Contracting and variations
Many years ago, when I was a young engineer working for a contract mining company at a large surface mine, a good friend (working for the client at the same operation) lamented the way contractors issue variations. From memory, I think he wanted to borrow a dozer for a few hours, and the contract didn’t provide for wet (operator included) hire.
“You’re not using it at the moment,” he reasoned, “so it should be part of your contract price!”
Mining contractors are usually more than happy to help out their clients – for a fee of course. All equipment costs money to run and operate; in the case of the dozer, it’s not just the diesel consumption or the operator driving the machine, but also provisioning for regular preventative maintenance as well as major repairs (engines, transmissions and the like) in the future.
Generally, a mining contract is based on a specific scope of work (such as the mine plan). Being a competitive environment, the contractor will operate equipment for the minimum amount of time necessary in order to complete the work – this provides the lowest possible contract price.
Variations arise when additional work is required that the contractor hasn’t planned for. When this happens, contractors need to cover the additional cost and ensure no one is left out of pocket.
Of course, while acknowledging the necessity of charging for variations, there’s still the concept of “mates’ rates” – a discussion around markup and/or margin that can help provide the “win-win” and keep everyone happy. Talking about that dozer back in the day, I’m pretty sure we found the “win-win” at the time. And after all these years we’re still mates.
Post by James Cooney.