engineering deliverables

1. EPC -v- EPCM
Contract & Procurement Optimisation 501
Group Assessment
Tamahra Moore and
Helen Sarcich

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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. Conclusion
EPC or EPCM?

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