 percent talked about the complexity of the approvals process. They suggest that these two issues, combined with labour and cost problems, could be driving investment away from Australia.

The regulatory context is perceived to be not only difficult, but changing. There is a sense that the perceived lack of consultation on the recent Minerals Resource Rent Tax (MRRT) is an indicator of future policy unpredictability, making it increasingly difficult to plan for and manage the risks of further changes that may require a major re-think of a project:

“The regulatory environment for our particular project and the fluidity of it, and perhaps the possibility of being hijacked for political agendas are our regulatory concerns. Certainly nobody questions the need to look after the environment, to look after the social impact on the people of Australia, but it’s when things start to swing around suddenly...”

However, at the time of our interviews (May – July 2011), there was acknowledgement among some participants that the government was working hard to consult on the proposed carbon tax, and there was a more positive sentiment about that process: “With all fairness, the carbon tax is an idea. The actual policy is not articulated yet and is in consultation—which is in contrast to the Resource Profit Tax and MRRT, where decisions were made without consultation with the industry.” Certain participants also say that state governments are working to consult on other proposed legislation.

Figure 5: Reasons to do business in Australia and short-term issues reported by participants.

Stable political and economic environment

Attractions of the Australian environment…

Availability of natural resources

Quality of the workforce

Government recognises importance of the sector

Proximity to key markets

71%

71%

46%

29%

17%

Uncertainty about Australia’s regulatory environment

Difficulties of the Australian environment…

High costs of construction in Australia compared to other regions -jeopardising investment in Australia

Availability of labour (79%) and problems with industrial relations (25%)

Unpredictable and onerous government approvals process

Maintaining efficiencies and keeping costs down

42%

42%

38%

21%

79%25%

Note: total percentages may not add up to 100 as participants were invited to provide more than one answer.

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Naturally, country-level regulation has its limitations, and some participants aspire to a more regional and/or global view of carbon regulation, to drive the right behaviours more broadly and for the longer term: “It’s a little bit ironic that as an LNG producer, we produce gas in Australia in order to replace coal that would otherwise be burned in China, for example, and we reduce greenhouse gases by a factor of two, but we get penalised for the greenhouse gases that we generate. In an ideal world, there would be some global emissions management scheme.”

And approvals are seen to be disjointed and unpredictable…

Thirty-eight percent of respondents raised issues with the process of government approvals—with multiple levels of government involved, a lack of accountability, time-consuming processes and difficulties navigating legislative requirements that can overlap and conflict with each other.

Companies feel they cannot predict how long approvals will take—and this affects the predictability of their project schedule and associated costs. One respondent explained the issue, “In Western Australia, you can’t do parallel applications—you must wait for your Environmental Act approval before any other approval. Sometimes you wait three years for an environmental approval; you can’t physically start work without the approval. If you don’t know when approvals are coming and how long they will take, it’s difficult to get a firm price negotiated to do the work. If you haven’t got a firm price, it’s difficult to get it financed and, in any event, if it’s debt financing, you’re not going to be able to draw down your money until your approvals are in place. So really, you’re going in a vicious circle.”

That said, participants in general do understand the need for, and value of, the approvals process: “I don’t think we are being asked to do anything in the approvals process that’s not in the

public interest. We’re not being asked to do things that do not have a sound basis in good community outcomes and people are entitled to know certain things about the project.”

Others mentioned that, when working with companies with Chinese (and other overseas) involvement, effort needs to be dedicated towards educating shareholders and partners about the approvals process, the extent of the requirements—and when true ‘approval’ has really been granted (as opposed to one process step in a longer chain). In addition, some participants believe that the current approvals process might put foreign companies off investing in Australia, mentioning in comparison, the lack of ‘green and red tape’ in locations such as Africa. However, this must be balanced against Australia’s politic stability.

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2Labour costs and availability are the biggest threats to today’s projects and tomorrow’s investments

The biggest single difficulty of the Australian operating environment for large capital projects is the availability of labour, with 79 percent of participants mentioning this issue. Labour shortages may delay delivery and thereby increase costs; scarce labour is also more expensive and that scarcity equally drives up costs.

Generally, getting the right people is tough and costs a lot…

The recent increase in the number of capital projects has resulted in much greater demand for labour and a shortage of experienced and capable staff for building and subsequently running operations. Companies have to pay more to get the right people, in a very competitive environment, with one participant saying, “There’s a shortage of people at all levels. The professionals that I employ in Australia are paid a lot more than

those employed just about anywhere in the world. If you take a project controls manager in Australia, he probably gets about a hundred grand more than the same guy in the US.” Labour costs are also affecting construction, with competition for the same people from non-resource industry build programs, such as the National Broadband Network. Despite this, many participants comment that most roles can be filled and projects do progress, despite the higher labour costs. One says, “I don’t know of any project that has been stopped or slowed down because of a lack of people. If resources are the big issue, getting people, then we should be seeing it now.” So is the labour shortage overblown?

There is a perception that labour shortages are much more pronounced for projects in Western Australia than for those in Queensland and New South Wales. The ‘fly in, fly out’ model for staffing Western

Australian projects comes at a high cost and some participants mention the increase in projects in New South Wales and Queensland pulling people originally from those states back closer to home.

The reduced supply of skilled people may be driving ‘poaching’ between companies, artificially inflating costs, when a longer term solution is required across the industry to address training and skilling: “What the industry has done to a certain extent is rob from each other, and the actual capacity of the industry doesn’t go up terribly—just the cost goes up. We need, as an industry, to bring more people in and build skills, rather than just increase the cost of what we’ve got.”

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A lack of experience is putting projects at risk…

A lack of experienced people is being felt at all levels, with some senior management teams having less experience than participants feel is necessary for directing such complex projects. As one participant said, “The overruns that are occurring in projects, the amount of capital we destroy at the moment is just astonishing…it is [due to] putting people into roles they’re not able to do. As more and more projects have come along, we’ve promoted less and less capable people up into more and more senior roles.” A lack of experience may also be affecting understanding and management of risk. As another respondent says, “No one is prepared to be accountable. Everybody sort of becomes pseudo risk-averse, but in fact in the process of doing that, they actually open themselves up to more risk.”

Any lack of management experience is likely to exacerbate the general skills shortages on capital projects, with the same issues being experienced by contractors equally.

Industrial relations are complicating matters…

Twenty-five percent of participants mentioned industrial relations as one of the main difficulties of operating in Australia. They feel that the industrial relations regime is allowing unions to drive up the cost of labour by negotiating higher pay rates and creating perceived roadblocks to bringing in foreign labour, exacerbated by difficult visa conditions: “It’s quite difficult to bring in foreign resources. The government is taking some steps to improve this aspect and should allow more easy access to visas. There is a strong union aspect—the constraint on the industry is coming from industrial relations in Australia.”

Certain respondents felt that the labour—and immigration—issues might potentially lead to reduced investment in capital projects in Australia, with one saying, “We don’t allow more qualified people to be attracted here, so at the end of the day, we will invest overseas. It’s become too hard to do business in Australia.” Yet others, as previously mentioned, believe that labour shortages are not actually holding up projects—though they highlight labour as a concern for the future.

Nevertheless, some participants urge caution around increasing immigration to fill roles that may not be permanent, with the risk that the market will normalise over time and immigrants may find themselves unemployed.

79%

42% 42%

38%

25%

21%

8%

Availability of labour

Regulatory environment

Increased costs

Industrial relations

Community issues

Infrastructure demand

Approvals process

Figure 6: Challenges operating in the Australian environment.

Note: total percentages may not add up to 100 as participants were invited to provide more than one answer.

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Seventy-nine percent of participants commented on the low availability of labour as a constraint for now and for the future. In the short term, many believe that re-training and (limited) immigration are the solutions. For the long term, many participants mention programs and initiatives their companies are undertaking to skill students to be future workers. Approaches include setting up a training consortium to build industry skills, or focusing on young students: “We’re on a 30-year project so we’ve got some very foundational programs to develop skills and interest people all the way down into middle school—there is a need to grow a longer-term sustainable workforce.”

Many comment that training should drive development of multi-skilled, flexible workers, who can adjust to the job roles of the future: “We want to guard against building an expectation

for a whole bunch of welders to have continuous and ongoing jobs. We’re much better off taking the money associated with those projects and investing it in infrastructure and other stuff that allows those welders to be trained in other industries, so that we are competitive in service industries and whatever else. So train them to be operators, for example.”

Local content is also part of the solution: for example, local sourcing of skills for maintenance and emergency management may be more convenient. Many participants also recognise the need to balance local and offshore sourcing to keep skills here for the future: “The challenge is to make sure we get the right amount of stuff built here so that we keep a vibrant services economy going, so that we’ve got people and skills and knowledge to be able to maintain our stuff here in Australia.”

Skilling for the future: Responses to support the talent pipeline

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And local content requirements, while manageable, generate split views…

Fulfilling local content requirements does not seem a major concern for most participants, with those from smaller organisations often reporting that they have few requirements, and those from larger organisations saying that, while they are subject to more extensive requirements, these do not cause significant issues. While some larger organisations have their own internal targets for local content use, others feel that targets are unhelpful and do not drive the right behaviours.

Views are split about the business value of local content. Much of the commentary around the advantages of local contractors focused on the ‘win-win’ of supporting the local

community and generating the same or higher quality outcomes. One participant remarked, “We try and get as many local contractors as possible because it actually helps the local community from an economic perspective and it’s often cheaper as well. You normally get good quality, so for me that’s almost a bit of a no-brainer.” For example, transport costs can be minimised through local content. However, others commented that local content was often more expensive. Some point out the advantage of physical proximity to suppliers and manufacturers for the purposes of inspections, and the broader opportunities for community engagement—but without losing sight of competitiveness.

Other respondents are far more focused on cost and predictability, with no qualms about sourcing from overseas if comparable quality can be achieved at lower costs.

"We try and get as many local contractors as possible because it actually helps the local community from an economic perspective and it’s often cheaper as well. You normally get good quality, so for me that’s almost a bit of a no-brainer."

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3Project leads are preoccupied with workforce management issues

Seventy-one percent of participants cited workforce management as a significant concern within their organisation. With more and bigger projects underway, large and diverse groups of employees must be mobilised and managed effectively, and standardised processes and interfaces understood and adhered to. The context of frequent JV arrangements and high staff turnover makes for further difficulty.

Optimising employee productivity is a concern, but the workforce is still perceived as high quality…

Some participants talked about difficulties with keeping staff focused and maintaining productivity, with unprecedented competition for people and so many competitor

opportunities that may pay more for less. As one respondent said, “I look at the remuneration they expect for the output they want. There’s a huge cultural challenge, a cultural shift that has happened in the last 10 to 20 years.”

This productivity issue is perceived to be driving many projects to be less efficient than they could be, and have been in the past. Previously achieved productivity advances seem to be undergoing a reversal: “We’ve had a lot of improvements over the years in productivity in Australia and we’re losing ground there.”

Nevertheless, 46 percent of participants say the Australian workforce is highly educated and skilled. A strong mining culture has been forged in Australia over time, and a strong pool of knowledge created among local workers. In

addition, a number of participants talked about Australia as an industry leader and innovator in some aspects of production and operations, a knock-on effect of long-established industry knowledge and the skills of the workforce: “Australia is a centre of excellence in the resources business. A number of mineral processes were invented in Australia. There is a body of expert knowledge in Australia.”

And fostering a health and safety culture presents some particular challenges in Australia…

Many participants said their organisations went beyond the health and safety requirements mandated by law. They view health and safety as ‘part of how they do business’ that has to be done well: “It’s a constant worry

18

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that somebody’s going to get hurt. Is it something where we accept anything other than good outcomes? No. So we don’t see that so much as a challenge or an impediment. We just see it as part of the business.”

Their main difficulty is aligning workers’ behaviour with safety requirements and expectations. Firstly, staff turnover and the scale of projects makes consistent training and understanding around expectations difficult, and such frequent training is costly. Secondly, a number of participants with international experience specified cultural and behavioural challenges with Australian workers that may result in worse health and safety outcomes than in other countries. This disparity is perceived to centre around cultural attitudes to following rules—or not as the case may be. One participant said regarding Australia, “Complying with

rules and procedures is not something that we as a nation like to do. ‘She’ll be right, no worries’ is a culture that has an impact on compliance in Australia.”

Participants believe that employees in Asia or developing nations in other regions are far more likely to follow rules and processes without seeking short-cuts. As one participant says, “We did a job in Madagascar—you train people there, they do exactly what you tell them, there is no deviation and because of that, you can get better safety results.”

With labour issues affecting contractors too…

Participants note that the availability and increasing cost of labour are affecting their ability to source, retain and manage contractors for efficient outcomes. Contractors are also

struggling to find capable people—with contractors possibly competing for the same people as the respondents’ organisations—and there is a perceived shortage of contracting companies.

Some participants feel that they are getting less experienced staff from contractors than they expect, as a knock-on effect of plenty of work and few people available: “They’ll give you a price but when it comes to executing a contract, they put forward the A team and then you get the B team or the C team, because the key people that they’ve nominated have been snapped up.” This affects organisations’ own productivity and progress against their plans.

Figure 7: Key Unprompted Internal Challenges.

71%

54%

25%

21%

Workforce management

Ability to attract staff to fill key roles

Management of change

Efficiencies and keeping costs down

Note: total percentages may not add up to 100 as participants were invited to provide more than one answer.

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Many participants say a safe project is an efficient project: “In a lot of cases, safety is an outcome of a well-run organisation.” If project teams follow the right processes and stick to their agreed plans, safety can be maintained and projects are more likely to be completed on time and budget.

Maintaining safety on projects requires sustained effort around communication and training, to keep safety considerations top of mind and demonstrate that management is serious about safety. For example, “Every meeting starts with the safety discussion; every visit includes interactions with everyone on site about safety.” This consistent focus is particularly important in the context of large-scale projects and high volumes of people being brought in from different backgrounds.

Implementing systems and procedures is not enough—they may help companies reach minimum standards, but behaviour change is also crucial. Cascading of behaviours down the management chain is vital, with employees needing to lead the charge: “You’ve got to cascade [the health and safety approach] into workmates looking after other workmates.” One participant also talked about two types of behavioural programs to attack the issue: “We run behavioural safety programs at both the craft and supervisory level. One’s sort of ‘peer on peer’ and one’s management or supervisors.”

Injuries of all sorts—not just significant injuries—should be dealt with quickly and methodically: “We have a fairly strict injury management process, so if someone has a sore back, if it doesn’t

get treated straight away, then it can turn into something worse, and so people are looked after fairly carefully from the minute an event happens.”

Australian workers may be less likely to follow rules without challenging them. Countering this cultural factor requires consistent communication of the personal benefits of safety procedures: “In Australia I think you have to pitch the story a lot more around what’s in it for the individual and the work group and why it’s benefiting them, so it takes a bit more time to get the message across.”

What’s working? Health and safety approaches on Australian capital projects

EPCm EPC Not sure yet Individual contractors

8%

58%

13%

21%

Figure 8: Contractor Arrangements

Mixed Reimbursable Lump sum Not sure

17%

46%

4%

33%

Figure 9: Contracting Strategy

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Engineering Procurement Construction Management (EPCm) contractors are used by 58 percent of participants, while 21 percent use Engineering Procurement and Construction (EPC) contractors. A further 13 percent said they were too early in the project to determine their contractor needs and a further 8 percent—usually smaller operations—said they used individual contractors for each function.

Participants talked about three broad approaches to contracting strategies: a mixed model, whereby different aspects of the project call for different strategies; a reimbursable strategy, where all work is done according to a schedule of rates; and a lump sum contract with a fixed price. The most prevalent contracting strategies were mixed (46 percent of respondents) and reimbursable (33 percent), with only 4 percent using a lump sum approach.

So how do organisations get the most value from their contractor arrangements? Almost half of all participants (46 percent) say they use a mixed contracting strategy, whereby different aspects of production call for different strategies to ensure that risk is managed appropriately throughout

the contract. New strategies are being developed, largely as a result of the pressure being applied by contractors who do not want to take on risk—and can push the risk back onto the project manager in a climate of scarce contractor resources. A popular approach is to use a schedule of rates against quantities to begin with, whereby the project holds onto the scope risk. Once the scope risk has been mitigated, and the definition of the required work is clear, then a lump sum arrangement can be made and the contractor takes on the execution risk. In these scenarios, clear risk definition is important: “For the contractor to accept a level of risk, the level of definition needs to be high. We’re finding that a number of contractors have been burned by taking on lump sum contracts with poor definition and therefore high risk, and we have seen attitudes change.”

Participants comment that project effectiveness can be undermined by fixed price contractor arrangements that may drive contractors to try and minimise their own costs: “It tends to be easier when you have a fixed price, but not always, because you have to monitor them [the contractors]. Time, safety and quality become issues

because they cut corners, whereas with cost-reimbursable arrangements, you don’t have so many issues with quality, because you’re paying for the time and for everybody on the job, so goals are aligned.”

It may also be more efficient for project managers retain risk, recognising that contractors may charge a premium for ownership of risks. One participant said, “We’re happy to take on a lot of the schedule risk ourselves, and at the end of the day, that results in cheaper contracts.”

In a highly competitive environment for contractor resources, more collaborative, long-term relationships are being forged with contractors: “There’s still a tendency to beat up on contractors, instead of working with them. It makes it much easier if you’re working together, than if you keep having the contract out and arguing about what it means.”

Participants agreed that role definition and accountability of contractors is vital and should be established at the front end of the project—particularly in the context of current reluctance by contractors to take on risk.

Engaging contractors: Strategies for the current climate

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4Aggressive growth targets, increasing demand and high labour costs are driving efficiency

Organisations are under increasing pressure to meet growth targets and take advantage of opportunities in China, in the context of rising costs and low availability of labour. Many are responding with information technology (IT) solutions, centralisation, standardisation and automation strategies, to reduce labour needs as well as deliver other benefits.

Technology is playing an increasingly important role…

Participants report using a broad range of analytics to support risk management, supply chain modelling, scenario planning and pricing and reporting. They say that these tools are critical for controlling large projects and optimisation of systems is considered crucial, and planned for, from the very beginning. Almost all participants say that they put operations people from the construction team into system planning activities, to ensure that the operational

perspective is captured and systems do not have unforeseen consequences for ramp-up and production.

The most common IT issue mentioned by participants is the integration of data across systems, with multiple sources of information and teams requiring it in different formats—and the practical challenges of making data available to multiple stakeholders: “It’s connectivity that’s the issue. We have multiple major contractors, and getting any information that flows between the operators and within the JV with our shareholders in the right way is a real issue.” They also prioritise data integrity and quality, and invest significant resources into maximising data and system confidence and robustness. Many participants said they had experienced past delays with transitioning from execution to operation due to poor quality data, and they were keen to avoid future issues.

Many felt they were performing well on data and Intellectual Property (IP) security, and these areas did not present particular challenges, beyond

investing enough upfront to establish good standards. Companies are taking steps to register what they consider to be their IP, but more generally, participants are pragmatic about the transfer of IP with employees from one company to another in the context of a fluid and globalised workforce.

Centralising and standardising functions and processes is prevalent…

Organisations are finding that centralising core skills or activities supports the efficiencies they need to find to meet growth targets. Project management functions and processes are changing, with a move away from business units being responsible for their own projects, towards a dedicated project management group that has input across a range of projects: “There is a business improvement group that’s all about how we make step change improvements to the way we do projects. We absolutely have to, otherwise we can’t deliver on the growth promises.”

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In the same vein, many organisations are focusing on greater standardisation of design and processes, capturing and replicating good practice from their other sites: “We’ve learnt a lot from elsewhere in the US so, for our project here, there’s going to be a lot of standardisation. Upstream, we’re building several facilities over time that are identical. It’s much more efficient to build the same thing over and over and we can get a learning curve, if you will.” Standardisation is also is likely to be relevant for operations in the ‘run’ state.

And labour issues are driving automation…

Many organisations are being driven towards greater automation by the current labour shortages and high wage costs. Some participants expressed their automation move not so much as a labour strategy, but more as a general way to establish a common delivery model, reducing the work required to oversee a project and allowing core people to perform the same functions across multiple projects at the same time. As one participant noted, “The

biggest recent change is in automation of a lot of equipment, remote operation and automation. This is partly driven by the fact that there are not enough people, but also partly driven by the fact that it’s safer. A lack of people and expertise and improved safety are really good drivers for automation and improved productivity.”

Some cautioned against allowing automation to reduce skill levels or understanding of process steps: “When things used to be done manually, there was a certain output. Since things have become more automated, certain processes have been forgotten. So we are going back and rediscovering some of those things.”

But views on the extent of process innovation differ…

When asked about process innovation on capital projects in Australia, most participants agree that the key driver is the cost imperative and, as such, process innovation is focused on reducing costs in a highly competitive environment: “Some of the innovation

is actually essential for the project to proceed—things like producing modules in South East Asia and floating them down to Australia. So your main construction work is not actually done in Australia. Without [these types of strategies] we just couldn’t do the projects we’ve got in Australia, we couldn’t afford it.”

Some participants believe that ‘true’ innovation is lacking, beyond that driven by cost imperatives, and that this is due to a lack of experience and understanding of what works on a large capital project among senior people. However, as described earlier in this key findings section, views on innovation vary and some participants see Australia as a genuine centre of excellence and innovation.

"The biggest recent change is in automation of a lot of equipment, remote operation and automation. This is partly driven by the fact that there are not enough people, but also partly driven by the fact that it’s safer. A lack of people and expertise and improved safety are really good drivers for automation and improved productivity."

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All of the participants interviewed for this research said they use extensive risk management procedures, with risk matrices and workshops to identify risks and develop strategies to mitigate them. They dedicate significant resources to risk management beyond the project development phase.

Most participants use internal and/or independent reviewers and facilitators as part of their standard approach, as well as calling in experts to assess specific risks on a case by case basis. Participants emphasise the need for external experts to work closely with the internal team, who hold the knowledge of, and experience in, the project. Risk registers and matrices are updated on an ongoing basis, using well-established processes, which

do not seem to conflict between JV partners in JV set-ups: “We manage it [risk] using a fairly standard risk matrix. Both companies [JV partners] have their own that they use, but they’re the same basic structure, where you look at potential impact and likelihood of impact in a matrix.”

Risk management and reporting often includes regular board updates, with one participant describing risk presentations as a standard inclusion in the materials that go to the board every month. Independent reviews of risk registers, as well as the registers themselves, may also form part of the board update. Some participants emphasised the importance of cross-functional input into risk definition and management: “We have what we

call integrated project reviews. So a fairly broad-based group of people come in from various functions, from both owners and operators, and review the project, including risk, and discuss the mitigation and whether we’re happy with where we are.” Below board level, many participants have a steering committee or other strategic governance function, part/all of whose agenda is to monitor risk management.

Risk management: Getting the processes right as well as the systems

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5Standard internal KPIs—while heavily in use—may not be the right KPIs to give boards true measures of capital project effectiveness

Participants are largely measuring success on their projects using a mix of four standard KPIs: cost (100 percent of participants mentioned), safety (96 percent), schedule (88 percent) and quality (63 percent). Are these the right KPIs to be focusing on? Costs and schedules are frequently missed, as many participants described in their interviews—so are the right things really being measured?

Effective management of change is vital for delivering on cost and schedule KPIs…Twenty-five percent of participants talked about managing change as a challenge. Particularly, staff must work together effectively in the project planning phases to create robust and realistic plans, underpinned by the right assumptions,

and minimise scope change during construction. Approaching planning consistently can be challenging when diverse employees are involved and assumptions may not be understood: “It’s making sure people get the right balance between being approximately right and not precisely wrong in their assessment of how much things are going to cost to build and how we’re going to build them.”

Participants emphasise the dangers of scope change during projects, and come back to the vital nature of the initial planning activity: “Most of the scope changes in projects are caused by omissions or errors in the original scope.” Where scope changes do occur—with some level of scope change recognised as a reality of a large and complex project—participants say a quick response is necessary to finalise changes promptly and minimise fallout.

A lack of skilled staff, as well as management attitudes, is affecting project controls and reporting functions. There is a lack of recognition of the importance of having the required staff in ongoing project controls roles beyond the monitoring and analysis phases, and during construction. As one participant said, “Project controls people don’t build anything. They’re there to report on it, make sure the project is on track. So if you don’t have the right project controls people or system in place, it doesn’t matter, you still keep going ahead because they don’t actually build it. That’s a real problem if you want to keep things on track—the project will more likely be a disaster actually.”

Managing change in collaboration with JV partners is also a challenge, with a number of participants citing difficulties with managing multiple

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Figure 10: Main KPIs Used.

100% 96%

88%

63%

25% 25%

Cost Health and Safety

Schedule Quality Environment Community

interests and agendas. Participants noted challenges both with even shareholding between partners and arrangements where one partner has more power. Among participants whose JV experiences were generally positive, nevertheless they observed that the speed and method of decision making could be improved.

Measuring efficiency and effectiveness…

While the cost and schedule KPIs being used are fairly standard, some participants are recognising a broader need to define success in terms of effectiveness as well as efficiency. Sixty-three percent of participants said that the quality of the final project—ensuring the project is delivered to specifications, and it does what it is supposed to do—is an

important measure of success. While many acknowledge that the success of the final outcome is more difficult to measure, they suggest that a good approach might be to quantify the time taken from the end of execution to ramp-up and to full production.

Similarly, a number of respondents are measuring safety performance in two ways that reflect the steps they are taking as well as the outcomes. The first is a measure of the number of accidents, incidents and injuries that occur. The second is a broader measure of behaviours and actions taken to mitigate and minimise safety issues, such as the number of training events, audits and similar activities that contribute to establishing a safety culture. Differing views were expressed about the compatibility of safety and cost efficiency: some participants believed that the most efficient

operations are also the safest and there was no tension between cost and safety; others believed that meeting required standards was sufficient and the most cost-effective approach.

Other important KPIs mentioned by participants were their impact on the environment (25 percent) and the local community (25 percent). Measuring local community engagement often includes two aspects: adherence to community agreements and a broader measure of reputational standing and perception among the community. Participants from the coal and gas industries were particularly focused on community-based metrics and actions to promote the advantages of these energy sources among local communities.

Note: total percentages may not add up to 100 as participants were invited to provide more than one answer.

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Many participants are concerned about negative perceptions from the community, and the potential for them to undermine companies’ ability to operate: “In the Hunter Valley, I think their tolerance for mining has changed. I think they’ve probably got to the point where they think the balance has tipped too much towards mining.”

A number of participants believe engaging with the community successfully requires informal and ongoing contact: “When you’re in a mining operation such as ours and you’ve become part of the community, you have to actually act like part of the community. So we spend a lot of time talking around the kitchen table and at the shire councils and put our case forward.” As mentioned previously, fulfilling local content requirements can provide

a real opportunity for skilling and employment of local communities, as well has supporting ‘hearts and minds’ community relations.

With a view to broader industry benchmarks…

Twenty-one percent of respondents said that, while meeting internal targets was important, comparing performance against the rest of the industry was the true measure of good practice and capital effectiveness. How does their performance compare with that of other companies doing similar projects? Have they delivered the best possible value for the asset? It is important to note that these types of industry benchmarks were not within the four standard KPIs (cost, safety, schedule, quality) most participants said were being used in their organisations.

Some participants highlight that capital effectiveness can be hard to measure, but should be pursued for a true sense of performance: “Capital effectiveness and schedule effectiveness typically aren’t measured by companies because they’re too hard to measure. It’s one thing to set yourself a budget and then measure yourself against that budget, but what if the budget was too fat or too skinny to start with? How does your budget compare to everyone else’s budget?”

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Cost blow-outs—Australia is more expensive than ever for capital projects

High, and escalating, costs are a major theme of this research—42 percent of participants cite increasing costs of projects as a major concern and talk about the high costs of construction in Australia versus locations such as the US. Labour costs are higher than ever and labour prices are filtering through to inputs required for construction. Regulation and approvals are slowing delivery and affecting costs—with 38 percent of participants talking about unpredictable and onerous approvals. Could the high costs of doing business really drive investment away from Australia, with its abundant resources and stable political climate? As one participant put it, “Australia is the highest cost environment in the world. If I look at subsea equipment and subsea installation, we apply a factor of about 40 percent over the Gulf of Mexico for ‘installed in Australia’.”

Minimising change: Embedding operations in the project

Research participants tell us that scope change can correlate with failure—and that upfront planning activities should mitigate later scope change as far as possible. To that end, participants are aiming to optimise plans and systems early, and almost all bring operations people into the construction team. Their role is to ensure that operational implications of decisions are considered before those decisions are made. As one participant says, “The earlier you get operators involved, the better chance you have of designing and building something that can be operated.”

Operations people come from a different perspective and offer a different viewpoint that helps balance different stakeholders’ priorities and inputs: “Our operations team understand that our intent is cost and

time, and their intent is operability and maintainability, so you have got to keep that healthy tension.” Failing to integrate operations people into planning activity effectively may cause delays in the project, require additional budget to build items later than desirable, and undermine relationships between operations and project teams.

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ImplicationsIn this section of the report we consider the implications of the findings for government and industry. We provide a ‘wish list’ from industry on what it would like to see from government, and put forward new ideas and strategies to help resources companies effectively manage capital projects in the Australian context.

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1. Streamline the approvals process

Most participants actively support a rigorous and transparent government approvals process. They are not looking for shortcuts—but do want simplicity, government accountability and clarity, to support their industry and continue to attract investment to Australia. The biggest issue seems to be the unpredictability of the process—which in turn, affects certainty of project schedules and costs. The industry is behind the process per se—so what can be done to make approvals more efficient and effective?

Clarify federal and state ownership Participants are unclear about the division of responsibility between federal and state authorities. They advocate the approvals process being owned entirely at either the federal or state level—rather than being partially owned by both levels of government. Participants are also looking for a clear sense of who holds ultimate responsibility—

and consistent application of that responsibility: “We quite often get Federal Ministers overriding State Ministers on what really should have been a state approval.”

Simplify and join up the process—and make it quickerParticipants want a more integrated approach to the approvals process across government departments, to help them navigate the process and increase accountability for outcomes. They want the government to review the process from an end-to-end perspective and make the steps and interactions simpler and more integrated, and particularly cut the time taken to gain approvals: “The process is rigorous. It takes a lot of time. It costs a lot of money, but it’s the time which is the bigger issue.”

They feel government departments need more resources to handle approvals effectively, particularly given the large numbers of capital projects being planned and executed in the current climate. Enabling some degree of parallel applications would

also help save time and cost, without circumventing requirements. The best solution would be a ‘one stop shop’ for all approvals activity, with a single government organisation responsible for, or coordinating, every element. Ideally, the whole process would be overseen by ‘case managers’, who would provide a single point of contact for companies. There is recognition that state governments have been trying to join up the process—and that, on occasion, a ‘one stop shop’ is available at the state or even federal level: “For some of the very big developments that are going ahead, many of the state governments will put up a ‘one stop shop’ that you can approach and they will have a fairly senior bureaucrat in charge who will work with all of the departments to get something through.” Participants wholeheartedly support this type of integration and would like to see it implemented more generally, with some observing that the Government of Western Australia is taking steps in this direction already.

Recommendations for Government: Building a sustainable environment for capital investment

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Resolve conflicting or overlapping requirementsParticipants also want increased clarity around requirements and help addressing issues, with one saying, “The concerns that we find are either that we’ve misinterpreted what the requirements are of a particular body, or they’re in conflict.” In cases of conflict, participants want accountability and proactive action from government to resolve issues. One comments, “We have to foster the discussions between the various bureaucracies to come to an agreement as to what the answer is or what it is that is going to satisfy them.” Participants would also value removal of requirements that are duplicated across more than one process step.

While many participants feel the government understands and supports the resources industry, they want help to reduce ‘green and red tape’, to safeguard future investment in Australia and support quality execution of projects.

2. Support the right skills for the future

Continue to engage with industry on developing talent earlyBetween now and 2020, the Minerals Council of Australia estimates an additional talent need of 86,000 people for the mining industry.11 Many participants’ companies are already engaging with students at much younger ages, to promote their industry and develop future workers for both building and operating assets. Participants think multi-skilled, flexible workers will be successful workers for the future. Operations skills are particularly hard to find, say some participants. So what can the government do? Continue to engage with the resources industry on skills development and help link these requirements with higher and further education.

Continue to set balanced local content requirementsState government local content requirements for larger organisations, while perceived as onerous by some participants, generally seem to be setting the right tone for local skills development. These requirements may also be driving companies to think more about how local content could be valuable and develop their own management targets, thereby maintaining focus on local contracts.

Local content is often perceived by participants to provide economic benefit for local communities, while developing skills in the right location and for the long term. Participants value local skills and recognise their role in safeguarding them: “If equipment comes off the boat and it’s already got the cables run and the motors installed and it just needs a few bolts and some plugs put on when it arrives in Australia, then where are our electricians going to get their apprenticeships and training?” Government appears to be getting it right on local content and driving the right behaviours through its requirements.

3. Foster more consultation with industry

Ease the labour shortage with better industrial relationsIndustrial relations are cited as a significant difficulty of operating in Australia by 25 percent of participants. They want help from unions to stabilise pay rates and support short-term access to foreign labour. Unions are not always perceived to support companies’ interactions with their workforce: “The Fair Work Act has created an environment for unionisation in industries which had moved to direct agreements with the labour force.” Salaries continue to rise: in 2011, according to Hays Plc, a specialist recruitment company, the average oil and gas industry salary in Australia was over $143,000 (expressed as US Dollar equivalent), higher than that of any other country examined by Hays.12

Many feel that unions are opposed to immigration and influencing the government in this respect; participants are looking to the government to continue supporting easier visa processing for the overseas staff they feel they need, and are open to flexible visa durations (for example one year, five years or other time periods). Enterprise Migration Agreements (EMAs) announced by the government in May should help the resources sector source temporary overseas labour more easily in the short term.13

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Increase regulatory certaintyParticipants are seeking more confidence about potential legislation and how it might affect their operations—42 percent cited regulation as a big concern. Participants would have wished for greater consultation around the recent MRRT and feel uncertain about the future as a result. Regulatory confidence is crucial when planning schedules and costs and assessing risks, and earlier and more extensive consultation on proposed legislation would help. Participants emphasise that Australia is part of an international market and regulatory certainty remains important for attracting investors.

Participants want to consult earlier and more thoroughly on both federal and state legislation, and feel they can help get requirements right, as well as providing a sense of practical implications of proposals before they are legislated. Participants mention the Queensland Government legislating on short-term traded gas markets as an example where consultation would have been beneficial.

Keep talking to the industry about carbonAt the time of interviews, participants acknowledged the hard work the government has put into consulting on carbon taxation—and the key message is that they should continue with this open approach. Participants are focused on carbon regimes that drive the right incentives and encourage the government to respond as holistically as possible: “You can’t generally transport the mine because it depends on the resources in the ground, but if you end up moving a downstream process away from Australia to China, for example, or India, then you’ll probably create more carbon dioxide in the environment.” Thinking more aspirationally, some participants talked about a wish for Australia to drive or be included in a broader regional/ global view of carbon regulation, to create the right incentives for the long term.

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Recommendations for Industry: Run capital projects like businesses

Talent and workforce management, stakeholder and supplier relations, defining and measuring success, planning, monitoring and governance—these are all general business issues, not specific to capital projects—and these were the issues mentioned repeatedly in this research, not the nuts and bolts of capital project engineering and execution. Participants also talked in depth about the structures and strategies businesses adopt to manage these issues—HR, Finance, Project Controls and KPIs. A recurring theme is the need to enable robust and rigorous decision making—with the right information going to the right people, underpinned by the right assumptions.

Many respondents feel they are doing well at project management, but the data show that getting it right is very difficult—capital projects consistently fail to deliver to plan.14

“We need to be more thoughtful and perhaps think differently when we’re saying these are all the projects we want to deliver in a particular space of time. How long is that going to take? What’s the doability? I think that’s the area that needs a fair bit of work. We always seem to underestimate how long it takes to get stuff done. We say we’ll do that in six months and it ends up taking nine. Well, why is that?”

Accenture believes that for success, capital project executives must think and act like business owners—not project managers. Capital projects in Australia must be run like businesses—their unprecedented scale, complexity and newness warrants a tailored vision, KPIs that reflect it, and an intense focus on realistic and usable planning and monitoring. Project leads need to recognise success in terms of time to operation—which means making sure their business is integrated with, and transparent to, the operator’s business from the very beginning. At the same time, operators need to set stronger direction earlier in the process, to ensure the workforce, technology, supplier and stakeholder relations approaches put in place by the project are in line with their own long-term vision for the asset.

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“I’m trying to manage this project through the lifecycle in a proper way. You can’t rescue a bad project through good construction. So if you choose the wrong option and then to try and recoup it through the construction process and save money in construction, you will never recoup the value, you will lose.”

“[We need] a recognition by all of the stakeholders that a stable or consistent approach matters to these major project decisions. That would be the thing that is concerning at the moment and would make it a much easier place to make decisions on multi-decade projects.”

The major capital projects lifecycle is an accepted management tool. Each phase of the lifecycle is defined by specific tasks, milestones and approvals, heavily weighted towards engineering and capital procurement requirements. While lessons learned and good practices are continually fed into the lifecycle management process, the fundamental focus remains on how to build an asset—not how to build a business. For example, establishing a project vision, strategy, and stakeholder engagement approach upfront is vital for success on very long-term projects, where the impacts of early decisions are amplified further down the road.

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Moving to an integrated capital project business model

So how do capital projects become businesses? Accenture believes capital projects need to move to a business framework by considering six key areas for high performance—from the outset of the project and throughout. By thoroughly assessing the needs of these six areas, related processes and systems, project teams and operators will have a much higher degree of insight into:

• The key business decisions that need to be taken;

• The key processes that need to be present;

• The key systems and/or applications that are required to support and enable the identified processes;

• The critical questions that must be answered for each area.

Below, we illustrate these six areas and some of the ‘must have’ questions capital projects should be addressing. Capital projects should focus on these six areas as early as possible in the lifecycle—to set up the right vision, strategy and delivery arrangements to drive success down the road.

Figure 11: Six areas for high performance in capital projects.

High Performance

Strategy• What are we seeking to achieve with the capital project? How does it align to the strategic agenda (new markets, new geographies etc)?

• How are we measuring success and are our KPIs right?

• Are we prioritising upfront planning to mitigate later risks?

• What is our contractor strategy?

• Do we illustrate our vision and strategy through clear communications to the market?

• Do we prioritise the right investments to achieve our strategic goals?

Information Technology• What technology enables the capital project to succeed and aligns with the strategy? Back office technology?

• What technology will integrate information needs and stakeholders?

• What technology is being considered to reduce operational costs into long term?

• How is technology reducing labour needs and increasing flexibility?

Operational Excellence• Do we understand the key and critical processes that will safeguard delivery?

• Do we understand the roles and responsibilities of different parties (internal, external, such as EPCm)?

• Do we seek to optimise our processes during the capital project lifecycle for maximum efficiency and effectiveness?

• Do we understand what industry good practice looks like?

• Can we use insights from other industries?

Leadership• How do leaders set a clear example to drive focus and delivery?

• Do we have the right types of leaders and managers for the capital project (short-term delivery, long-term business sustainability)?

Organisation and Governance• Do we have an organisation design (including performance management) that enhances delivery and assigns clear roles and responsibilities?

• Are we making the right decisions, at the right time, with the right information?

• Do we have defined governance structures to manage internal and external stakeholders (JV partners, government, environmental bodies, communities)?

• Do we have the right governance structures to manage the “management of change” process?

People and Culture• Do we have a talent strategy including onshore/offshore mix?

• Do we promote of culture of delivery excellence and responsibility?

• How do we support health and safety compliance and good practice?

• How do we capture knowledge and experiences from employees, contractors, JV partners?

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Six areas for success: Illustrative actions for high performance

High Performance

Strategy Information Technology Operational Excellence

Leadership Organisation and Governance

People and Culture

A complex, large-scale project functions like a business and needs a bespoke vision, governance structure, and organisational design that support it from the outset. That said, projects that are post-Final Investment Decision (FID) can still benefit from reviewing their KPIs and structures against their project goals, and ensuring that KPIs really reflect—and enable measurement of—success.

• Define business-level KPIs: Capital projects, like any large business, need a vision and clear target outcome, and KPIs that will reflect that vision and give a proper picture of performance. We believe capital projects need to re-examine the four top KPIs that most participants are using: cost (100 percent using), safety (96 percent), schedule (88 percent) and quality (63 percent). If capital projects repeatedly fail to deliver to cost and schedule, the cost and schedule KPIs are not enabling high performance.

Consider focusing more heavily on a range of outcome-based KPIs—more capital projects should be using quality-related KPIs.

Only 25 percent of respondents have key community-based KPIs, yet community and government relations are cited as significant concerns. What of talent? Workforce availability is the single biggest problem highlighted by research participants—yet there are no talent KPIs in the top few mentioned here.

In addition, capital project managers need to ensure they align their organisation’s individual performance management framework with the behaviours they want to drive among employees. This study also highlighted perceived issues with productivity and health and safety compliance, both of which need to receive focus in individual performance management.

• Align contractor and employee KPIs with business KPIs: Contractor KPIs should focus on efficiency and quality of output or outcome—not volume or cost per se. As we note, only 63 percent of respondents are using a quality KPI among the top KPIs for their business—and quality metrics must flow through to contractors too. Project managers who have a vision for their ‘business’

(capital project) can communicate this vision much more easily to contractors, and ensure contractors really understand the project’s value drivers and how their actions contribute to success. Consider contractor incentives and risk allocation: research participants commented on the relationship between the contract strategy used (mixed, reimbursable, lump sum) and the behaviours driven by that strategy. For example, lump sum contracts might drive contractors to minimise their own costs, having a knock-on effect on outcomes and requiring more project manager time to monitor safety and quality.

• ‘Design out’ functional silos and centralise for rigorous decision making: New capital projects should go through an organisational design process to establish key ‘corporate’ functions such as Project Management, Procurement and Finance—and how they communicate, for what purpose.

Try to eliminate functional and informational silos from the outset of a capital project. Joint venture arrangements, for example, stretch

1. Set up a business-level vision, strategy and organisational structure that reflect the vision

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partner organisations to share information in new ways, be flexible about individual roles, and overcome different ways of working—so this amalgamation of people and methods must be supported by simple and effective information flow. Of course technology plays a vital role—but business requirements need to drive technology (not the other way around). Aim to set up collaboration and reporting processes and good practices from the beginning of the project. Who needs what, why and when for decision making?

Centralising skill pools can also generate efficiencies and better knowledge management, particularly in large organisations. Many respondents talk about specialised project groups, who plan and manage multiple projects using the same methodologies and skill sets. Transferability of skills is increasing as greater standardisation is being implemented in the assets themselves—standardisation that reflects a growing understanding of what is unique to the Australian operating environment and what is replicable from other sites. For

example, participants talk about driving uniformity in mines in Australia, and enabling the same person to fulfil the same role across more than one site as a result.

Supply chain activities also present a particular centralisation opportunity. Capital project teams may procure materials from different vendors, or from the same vendor, but under a different contract. Centralising supply chain activities under a specialised group can generate efficiencies by: managing vendor contracts across an organisation to optimise rates; putting category managers in place to drive standardisation of equipment across assets, helping reduce inventory and supporting the Maintenance organisation to maintain materials; and managing the logistics of transporting materials and people to and from site. Centralising materials management can also improve handover of inventory and documentation (for example, specifications, instructions, certificates) from project teams to operations.

• Develop an integrated stakeholder management strategy early: Many of the issues participants articulate are stakeholder management issues—

and executive understanding and sponsorship are critical from the outset. They comment that board members may not understand the need for, and value of, extensive business planning. Capital project managers should dedicate significant effort towards generating board and debt provider trust and understanding of the practical implications of certain requirements or decisions—in an integrated way. As one participant put it, “Often, some of the things that are a requirement of the banking or debt providers can turn out to be the very things that can cause grief for the project…the correlation with success is when your owners, your bankers and your constructors are all in alignment. If you treat them separately, then you’ve got big problems.”

With JV arrangements more common, boundaries and accountabilities need to be established from the outset, particularly with cross-cultural involvement and the assumptions that different cultures may bring. For example, communicate clearly about the local approvals process and when approvals are actually granted.

“Often, some of the things that are a requirement of the banking or debt providers can turn out to be the very things that can cause grief for the project…the correlation with success is when your owners, your bankers and your constructors are all in alignment. If you treat them separately, then you’ve got big problems.”

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2Maximise the use of technology to deliver on the business vision

High Performance

Strategy Information Technology Operational Excellence

Leadership Organisation and Governance

People and Culture

• Set up processes and systems to reflect the business vision and mitigate risk: As far as possible, organisations should set up capital project operating systems and processes at the point of project set-up, to reflect business goals and enable measurement of KPIs, effective information flow and risk management. Industry participants tell us that such early system design/implementation is not always feasible, and that requirements evolve—but the goal should be to implement as early as possible. All research participants use a range of systems and tools for project planning, reporting and risk management, among other activities.

An area organisations certainly should consider upfront is flow of information—how systems enable input and decision making, and by whom, particularly in joint venture set-ups. Focus more on how systems avoid functional silos and drive the right information to the right people.

System and data integrity and security also continue to need executive focus—security is a board-level issue and cyber attacks are increasing. The priority is to safeguard core data and drive a culture of data security. With regard to stakeholders, data boundaries may need to be established early on, when project governance and organisational boundaries are being set up. For example, while good information flow between stakeholders, such as

JV partners, is crucial, there must be clarity around data ownership—and each organisation’s data should be appropriately segregated. A joint venture partner in one state could be a competitor in other, and data ring-fencing should be part of the data management strategy.

• Automate and remote operate to cut labour needs—and improve outcomes: Automation and remote operation cut labour needs as well as reducing the risk of human error and improving safety outcomes. Longer term, if labour needs fall sufficiently, labour costs may also fall—with more people in the market and resulting lower wage pressures. For example, using autonomous equipment in iron ore extraction minimises the need for heavy equipment operators (a scarce resource), reduces the need for people to work in remote and high-risk areas and improves operational safety. Similarly, remote management of gas wells or rigs requires fewer people, sites are only accessed by exception, and mechanical failures are reduced due to data monitoring.

Automation and remote operation may improve efficiency substantially in many cases. For example, in the mining industry, people must be kept away from the site of blasting activity for several hours afterwards; when blasting is done using autonomous equipment, no time delay is needed and a ‘per event’ saving of several hours can be generated.

• Use technology to enable workforce flexibility: Worker location—as well as availability—is a big issue for research participants, with competition between states for workers. Mining organisations should consider using IT to organise employees in remote operating centres or competence centres, with employees working in the same location responsible for activities in multiple sites—and able to share knowledge and skills to improve outcomes. Only essential operations people remain at the remote site and back-office staff can work in urban centres with safer working conditions and greatly reduced ‘fly in/fly out’ costs. Economies of specialist skills can be achieved, as well as better knowledge management and understanding of good practice.

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3Turn to internal, industry and non-industry good practice

Strategy Information Technology

Leadership Organisation and Governance

People and Culture

High Performance

Operational Excellence

• Capture project knowledge more systematically: With around 37 percent of people currently working in mining in Australia over the age of 4515 and a high staff turnover rate more generally, knowledge capture and use has never been so important. Ways to capture and use knowledge include providing online project management platforms, creating online expert groups, and capturing temporary workers’ knowledge systematically after their project phase is complete. The same is true for contractors, whose ‘lessons learned’ should be recorded methodically.

A number of participants recognise that some conditions in Australia are general—not particular to this environment—such as remoteness, and the need for infrastructure to transport resources. They are realising the value of capturing and replicating good practice from their other sites to address these general issues. This also relates to a broader drive towards standardisation as a way to deliver value, but without robust knowledge management, good practice cannot be identified or repeated.

• Focus to a greater degree on industry benchmarks and good practice: Any business should be looking at competitor and industry performance and good practice. However, only 21 percent of respondents said that, while meeting internal targets was important, measuring performance against the rest

of the industry was the true measure of good practice and capital effectiveness. Some say innovation is limited, beyond short-term measures to cut costs.

We suggest that a more holistic approach to KPIs should include industry benchmarks as standard—and that in general, there is far more scope for industry collaboration on good practice.

With so many partners and stakeholders around them, project managers must maintain focus on lessons learned from other business units, joint venture partners and industry peers to improve the quality and accuracy of the project schedule and cost estimates. Conversely, a highly mobile workforce means capital projects are bringing in contractors who look to repeat operating approaches from their last project—and potentially, the incorrect assumptions that might have gone with that project. It is therefore even more important to define what ‘good practice’ looks like in an environment of high turnover.

• Look beyond the industry for successful practices at scale: The biggest issues for respondents are general business issues for very large and complex organisations. Capital project executives may benefit from technical and other innovations in other industries dealing with the same generic issues, such as large-scale logistics management (for example, military logistics) and mobilising large groups of employees (for example, large-scale retail operations).

“There are people who would argue that [the best measure of success] is predictability, but if I can predictably build things in twice the time and at twice the cost compared to my competitors, that’s wonderful, but it’s not very competitive.”

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The Defense Logistics Agency (DLA)’s mission is to provide the best value logistics and contract management support to America's Armed Forces. The organisation operates at huge scale, distributing more than 30 million items annually.

A priority for DLA is to modernise its supply chain processes and systems, including supply and demand planning, material management and procurement. A key goal is to enable easy exchange of data across the supply chain and boost visibility of assets in each system.

In response, DLA developed an integrated data environment (IDE) —a shared service capability to better manage and route the logistical transactions required to handle DLA's vast inventory.

IDE is a complete integration engine that addresses business processes, data strategy, operations and technologies. It connects legacy systems with emerging technologies, enables integration and management of corporate level data, provides up-to-date supply chain information and supports the overall U.S. Department of Defense (DoD) and DLA Enterprise Logistics Architectures for improved supply chain outcomes.

U.S. Defense Logistics Agency (DLA): Supply chain modernisation

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Front-end loading project planning

Accenture believes that addressing the six areas for business high performance as early as possible will generate the greatest benefits for capital projects—taking advantage of the best window of opportunity for addressing core business issues like vision, strategy, KPIs that align with the strategy and governance arrangements to support rigorous decision making.

To give this business approach the attention it warrants, Accenture believes the planning stage of the project needs to be front-end loaded. This is where key decisions on project processes, operating processes and business applications must be taken. The window to get the right assumptions and upfront decisions in place is small—lasting from what

Accenture calls ‘Identify’ (step 1) to ‘Design’ (step 3)—and closes by the time ‘Execution’ (construction) starts. By the time construction is underway, the focus will be on delivering to technical specifications—and while this will deliver an asset, it may not deliver it in the most efficient and effective way without early focus on planning and business frameworks.

At present, the drive to meet cost and delivery schedules means some decisions are made too late—paradoxically, this lateness then affects cost and delivery. We observe that too many decisions are being made in the ‘Execute’ phase and this may cause confusion around outcomes and how to achieve them.

“The biggest value to be made in a project is actually getting the right plan...80 percent of your value is actually derived in going through and choosing the right options in your planning phases before you make the investment decisions.”

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Specifically, we believe capital project teams need to take the following actions with respect to the project lifecycle:

1. Place greater value on planning at the start—and continue to monitor closely throughout the project

Planning skills are undervalued by boards—but vital—according to this research. Like the research participants, Accenture believes these skills need to be valued more highly, more time allocated for planning work, and the right people must be involved at the right time.

The same is true of valuing project controls and monitoring skills. These skills are among the hardest to find, and participants observe than in an execution-driven culture, this

requirement may fall by the wayside, exposing the project to significant risk. Extensive and realistic planning minimises the likelihood of scope change later—and while some scope change is inevitable, minimising it is crucial for delivering to plan.

Defining what ‘good’ project management looks like is vital for effective planning and project controls, for example, applying proven methodologies that drive project management consistency and discipline.

Define a strong process and governance framework for managing change. While minimising change is important, it is equally important to act on necessary change in a timely and well-governed way, and avoid any reluctance to amend plans that may be ‘finished’.

2. Ensure plans are realistic and usable—not just high quality—and flexible to local variables

Executing according to plans only drives success when those plans are realistic, usable and accurate—largely a function of getting the right people and priority assigned to planning to begin with. Anecdotal evidence suggests that where plans are too complicated, or developed without sufficient consultation, engineering teams may also develop their own ‘working’ plans in parallel. If this disconnect occurs, overall project plans may not be updated or amended effectively as the project progresses. Generating a trusting relationship between project controls and engineering teams is vital for creating a ‘living’ plan that actually drives action and reflects current reality.

Many organisations are also putting some form of peer review in place—but others could benefit from a more universal and structured approach to review. For example, larger organisations can set up internal peer reviews of strategic

“Project management is a skill and it’s not about an engineer having a clean desk, therefore he’s a project manager.”

“There is a correlation between scope change and failure.”

Figure 12: Address the six areas for high performance as early as possible in the capital project to maximise value.

1. Identify 2. Select 3. Design 4. Execute 5. Operate

FID First Gas/completion milestone

The window of opportunity closes for effective, upfront business decisions

Specialised project planning teams drive front-end loading for planning activity

Operations specialists input into and validate plans upfront and their role grows

The benefits of front-end loading action in the six areas for high performance diminish as the capital project progresses to ready for start-up (RFSU) and first gas/completion milestone.

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plans within geographical, technical or functional areas to validate and challenge assumptions. Combining internal and external peer reviews may work, with external advice sought for specialist issues.

Participants talk about local Australian variables as problematic for execution: fluid regulatory context, unpredictable approvals process, community engagement needs, workforce availability. ‘Best practice’ planning should account for likely variables in the local market, and have some flexibility built in for different scenarios that may emerge (for example, how long the full approvals process will take). The potential for local variables to affect delivery is partly due to the newness of the Australian operating environment for much of the industry—but some of these lessons may be transferable between the more established mining industry and the newer energy industries.

Also differentiate between universal and local industry factors in planning: participants talk about the remoteness of Australian

resources, and the infrastructure needed to transport them—but many acknowledge the same issues exist in China or the US. Be clear about where circumstances are actually universal and therefore experience from elsewhere is replicable.

3. Plan early to avoid costly retro-fitting

For example, the data management strategy should be defined well before engineering data handover (EDH) to the EPC provider. This allows for the EPC provider to work to a pre-defined data format and standards—with an engineering data warehouse solution acting as a common platform—instead of the EPC provider passing data to the project manager in their own format, and the project manager then having to retro-fit this format to their own. This retro-fitting may involve manual upload and manipulation, both of which increase the likelihood of error. Given the vital importance of data integrity for decision making, data management arrangements must also specify the frequency of receipt of data, quality and completeness

expectations, and the ability of the data to demonstrate regulatory compliance. As an aside, the value and contribution of EDH may not be fully understood by project teams, whose primary focus may be on cost, schedule and quality deliverables.

4. Develop a project talent strategy—and well before you think you need it

In a market with talent constraints, Accenture believes organisations need to source talent earlier and in a more structured way. For example, start looking for the operations people before you need them, to mitigate the longer recruiting process you have come to expect.

“Decisions about what level of automation or decisions about the technology to be used…these are the sorts of things we need to allow for now because it’s really hard to retrofit.”

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Continue to focus on female talent and other new pools of talent: in the oil and gas industry globally, only about 7 percent of employees are women, most of them under 35 years of age.16 Consider how to fully utilise female talent: many organisations develop flexible work programs to increase female participation, but culture change and mentoring programs may be more effective in retaining female employees.17

Re-training of existing workers is also an important short-term measure to create flexible, multi-skilled workers. Look at existing workers creatively: think about launching accelerated apprenticeships for experienced workers without a trade, or employees from other industries with transferable skills. Expedite learning and re-training through strong skills development programs, using techniques such as simulation. ‘Learning Academy’ models may combine onsite, classroom and online training to develop people in flexible ways and in a range of locations—and contribute to a culture of operational excellence.

In this climate of low resource availability across the board, staffing approaches may need adjustment. At any stage of the project, there may be value in reviewing the contractor/in-house skills and work split. Bringing skills back in-house may allow project managers to be more directive, maintain better visibility of progress and cut costs by paying employees better packages instead of paying a contractor margin. It may also safeguard a skilled and long-serving workforce.

More generally, is the push for employees, not contractors, actually a function of poor contract management and inadequate KPIs that undermine outcomes? Before bringing functions in-house, review contract management strategies and KPIs to be sure that envisaged benefits are real, and not a symptom of sub-optimal contracting arrangements.

Conclusion

As this research shows, Australian capital projects’ complexity, scale and investment levels are unprecedented. The project pipeline is stronger than ever—and the challenges more daunting. With low labour availability, high and escalating costs, an uncertain regulatory context and emerging community resistance, not all projects will come to fruition. Some will fall by the wayside and others will continue to experience cost and schedule blow-outs.

Accenture believes that the Australian capital projects most likely to reap the value from their investment will be thinking and operating like a business well before the asset is in operation. This will be the true measure of capital project high performance.

As one participant put it, “We believe, based on industry benchmarks, that the front end is where the value is created and the back end is where it’s destroyed.”

Australian capital projects: Operating like a business to stay the course

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References1. All $ figures provided in this report are expressed in Australian Dollars (AUD) unless otherwise indicated.

2. "Minerals and energy major development projects- April 2011 listing”, Robert New, Allison Ball, Alan Copeland and commodity analysts, Australian Bureau of Agricultural and Resource Economics and Sciences, May 2011. www.abares.gov.au.

3. A term sometimes used to describe Australia, from the 1964 book of the same name by Donald Horne.

4. The Australian, May 21, 2011. See http://www.theaustralian.com.au/business/mining-energy/bn-prelude-floating-plant-has-shell-fired-for-lng/story-e6frg9ef-1226059923612, accessed June 29, 2011.

5. See http://www.chevronaustralia.com/media/mediastatements.aspx?NewsItem=550ddd98-7280-4657-a473-7fdf83f16296, accessed 5 October 2011.

6. “Queensland coal seam gas overview”, February 2011, Department of Employment, Economic Development and Innovation, Queensland Government, accessed 6 October 2011.

7. “BHP Billiton Advances The Olympic Dam Project”, 30 March 2011, http://www.bhpbilliton.com/home/investors/news/Pages/Articles/BHP%20Billiton%20Advances%20The%20Olympic%20Dam%20Project.aspx. Accessed 6 October 2011. Also “Olympic Dam Supplementary Environmental Impact Statement”, 13 May 2011, http://www.bhpbilliton.com/home/investors/news/Pages/Articles/Olympic-Dam-Supplementary-Environmental-Impact-Statement.aspx, accessed 6 October 2011.”

8. See http://www.riotintoironore.com/ENG/operations/301_expansion_projects.asp, accessed 6 October 2011.

9. "Minerals and energy major development projects- April 2011 listing”, Robert New, Allison Ball, Alan Copeland and commodity analysts, Australian Bureau of Agricultural and Resource Economics and Sciences, May 2011. www.abares.gov.au.

10. According to Independent Project Analysis (IPA), one in eight large capital projects around the world is a failure, with significant deviation from plan on budget, schedule and/or performance.

11. “Australian Mining Industry’s Looming Labor Shortage”, Engineering & Mining Journal, 11 August 2010, ©Engineering & Mining Journal.

12. The Oil & Gas Global Salary Guide 2011, Hays plc, www.hays-oilgas.com. Average annual oil and gas industry salary for local Australian labour quoted as $143,700 (US Dollar equivalent) and average annual salary for labour imported to Australia quoted as $144,600 (US Dollar equivalent), higher than average annual salaries in Canada, the US, Norway or Netherlands.

13. On 10 May 2011, the government announced the implementation of Enterprise Migration Agreements (EMAs) for the resources sector. See http://www.immi.gov.au/skilled/enterprise-migration-agreements.htm, accessed 5 October 2011.

14. According to Independent Project Analysis (IPA), one in eight large capital projects around the world is a failure, with significant deviation from plan on budget, schedule and/or performance.

15. 2009 figures from “Employment Outlook for Mining”, SkillsInfo, Department of Education, Employment and Workplace Relations, Australian Government.

16. The Oil & Gas Global Salary Guide 2011, Hays plc, www.hays-oilgas.com

17. According to Australian CEOs interviewed for “How is your Talent in 2011? A Talent health check for Australian CEOs”, Accenture 2011.

Copyright © 2011 AccentureAll rights reserved.

Accenture, its logo, and High Performance Delivered are trademarks of Accenture.

About AccentureAccenture is a global management consulting, technology services and outsourcing company, with approximately 236,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$25.5 billion for the fiscal year ended Aug. 31, 2011. Its home page is www.accenture.com.

ContactJames Arnott james.arnott@accenture.com

Tracy Gawthorne tracy.a.gawthorne@accenture.com

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