Productivity drive weighs on contractors

Higher-than-expected capital spending on resources projects has led to "enormous" pressure to boost productivity now commodity prices have slipped, contracting bosses have told a mining summit.

Transfield Services managing director Graeme Hunt said miners were struggling to find ways to recoup their boom-time investments.

"Many of our clients in the sector all at the moment are trying to work out how to sweat their assets harder," Mr Hunt told the Australian Mines and Metals Association's annual event in Perth.

"Certainly, as a service provider for that sector it's all about how we can unlock that capacity.

"In many ways, that's about value not just cost."

Mr Hunt demonstrated what was at stake by giving the example of a day's sailing lost at a Pilbara port costing $100 million in iron ore revenue.

Orica managing director Ian Smith said demand during boom times led to unproductive practices sneaking in.

"All of that pushes up your costs at a disproportionately high rate," Mr Smith said. "You've got to transition back to a point where your cost structure meets the price. That puts enormous pressure on people."

Mr Smith said it would help if productivity was the central plank in workplace relations laws. "It should be the basis of how people go about pay increases in Australia," he said. "The legislation should be built around productivity."

Bechtel Australia managing director Shaun Kenny said the global project manager had always worked with clients and engaged with its workforce to bolster output.

"There's no magic to this," Mr Kenny said on the sidelines of the conference. "It's about working hard with people to get the best outcomes. I don't think there's anything new there."

While margins were being squeezed, he did not think sub-contractors on Bechtel's projects were making unrealistically low bids to win work.

"We'll always look at what's been bid and ask ourselves, is it feasible," Mr Kenny said. "I wouldn't say people are bidding a negative margin. That's not really a sustainable business model."