Home > Contractors tell of post-boom cost pressures at AMMA conference

Contractors tell of post-boom cost pressures at AMMA conference

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Boom-time investment has led to huge pressure to boost productivity, contractors said at a conference last week.

The Australian Mines and Metals Association conference in Perth hosted a number of keynote speakers including Transfield Services managing director Graeme Hunt.

Hunt told conference-goers that massive capital expenditure during the fatter years of the boom, combined with the present tightening of commodity prices meant miners has to find ways to recoup those investments.

“Many of our clients in the sector all at the moment are trying to work out how to sweat their assets harder,” Hunt said.

“As a service provider for that sector it's all about how we can unlock that capacity.”

Orica managing director Ian Smith said that the boom created an economic environment that had nurtured inefficient practices.

“All of that pushes up your costs at a disproportionately high rate,” Smith said.

“You've got to transition back to a point where your cost structure meets the price.

A McKinsey (global management consultancy firm) study from 2011 highlighted that multi-factor productivity was growing up until 2005; but it dropped 0.7% per year up to the year the study was undertaken. 

Smith said productivity ought to be the central plank in workplace relations laws.

“It should be the basis of how people go about pay increases in Australia," he said.

Bechtel Australia managing director Shaun Kenny told The West Australian that while margins were being squeezed, he did not think sub-contractors on Bechtel projects were making unrealistically low bids to win work.

“We'll always look at what's been bid and ask ourselves, is it feasible,” Kenny said.

“I wouldn't say people are bidding a negative margin. That's not really a sustainable business model.”

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