The unit rate model, which pays contractors a fixed price per unit of work, is a common approach for equipment-intensive projects. However, this model can be less flexible and transparent, leading to inefficiencies and waste, as contractors may be motivated to maximize the number of units worked rather than optimize resource allocation. The unit rate model can also be less responsive to changes in project scope or requirements, as the fixed price per unit of work may not reflect the project’s actual costs. Therefore, alternative models, such as the owner’s model and the performance-based model, may offer more advantages for equipment-intensive projects.
The owner’s model, which involves the owner of the project providing and managing the equipment and resources, can provide more flexibility, better efficiency, and better utilization for equipment-intensive projects than the unit rate model. By owning and operating the equipment, the owner can control the quality, availability, and maintenance of the equipment, as well as adjust the resource allocation according to the project’s needs and priorities. This ensures higher productivity, profitability, and sustainability in operations, reduces capital expenditure, operating costs, and project risks, enhances operational reliability, availability, and maintainability, and improves project delivery time, quality, and safety.
Another option for equipment-intensive projects is the performance-based model, which is based on the outcomes or results of the project rather than the inputs or activities. This model aligns the interests of the owner and the contractor, as both parties share the benefits and risks of the project’s performance. The contractor is paid according to the achievement of predefined performance indicators, such as a defined scope and objectives for project, rather than the number of units worked. This incentivizes the contractor to optimize the resource utilization, efficiency, and innovation of the project, while the owner can monitor and evaluate the project’s progress and performance.
One example of a company that offers both owner’s and performance-based models for equipment-intensive projects is TacminMadini, a mining consultancy and contracting firm that provides integrated asset management, engineering and construction services. TacminMadini has a longstanding track record of executing operational improvement assignments in numerous mining and infrastructure projects and offers various project optimization services such as:
- Operational excellence: improving the performance of mining and infrastructure operations by applying best practices, tools and techniques
- EPC for operating mines: providing engineering, procurement and construction activities for maintaining and improving an existing mining project.
- Lean mining construction: applying lean principles and practices to the mining construction process.
TacminMadini is committed to delivering excellence in every project it undertakes. With its extensive expertise, experience and track record, TacminMadini is a trusted mining and infrastructure project optimisation partner.
