Question

Critically evaluate the engineering, procurement and construction (EPC) contract and the engineering, procurement and construction management (EPCM) contract as used in the civil engineering industry. Critically evaluate how each contracting strategy is used in the real world

Answer 1

EPC stands for Engineering, Procurement, Construction and is a form of contract agreement in the construction industry in which the procurement, engineering, construction and commissioning of a project is done by the EPC contractor. The engineering and construction contract consists of the details about engineering design of the project, procurement of all the equipment and materials necessary for the project, and then steps to deliver a functioning facility or asset to their clients. EPC Contractors are the induviduals/institutions that provide EPC projects. Generally the EPC Contractor has to execute and deliver the project within an agreed time and budget, commonly known as a Lump Sum Turn Key (LSTK) Contract. An EPC LSTK Contract places the risk for schedule and budget on the EPC Contractor. The EPC phase is called the Execution phase. FEED or Front End Engineering Design phase is basic engineering design used as the basis for the EPC phase. In this type of contract, the contractor holds accountability to the owner and hence the risks are involded for him than the owner. These contracts are generally defined for any fixed period of time and posses contracting standards. The contractor is responsible for any defective works and services and the full control over the project lies on the part of the contractor. The real time examples are associated with development of operation facilities like power station, large scale resource development projects say oil & gas.

EPCM stands for Engineering, Procurement, Construction Management. In this type of contract, the Contractor is not directly involved in the construction as in EPC but is responsible for administering the Construction Contracts. The EPCM contractor posses the duty to ensure that the engineering and design of the project is in compliance with the projects technical and functional specifications. In this type of contracts, the owner holds more accountability and risks than the contractor and is not defined for any fixed period of time. The contractor is not responsible for any defective works and services, but the owner only and the full control over the project lies not on the part of the contractor, but the owner himself or his representatives. Real time use of this contracting is in the expansion and development of large scale industries like Mining, petrochemical industry, power plants etc.