The document discusses Engineering, Procurement, and Construction (EPC) contracts. It defines EPC as a contract that includes engineering, procurement, and construction activities. It notes that an EPC contract can be for a full project scope, making it equivalent to a turnkey contract, or only part of a project scope. The document examines what types of work can be included in an EPC contract and provides several case studies analyzing whether hypothetical contract scenarios would qualify as EPC contracts. It also reviews common clauses that should be included in EPC contracts such as related to securities, time/delay, determination of contract, and arbitration.

1. EPC CONTRACTS:A REVIEW
DR K M SONI
ADG(RETD.), CPWD, NEW DELHI

2. EPC
• E - ENGINEERING MEANS PLANNING
ACTIVITIES
• P - PROCUREMENT MEANS OBTAINING
SOMETHING
• C - CONSTRUCTION MEANS EXECUTION
• THUS EPC MEANS ENGINEERING,
PROCUREMENT AND CONSTRUCTION

3. EPC CONTRACTOF A WORK
• A WORK MAY INVOLVE MANY ACTIVITIES OR
SUB HEADS
• EPC MEANS ALL ACTIVITIES OF ENGINEERING,
PROCUREMENT AND CONSTRUCTION OR
MAY BE PART ALSO?
• LET US DISCUSS

4. SCOPE OF A WORK
• WORK MEANS THE SCOPE OF WORK DEFINED IN A
SANCTION
• THIS MAY INCLUDE
– CIVIL WORKS
– E&M WORKS
– FIRE PROTECTION & FIRE FIGHTING WORKS
– SECURITY RELATED WORKS
– HORTICULTURE WORKS
– FURNITURE
– INTERIOR & FURNISHING
– EQUIPMENT
– OPERATION AND MAINTENANCE

5. TYPE OF CONTRACTS
• ITEM RATE CONTRACT
• PERCENTAGE RATE CONTRACT
• EPC CONTRACT
• TURN KEY CONTRACT

6. ITEM RATE CONTRACT
• CONTRACT IN WHICH RATES ARE QUAOTED
BY THE TENDERER FOR EACH ITEM AND
ACCEPTED BY OTHER PARTY ACCORDINGLY
• THUS ITEMS ARE TO BE SPECIFIED BY THE BID
INVITING AUTHORITY
• THE BID INVITING AUTHORITY SHALL NOT
MENTION HIS RATES OF THE ITEMS

7. PERCENTAGE RATECONTRACT
• CONTRACT IN WHICH RATES ARE QUOATED
BY THE TENDERER ON PERCENTAGE BASIS,
ABOVE OR BELOW OR AT PAR ON ESTIMATED
RATES OF THE ITEMS MENTIONED BY OTHER
PARTY
• THUS ITEMS ARE TO BE SPECIFIED BY THE BID
INVITING AUTHORITY IN THIS TYPE OF
CONTRACT AND ADDITIONALLY ESTIMATED
RATES OF ITEMS ALSO

8. TURNKEY CONTRACT
• MEANS CLIENT OR EMPLOYER WANTS
EVERYTHING TO BE INCLUDED IN A CONTRACT
AND HE TAKES OVER THE KEY AND ENTERS INTO
THE BUILDING OR PREMISES
• THUS CLIENT HAS TO SPECIFY BROAD
REQUIREMENTS ONLY AND ENGINEERING,
PROCUREMENT AND CONSTRUCTION OF ONE
OR MORE PACKAGES TO BE DECIDED BY THE
CONTRACTOR
• IT MEANS THERE IS ONLY ONE CONTRACT
BETWEEN CLIENT AND CONTRACTOR

9. TURNKEY AND EPC CONTRACT
• IS THERE ANY DIFFERENCE BETWEEN
TURNKEY AND EPC CONTRACTS ?
• YES PROBABLY

10. WHAT SUBHEADS SHOULD BE INCLUDED IN
EPC CONTRACT?
– CIVIL WORKS
– E&M WORKS
– FIRE PROTECTION & FIRE FIGHTING WORKS
– LANDSCAPING AND HORTICULTURE WORKS
– SECURITY RELATED WORKS
– FURNITURE
– INTERIOR & FURNISHING
– EQUIPMENT
– OPERATION AND MAINTENANCE

11. CASE -I
• CIVIL OR E&M WORKS ALONE WHICH INCLUDES
• ARCHITECTURAL SERVICES
• ENGINEERING SERVICES
• EXECUTION
• QUALITY ASSURANCE
• PROJECT MANAGEMENT
• OPERATION & MAINTENANCE
AND CALL TENDER FOR ALL ABOVE HAVING
ARCHITECTURAL, ENGINEERING, PROCUREMENT AND
CONSTRUCTION ACTIVITIES OF ABOVE HEADS. WILL IT BE
EPC CONTRACT?

12. CASE -II
• CIVIL AND E&M WORKS WHICH INCLUDE
• ARCHITECTURAL SERVICES
• ENGINEERING SERVICES
• EXECUTION
• QUALITY ASSURANCE
• PROJECT MANAGEMENT
• OPERATION & MAINTENANCE
AND CALL TENDER FOR ALL ABOVE HAVING
ARCHITECTURAL, ENGINEERING, PROCUREMENT
AND CONSTRUCTION ACTIVITIES OF ABOVE HEADS.
WILL IT BE EPC CONTRACT?

13. CASE -III
• CIVIL, E&M WORKS AND
LANDSCAPING/HORTICUTURE WHICH INCLUDE
• ARCHITECTURAL SERVICES
• ENGINEERING SERVICES
• EXECUTION
• QUALITY ASSURANCE
• PROJECT MANAGEMENT
• OPERATION & MAINTENANCE
AND CALL TENDER FOR ALL ABOVE HAVING
ARCHITECTURAL, ENGINEERING, PROCUREMENT AND
CONSTRUCTION ACTIVITIES OF ABOVE HEADS. WILL IT BE
EPC CONTRACT?

14. CASE -IV
• CIVIL, E&M WORKS, LANDSCAPING/HORTICUTURE
AND FURNITURE/FURNISHING WHICH INCLUDE
• ARCHITECTURAL SERVICES
• ENGINEERING SERVICES
• EXECUTION
• QUALITY ASSURANCE
• PROJECT MANAGEMENT
• OPERATION & MAINTENANCE
AND CALL TENDER FOR ALL ABOVE HAVING
ARCHITECTURAL, ENGINEERING, PROCUREMENT AND
CONSTRUCTION ACTIVITIES OF ABOVE HEADS. WILL IT BE
EPC CONTRACT?

15. CASE -V
• CIVIL, E&M WORKS, LANDSCAPING/HORTICUTURE,
FURNITURE/FURNISHING AND SECURITY MEASURES
WHICH INCLUDE
• ARCHITECTURAL SERVICES
• ENGINEERING SERVICES
• EXECUTION
• QUALITY ASSURANCE
• PROJECT MANAGEMENT
• OPERATION & MAINTENANCE
AND CALL TENDER FOR ALL ABOVE HAVING
ARCHITECTURAL, ENGINEERING, PROCUREMENT AND
CONSTRUCTION ACTIVITIES OF ABOVE HEADS. WILL IT BE
EPC CONTRACT?

16. CASE -VI
• CIVIL, E&M WORKS, LANDSCAPING/HORTICUTURE,
FURNITURE/FURNISHING, SECURITY MEASURES,
EQUIPMENT AND ANY OTHER ITEM AS PER CLIENT’S
REQUIREMENT WHICH INCLUDE
• ARCHITECTURAL SERVICES
• ENGINEERING SERVICES
• EXECUTION
• QUALITY ASSURANCE
• PROJECT MANAGEMENT
• OPERATION & MAINTENANCE
AND CALL TENDER FOR ALL ABOVE HAVING
ARCHITECTURAL, ENGINEERING, PROCUREMENT AND
CONSTRUCTION ACTIVITIES . WILL IT BE EPC CONTRACT?

17. CASE -VII
• CIVIL, E&M WORKS, LANDSCAPING/HORTICUTURE,
FURNITURE/FURNISHING, SECURITY MEASURES,
EQUIPMENT AND ANY OTHER ITEM AS PER CLIENT’S
REQUIREMENT WHICH INCLUDE
• ARCHITECTURAL SERVICES BUT WITHOUT CONCEPTUAL
PLANS
• ENGINEERING SERVICES
• EXECUTION
• QUALITY ASSURANCE
• PROJECT MANAGEMENT
• OPERATION & MAINTENANCE
WILL IT BE CALLED EPC CONTRACT?

18. CASE -VIII
• CIVIL, E&M WORKS, LANDSCAPING/HORTICUTURE,
FURNITURE/FURNISHING, SECURITY MEASURES,
EQUIPMENT AND ANY OTHER ITEM AS PER CLIENT’S
REQUIREMENT WHICH INCLUDE
• ENGINEERING SERVICES
• EXECUTION
• QUALITY ASSURANCE
• PROJECT MANAGEMENT
• OPERATION & MAINTENANCE
BUT EXCLUDING ARCHITECTURAL DRAWINGS. WILL IT BE
CALLED EPC CONTRACT?

19. CASE -IX
• CIVIL, E&M WORKS, LANDSCAPING/HORTICUTURE,
FURNITURE/FURNISHING, SECURITY MEASURES,
EQUIPMENT AND ANY OTHER ITEM AS PER CLIENT’S
REQUIREMENT WHICH INCLUDE
• ENGINEERING SERVICES EXCLUDING STRUCTURAL DESIGN
• EXECUTION
• QUALITY ASSURANCE
• PROJECT MANAGEMENT
• OPERATION & MAINTENANCE
BUT EXCLUDING ARCHITECTURAL DRAWINGS , E&M AND
STRUCTURAL DRAWINGS. WILL IT BE CALLED EPC
CONTRACT?

20. EPC
• THUS EPC CONTRACTS IS A CONTRACT FOR PART
OF A WORK OR COMPLETE WORK IN WHICH
ENGINEERING, PROCUREMENT AND
CONSTRUCTION ARE INCLUDED
• IF EPC IS FOR COMPLETE WORK AND INCLUDES
ALL ITEMS OF E, P AND C, IT BECOMES TURNKEY
CONTRACT
• HOWEVER EPC MAY BE FOR PART OF WORK
• AND EPC MAY BE FOR E, P AND C WITHOUT
ARCHITECTURAL AND PART OF ENGINEERING
SERVICES ALSO.

21. AND CONTRACT
• A CONTRACT IS BASICALLY AN AGREEMENT BETWEEN
TWO PARTIES CREATING A LEGAL OBLIGATION FOR
BOTH OF THEM TO PERFORM SPECIFIC ACTS. EACH
PARTY IS LEGALLY BOUND TO PERFORM THE
SPECIFIED DUTIES SUCH AS RENDERING A PAYMENT
OR DELIVERING GOODS.
• IN ORDER FOR THE CONTRACT TO BE ENFORCEABLE,
EACH PARTY MUST EXCHANGE SOMETHING OF VALUE
(CALLED “CONSIDERATION”).
• THEY MAY BE EITHER ORAL OR WRITTEN, THOUGH
COURTS PREFER THAT AGREEMENTS BE PUT IN
WRITING.

22. REQUIREMENTS OFA VALID CONTRACT
• MUTUAL ASSENT: EACH PARTY MUST HAVE A SHARED
UNDERSTANDING REGARDING WHAT THE SUBJECT
MATTER OF THE CONTRACT IS. FOR EXAMPLE, WORK
MEANS PROJECT AND NOT A SERVICE OF BRINGING
SOMETHING FROM SOME WHERE.
• OFFER AND ACCEPTANCE: ONE PARTY MUST MAKE AN
OFFER BY CLEARLY COMMUNICATING THEIR INTENT TO BE
BOUND IN A CONTRACT. LIKEWISE, THE OTHER PARTY
MUST RENDER THEIR ACCEPTANCE IN UNAMBIGUOUS
TERMS.
• CONSIDERATION: THIS WHERE BOTH PARTIES MUTUALLY
EXCHANGE SOMETHING OF VALUE IN ORDER TO MAKE
THE AGREEMENT BINDING.
• AN EPC CONTRACT SHOULD ALSO CONFORM TO
REQUIREMENTS OF A CONTRACT AS PER THE CONTRACT
ACT

23. UNDERSTANDING
• UNDERSTANDING MEANS THE TERMS AND
CONDITIONS ARE TO BE CEARLY SPELLED OUT
• THESE ARE INCLUDED IN GENERAL CONDITIONS
OF CONTRACT, SPECIAL CONDITIONS OR ANY
OTHER CONDITIONS MADE PART OF TENDER
DOCUMENT HENCE THERE MUST BE CLEAR
UNDERSTANDING OF SCOPE OF WORK IN EPC
CONTRACT ALSO
• LET US DISCUSS SOME OF THE CONTRACT
CONDITIONS

24. SECURITIES
• PERFORMANCE SECURITY/GUARANTEE FOR
PERFORMANCE OF CONTRACT
• SECURITY DEPOSIT FOR ADJUSTMENT ON
ACCOUNT OF SUMS PAYABLE BY THE
CONTRACTOR
• THIS IS SIMILAR TO OTHER CONTRACTS

25. TIME AND DELAY
• COMPENSATION FOR DELAY
– WITH MAXIMUM RATE @ 1% (ONE PERCENT) PER MONTH OF
DELAY TO BE COMPUTED ON PER DAY BASIS BASED ON
QUANTUM OF DAMAGE SUFFERED DUE TO STATED DELAY ON
THE PART OF CONTRACTOR
• INCENTIVES FOR EARLY COMPLETION
– IN CASE, THE CONTRACTOR COMPLETES THE WORK AHEAD OF
STIPULATED DATE OF COMPLETION OR JUSTIFIED EXTENDED
DATE OF COMPLETION, A BONUS @ 0.5 % (ZERO POINT FIVE
PER CENT) OF THE TENDERED VALUE PER MONTH COMPUTED
ON PER DAY BASIS, SHALL BE PAYABLE TO THE CONTRACTOR,
SUBJECT TO A MAXIMUM LIMIT OF 2 % (TWO PERCENT) OF
THE TENDERED VALUE.
THIS IS SIMILAR TO OTHER CONTRACTS. ABOVE CRITERION MAY
CHANGE FROM ORGANISATION TO ORGANISATION. ABOVE
CRITERION IS OF CPWD

26. DETERMINATION OF CONTRACT
• DEFECTIVE WORK
• SUSPENSION OF WORK
• DELAY
• NEGLIGENCE OF OBLIGATIONS
• INVOLVED IN CORRUPTION
• PAYING COMMISSION
• OBTAINED CONTRACT WITH MALPRACTICES
• BECOMES INSOLVENT
• SUBLETS THE WORK
ABOVE CRITERION IS FROM CPWD, APPLICABLE TO ALL
TYPES OF CONTRACTS

27. CLAUSE 3 A
• IN CASE, THE WORK CANNOT BE STARTED DUE
TO REASONS NOT WITHIN THE CONTROL OF THE
CONTRACTOR WITHIN 1/8TH OF THE
STIPULATED TIME FOR COMPLETION OF WORK
OR ONE MONTH WHICHEVER IS HIGHER, EITHER
PARTY MAY CLOSE THE CONTRACT BY GIVING
NOTICE TO THE OTHER PARTY STATING THE
REASONS.
• ABOVE CRITERION IS FROM CPWD, APPLICABLE
TO ALL TYPES OF CONTRACTS

28. OTHERMAIN CLAUSES
• SECURED ADVANCE
• MOBILIZATION ADVANCE
• T & P ADVANCE
• WAGE INCREASES DUE TO STATUTORY
ORDERS
• PRICE INCREASE ON MATERIALS SPECIFIED
• ESCALATION CLAUSE
• DEVIATIONS

29. SECURED ADVANCE
• SECURED ADVANCE MAY BE INCLUDED IN EPC
CONTRCATS OR MAY NOT BE
• IN CPWD EPC CONTRACTS, IT IS INCLUDED
• IT HELPS IN MOBILISING RESOURCES AND DOES
NOT BLOCK MONEY FOR LONG TIME HENCE IS IN
FAVOUR OF WORK
• SINCE RATES OF ITEMS ARE NOT AVAILABLE IN
CONTRACT, ENGINEER IN CHARGE HAS TO
ASSESS THE MARKET RATES AND REQUIEMENTS
OF MATERIALS ON WHICH SECURED ADVANCE IS
GIVEN CAREFULLY

30. MOBILISATIONANDT&P ADVANCE
• MOBILIZATION AND T&P ADVANCE ALSO
HELP THE AGENCY TO ACCELERATE THE
PROGRESS HENCE IN FAVOUR OF WORK

31. WAGE INCREASE DUE TOSTATUTORY
ORDERS
• THIS IS REQUIRED TO BE PAID AS PER
APPLICABLAWS HENCE NEEDS TO BE
INCORPORATED IN EPC CONTRACTS ELSE
PROVISION HAS TO BE MADE AND CONTRACTOR
HAS TO PABSORB THE RISK AND PAY IF THERE IS
AN INCREASE
• THIS CLAUSE CAN ALSO BE AS REIMBURSEMENT
ON ACTUAL BASIS
• CPWD CONTRACT CLAUSE IS KNOWN AS CLAUSE
10C

32. ESCALATIONCLAUSES
• CPWD CONTRACT DOCUMENT HAS THREE SUB CLAUSES
IN ESCALATION CLAUSE (CLAUSE 10)
• CLUSE 10C: WAGE INCREASE DUE TO STATUTORY
INCREASE
• CLAUSE 10CA: FOR CERTAIN COSTLY ITEMS LIKE CEMENT,
STEEL
• CLAUSE 10CC: ESCALATION ON LABOUR AND OTHER
MATERIALS EXCEPT COVERED UNDER CLAUSE 10CA
IT IS UPTO NIT APPROVING AUTHORITY TO INCLUDE CLAUSE
10CA AND 10CC
IN CASE, ESCALATION CLAUSE IS INCLUDED, THEORETICAL
CHECK (QUANTITY) OF MATERIALS IS REQUIRED TO BE
PREPARED/CHECKED

33. DEVIATION
• EXTRA/SUBSTITUTED ITEMS
• IN CASE THERE IS CHANGE/ MODIFICATION IN DRAWINGS GIVEN
BY THE CONTRACTOR AFTER THE APPROVAL BY THE ENGINEER -
IN- CHARGE DUE TO FUNCTIONAL OR SITE REQUIREMENTS THE
CONTRACTOR SHALL CARRY OUT THE CHANGES INCLUDING EXTRA
ITEMS, SUBSTITUTE ITEMS, DEVIATIONS AS PER DIRECTION OF
ENGINEER IN CHARGE FOR WHICH NOTHING EXTRA SHALL BE
PAYABLE TO THE CONTRACTOR ON ACCOUNT OF SAME, PROVIDED
THE ADDITIONAL COST OF SUCH WORK IS UP TO 1 % (ONE
PERCENT) OF THE ACCEPTED TENDERED AMOUNT AND WORKED
OUT ON MARKET RATE BASIS FOR THE VARIATION COSTING
ABOVE 1 % (ONE PERCENT).
ABOVE CLAUSE IS AS PER CPWD CONTRACT WITH THE IDEA THAT
SOME DEVIATIONS MAY BE REQUIRED DUE TO LOCAL BODY
REQUIREMENTS LATER PROJECTED OR CLIENT’S REQUIREMENTS
OR STRUCTURAL REQUIREMENTS AND THUS SOME PROVISION IS
INCLUDED

34. DEVIATION
• THERE MAY BE CHANCES THAT
• DRAWINGS ARE SUPPLIED BY THE ENGINEER TO THE
CONTRACTOR
• DRAWINGS ARE PREPARED AND APPROVED BY THE
ENGINEER
• DEVIATIONS WILL BE WITH RESPECT TO APPROVAL OF
DRAWINGS ACCORDED BY THE ENGINEER HENCE
DEVIATIONS WILL ALSO BE WITH RESPECT TO
DRAWINGS APPROVED EITHER SUPPLIED BY THE
ENGINEER OR THE CONTRACTOR HENCE ENGINEER
SHOULD TAKE DUE CARE BEFORE CONVEYING
APPROVAL OF THE DRAWINGS TO AVOID DEVIATIONS

35. DEVIATION
• NIT APPROVING AUTHORITY MAY ALSO
CHOOSE THE OPTION OF “NO DEVIATION
ALLOWED” IN THE CONTRACT

36. FORECLOSURE OF CONTRACT
• DUE TO ABANDONMENT OR REDUCTION IN
SCOPE OF WORK

37. LIFE CYCLECOST
• CLAUSE 24
• THE CONTRACTOR SHALL HAVE OBLIGATION TO
RECTIFY CONSTRUCTION DEFECTS MINIMUM UP
TO 5 (FIVE) YEARS FROM THE DATE OF
COMPLETION OF WORK. THE DEFECTS HAVE TO
BE RECTIFIED WITHIN A REASONABLE TIME NOT
EXCEEDING THREE MONTHS AFTER ISSUE OF
NOTICE BY ENGINEER- IN- CHARGE
THE CLAUSE IS MORE ABOUT THE CONSTRUCTION
DEFECT REMOVAL PERIOD RATHER THAN LIFE
CYCLE COST

38. ARBITRATION
• CLAUSE 25 AS PER CPWD CONTRACT
• PROVISION OF DRC WITHOUT REFERENCE TO SE/CE
• DRC WILL GIVE DECISION WITHIN 60 DAYS
EXTENDABLE BY 30 DAYS WITH CONSENT OF BOTH
THE PARTIES
• NO PARTY WILL BE REPRESENTED BY LEGAL COUNSEL
DURING DRC
• PROVISION OF ARBITRATOR FROM GOVERNMENT
ORGANISATIONS OR RETIRED.
• SOLE ARBITRATOR FOR WORKS (TENDERED COST)
COSTING UPTO 500 CR AND TRIBUNAL OF THREE
ARBITRATORS FOR WORKS ABOVE 500 CRORES.

39. THANK YOU