BUILDING NEW AGGREGATE FACILITIES
What is the most effective contracting strategy to procure the engineering, equipment, materials and construction to build a new aggregate plant and material handling equipment?
- Does it make sense to purchase the final engineering separately, or is buying it along with the construction the way to go?
- Should structural steel and major equipment components, like screens and crushers, be purchased directly by an owner or is it more effective for these items be included as part of general design build/turnkey contract?
WHAT CONTRACTING STRATEGY WORKS FOR AGGREGATE FACILITIES
Often owners elect to buy the final engineering, the structural steel fabrication, equipment and construction under separate contracts. The reasoning for the separate contracts include thinking that buying each of these items individually results in lower costs, more control over the project and the concern over limited availability of design build/turnkey contractors with the capability to provide all these services under one contract.
Certainly before a project is bid, preliminary engineering and planning needs to be developed to the point that clearly defines the project, but just how much more engineering should be completed? The alternatives range from bidding with conceptual engineering and material and performance specifications to a completely designed project with everything in between.
Risks and Benefits
As these decisions are made, it is important to understand the associated risks and benefits.
Purchasing a new aggregate facility under one design build / turnkey contract that includes the structural engineering, steel fabrication, equipment procurement, electrical and field construction has many advantages. The most significant is that rather than buying the individual parts, like a screen, crusher or structural steel components, the owner can now buy system performance. Instead of specifying particular items of equipment, specifications can require that the system and all the individual components together produce a specified number of tons per hour of a specified product, quality and be available to work a certain percentage of time.
It further eliminates the risks of problems during construction that can occur when components don’t fit and don’t perform as anticipated. Warrantee issues are more straight forward, as a single design build / turnkey contract eliminates finger pointing between suppliers, when there is only one company is responsible for the entire system.
The value of buying system performance and a much stronger warrantee on components and the process should be considered when evaluating whether it makes sense to buy a turnkey contract.
Do these benefits outweigh any possible savings that could be realized by buying the project with multiple, individual contracts? The reduced management costs associated with one contract and the reduced potential for other unanticipated costs should also be considered as part of this equation.
Industrial Resources, a Fairmont, WV company, has been delivering processing plants and material handling facilities to the mining industry for more than 60 years. Many of these projects were design build / turnkey contracts, in which performance was guaranteed.
In addition to having a construction group, Industrial has an engineering and electrical design staff, as well as a fabrication shop. These resources allow Industrial Resources to assume full responsibility for a project, from the design, through the fabrication, construction and commissioning and guaranteeing performance. In many instances, Industrial has even initially operated the facility while training the owner’s personnel.
From the owner’s point of view, this arrangement eliminates the pointing game if performance is not achieved because of the single source responsibility of the design build / turnkey contractor.
Industrial Resources looks forward to working with you on your next project regardless of the size. This concept works just as well on small maintenance projects as well as major capital projects.