By Mark Noppe, Chair, AusIMM Consultants Society
Rio Tinto’s recent four week notice to suppliers that payment terms for contracts in excess of $3 million will be increased to 90 days and others to 60 days highlights a major concern for individuals and businesses providing professional and technical support services to the larger mining companies, several of which have recently made similar unilateral changes to payment terms.
Individual consultants and consulting businesses are particularly impacted at a time when such businesses are marginal and individuals rely on regular, or often irregular, work and income to simply get by.
This pressure placed on suppliers comes at a time when many mining companies are shedding professional staff and then relying on similarly skilled people to provide core technical and professional services back to these businesses to ensure their effective short and long term success. This business approach does not seem to be a good way to secure the trust and collaborative working relationships needed for delivering effective and successful outcomes.
In practice, we believe the consultant/client relationship should be synergistic or symbiotic. The effective use of service providers to provide creditor financing may be justifiable if the rates and job magnitudes are large enough and are part of the contractual arrangements; however, they should not be applied unilaterally without some balancing recompense.
The AusIMM Consultants Society will continue to engage with its members and the industry to highlight these challenging practices and provide our members with strategies on how best to manage such engagements. Ultimately the aim for the industry is to achieve the best value from the client/consulting relationship. This is also a key theme to be debated at a Consultants Society seminar on 25 August in Brisbane.