Optimising Supplier Contracts in Mining

Unlocking Value and Minimising Risks From Source-To-Pay

In mining, an industry characterised by high capital expenditure, complex supply chains and significant operational risks, sub-optimal contract management can lead to significant value leakage and a breakdown in governance and internal controls. Even though organisations spend considerable time negotiating supplier agreements, they often fall short when it comes to putting them into practice. This includes making sure contract terms are followed, controlling off-contract spending and ensuring Purchase-to-Pay (“P2P”) processes prevent non-compliance and value leakage.

Realising Value and Minimising Risks in Your Supplier Contract Portfolio

To truly realise value and minimise risks, it is imperative for mining companies to ensure their teams administering contracts are set up for success. This involves a comprehensive approach integrating people, technology and processes to achieve Source-to-Pay excellence, including robust supplier management, supported by effective training and accountability.

Identifying Your Pain Points: Where Value Leaks and Risks Emerge

The underlying nature of mining businesses exposes operators to common “pain points” across their Source-to-Pay process that erodes value and introduces risk. These include:

  • Inaccessible contract terms: A critical issue where centrally negotiated and documented supplier contract terms are not readily accessible to site teams creating or approving purchase orders (“PO”) and managing receipting activities. This can result in suppliers submitting off-contract spend and automated three-way match processes inadvertently leading to overpayments.
    A lack of visibility can also result in site teams not understanding the commercial impact of operational behaviours. For example, operational behaviours such as continuing to extend labour hire POs with “breakdown” rates, instead of transitioning to “labour hire” rates, can inadvertently lead to significant avoidable costs.
  • Ineffective risk management in P2P: If P2P processes and controls are not robust, they fail to effectively manage both compliance and value leakage risks, creating vulnerabilities throughout the payment cycle, from identifying a need to final payment and supplier management. For example, sole-sourcing requirements and delegation-of-authority limits can result in line managers corrupting purchasing controls through “PO splitting” if mitigating controls are not in place.
  • Lack of visibility across contract portfolios: Without robust systems to extract, structure and analyse large volumes of unstructured contract, invoice and operational data, organisations will likely lack the internal capability to assess performance against commercial obligations and identify risks in real time.

A Strategic Approach to Optimisation: Beyond the “Rote” Formula

Addressing these challenges requires a bespoke, value-focused approach rather than a generic, formulaic process. FTI Consulting develops and applies such tailored methodologies, structured in three key phases: diagnostic analysis, roadmap development and a strong implementation phase.

Phase 1: Diagnostic and Roadmap Development

This initial phase is crucial for establishing a clear understanding of the current state and charting a path forward.

Baseline and heatmap development: This involves gathering key information and tailoring a risk matrix specifically to your organisation’s unique context. Critical steps include understanding existing pain points and ongoing initiatives and analysing both structured and unstructured data to identify key supply categories and spend types that carry higher contract administration risk. For a mining company, tools may be developed to efficiently analyse vast quantities of data from various sites and suppliers. Key stakeholders then review summary data to identify priority supplier categories or contracts that warrant immediate attention.

Deep dive analysis: A thorough “deep dive” involves conducting selected interviews and key process walkthroughs to understand operational realities. Reviewing key contract documentation is essential to ascertain adherence to terms. Evaluating the organisational structure, identifying functional and non-functional requirements, spotting resource imbalances and requirements, uncovering process bottlenecks and pinpointing gaps in system configurations are all critical steps in identifying current state issues. A review of current systems may also identify opportunities to further leverage functionalities and automate business processes, crucial for efficiency and accuracy.

Solution design and roadmap: Based on the insights from the baseline and deep dive analysis, opportunities to optimise the organisation, processes and systems are identified. This culminates in the development of an actionable Improvement Recommendation Roadmap, complete with an estimate of the time and resources required to execute each initiative.

Phase 2: Implementation and Sustainable Improvement

With a clear roadmap in place, the focus shifts to execution through program or project management. Support for implementation is tailored to meet specific needs, ranging from a full Project Management Office (“PMO”) setup, ongoing monitoring, or providing additional resources for specific workstreams/projects. This flexibility ensures that initiatives are executed effectively and sustainably integrated into daily operations.

Illustrative Successes: How This Works in Practice for Miners

The effectiveness of this approach is evident in the following case studies from the mining and extractive industries.

Addressing off-contract spend and overpayments: A global mining company sought a tool to assess the potential for fraud, alongside the validity and accuracy of contractor invoices across billions of dollars in transactions and to ensure adequate contractor governance. A key problem was that supplier contract terms were not accessible to site teams, leading to off-contract spend and overpayments:

  • A tool was developed to analyse and index documents for many contracts. Furthermore, a comprehensive contract risk matrix (split between financial and governance-related attributes) was developed and tested across the contracts, with results graphically presented in a heat map. This proactive risk identification and analysis highlighted key economic and legal exposures across the business operations, enabling better contract negotiation and management.
  • The impact was significant: a tool was developed allowing drill-down per contract for further insights, with high-risk contracts flagged for investigation and resulting analysis used for commercial negotiation. The resulting tailored scrutiny of contract risks and tightening of contract controls and supplier dealings showed how targeted interventions can drive behavioural change and deliver tangible financial benefits.

Reducing off-contract and avoidable spend: In mobile equipment maintenance, significant value leakage was identified due to gaps in the Source-to-Pay process, leading to off-contract spend and frontline teams not being aware of the commercial levers in the contracts, resulting in avoidable spend.

  • The approach was to assess “3-way match” documents against contract terms.
  • The outcome was the identification of material levels of off-contract spend, not identified by 3-way match controls. This resulted from frontline teams not knowing the contract terms and accepting supplier quotes with off-contract items included.
  • Additionally, our review identified that avoidable costs were being incurred due to long-term use of higher “breakdown” rates, rather than transitioning to the lower “labour hire” rates beyond the initial breakdown event.

Ensuring contract management compliance in large-scale builds: For a mining company constructing a mine and supporting infrastructure, an in-depth analysis of contract management and procurement processes was required.

  • The approach involved conducting an independent assessment of the management and contract award processes against documented frameworks and contract documentation for the Procure-to-Pay process was also reviewed, including verification of claims and associated costs.
  • The review delivered impactful and ongoing improvement: eight immediate control measures were implemented, two longer-term improvement initiatives were identified and an invoice verification diagnostic ensured payments aligned with commercial terms and conditions.

Improvement of procurement practices over time: A major utilities company had concerns regarding its procurement practices and sought an independent audit.

  • The approach involved conducting 46 data analytics tests covering 100% of purchasing data transactions for a specific period, targeting potential fraud, governance and financial risks associated with vendors. A heat map was developed, plotting potential risks per vendor.
  • The outcomes had a major impact: a tool was developed allowing drill-down per vendor for further insights, high-risk vendors were flagged for investigation and findings were used to educate the employees involved in the procurement process. A refresher conducted the following year showed vast improvement, indicating the sustainability of the changes.

Conclusion

Despite the inherent challenges of their industry, miners can develop a bespoke, value-focused approach for contract management. This enables them to confidently navigate the complexities of their supplier contract portfolios, proactively identify key risk areas, prioritise high-value opportunities and implement initiatives that lock-in improvements.

This holistic approach ensures that the significant investment in supplier agreements translates into optimal value, reduced risks and optimised operational performance across the entire Source-to-Pay lifecycle.

FTI Consulting can assist mining businesses to assess where they sit against this objective, providing a rapid independent diagnostic of Source-to-Pay health and a pragmatic fit-for-purpose roadmap for improvement.

Related Insights

Related Information

Published

March 02, 2026

temp Key Contacts

Andrew Bantock

Senior Managing Director, Co-Leader of Global Mining Advisory

Travis Barnett

Managing Director

Melanie Blain

Managing Director

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