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EPC v EPCM Contracting- A Comparison

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Presentation by Helen Sarcich and Tamahra Moore for Contract and Procurement Optimisation 501 unit. Curtin Graduate School of Business

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EPC v EPCM Contracting- A Comparison

  1. 1. EPC -v- EPCM Contract & Procurement Optimisation 501 Group Assessment Tamahra Moore and Helen Sarcich
  2. 2. What is an EPC Contract?  EPC: Engineering, Procurement, Construction  “Turnkey” contracts: delivery of a completed project from design;  Contractor is responsible for Design, Procurement, Construction and Commissioning of a project;  Typically associated with developing an operating facility (ie: power station)  Contract contains performance standards the completed facility is required to achieve. (Loots 2007:3-5 and Cullen and Higgins 2011:2-5)
  3. 3. Services Performed Under EPC Engineering Detailed engineering and design; Programming and scheduling works; Cost estimating for all areas of the project. Procurement Tenders / quoting for all sub-packages of works involved; Purchasing, receipting and invoicing of goods; Potential coordination of any sub-contracts involved for services. Construction Adherence to construction schedule; Performance (directly or through sub-contractors) of all construction activities; Commissioning and finalisation of project; Closure of project. (Loots and Henchie 2007:8-11 and Godwin 2012:1-2)
  4. 4. What is an EPCM Contract?  EPCM: Engineering, Procurement, Construction, Management  “Professional Services Contract”;  Contractor is responsible for Engineering, Procurement and Management of the construction phase of the project, on behalf of the owner;  Management of construction only as the owner’s representative;  No responsibility for the construction or quality of the project;  Popular in major works sectors (ie: mining, petrochemicals, power plants etc) (Loots and Henchie 2007:8-11 and Godwin 2012:1-2 and Cullen and Higgins 2011:2-5)
  5. 5. Services Performed Under EPCM  Engineering / Design:  EPCM Contractor performs the ‘basic’ Front End Engineering and Design (FEED) works;  Specialist design is performed by a specialist supplier via an agreement directly between the specialist supplier and the Owner;  Risk and responsibility for the specialist design sits with the specialist supplier; not the EPCM contractor  Procurement:  EPCM Contractor advises the Owner of the optimum procurement strategy  EPCM Contractor assists Owner / acts as Owner’s Agent in implementing the procurement strategy  Construction Management:  The EPCM Contractor performs the coordination, supervision and management of the construction activities being performed by the various construction contractors (Loots and Henchie 2007:12-13)
  6. 6. EPC EPCM Accountability Contractor fully accountable Owner has multiple points of accountability Risk Contractor holds risk Owner holds risk Time Fixed date for completion No fixed completion schedule Price Fixed price contract Schedule of Rates / Cost Plus Procurement Contractor responsible for procurement Procurement as agent for the owner only Quality/Performance Guarantee Contractor guarantees performance of completed facility Contractor does not provide performance guarantees Owner’s Involvement Contractor in control Owner in control Defective works/services Contractor to rectify any defects Assists owner to manage rectification of defects A Comparison of EPC and EPCM
  7. 7. Santee Cooper – A Successful EPCM Case Study  Santee Cooper contracted EPCM services from WorleyParsons;  Construction of two additional 600mw coal fired power generation units;  7 year project;  Number of unforeseen changes experienced during the 7 years;  Staff from both companies worked together as a project team. (Hickson et al 2009:1)
  8. 8. Roles of Each Party  Santee Cooper  Issued all purchase orders in it’s name;  Accepted all risks;  Managed 80% completion and erection contract bid request.  WorleyParsons  Acted as the procurement, construction and start up manager;  Provided overall schedule;  Dictated and integrated the schedules for all fixed-price lump sum supply and erection contracts;  Developed all contract packages, bids, evaluated and recommends contract awards to the owner. (Hickson et al 2009:1)
  9. 9. Success Factors  Project team consisted of staff from both Santee Cooper and WorleyParsons;  WorleyParsons provided access to Santee Coopers business systems;  Use of technology to access specialists located off site;  Increased response time to changes in the project;  Ability to respond to major changes in the project effectively;  Tight management of the budget. (Hickson et al 2009:1)
  10. 10. Debswana Diamond Company– A Successful EPC Case Study  Debswana Diamond Company contracted EPC services from Fluor Corporation;  Construction of mine surface infrastructure for the Cut 8 expansion project at the Jwaneng open pit diamond mine;  3 year project;  Staff from both companies worked together as a project team on some aspects of the project. (Fluor Corporation 2014:1)
  11. 11. Roles of Each Party  Debswana Diamond Company  Worked with Fluor to manage the project, as it occurred within in operating mine site;  Worked directly with Fluor in the delivery of safety initiatives.  Fluor Corporation  Conducted a feasibility study;  Relocated and rebuilt portions of mine infrastructure;  Undertook earthworks, civil construction, pilings, structural steel erection and electrical installation;  Provided employment for 2000 people during the project, 85% of whom were local employees. (Fluor Corporation 2014:1)
  12. 12. Success Factors  Management of the activities by Fluor within an operating mine site;  Skills and technical expertise of Fluor staff;  Utilisation of staff who had worked on site for many years;  Joint safety projects between Debswana Diamond Company and Fluor. (Fluor Corporation 2014:1)
  13. 13. Conclusion EPC or EPCM?
  14. 14. References Cullen, David., and Andrew Higgins. 2011. ‘The ABC of EPC and EPCM’. Construction Alert. Blake Dawson, 2-5. http://www.mycorporateresource.com/index.php?option=com_content&view=article&id=93871 :blake-dawson-the-abc-of-epc-and-epcmcontracting&catid=2757:Propertyconstructiondevelopment- &Itemid=209952. Flour Corporation.2014. Debswana Jwaneng Cut 8 Diamond Mine Expansion. http://www.fluor.com/projects/pages/ProjectInfoPage.aspx?PrjID=233 Godwin, Peter. 2012. ‘EPCM contracts: a more sophisticated procurement methodology’. Construction Dispute Avoidance Newsletter. Herbert Smith Freehills. 40. 1-2. http://www.herbertsmithfreehills.com/-/media/HS/T- 290612-6.pdf Hickson, J., Steve Neher and Norm Koontz. 2009. ‘Santee Cooper Cross Units 3&4:an EPCM success’. Power Engineering. 5 January 2009. http://www.power-eng.com/articles/print/volume-113/issue-5/features/santee- cooper-cross-units-3-amp-4-an-epcm-success.html. Loots, Phil., and Nick Henchie. 2007. ‘Worlds Apart: EPC and EPCM contracts: risk issues and allocation’. Mayer Brown International LLP. http://m.mayerbrown.com/files/Publication/fe15bba4-fbe2-4eb0-804e- 17911edb0b15/Presentation/PublicationAttachment/ecb7569b-e0ef-4aee-9ff9- a7c4e853aac6/ART_EPC_EPCM_5DEC07.PDF

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