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EPC Contracts: advantages and difficulties

  • 1.  EPC Contracts: advantages and difficulties

    Posted 01-22-2021 05:29 PM
    One of the most interesting advantages of EPC contracts is that you can start the works before the engineering design is fully completed, unlike a lump sum construction contract where the engineering is supposed to be completed and coordinated to start the works. But, thinking about not falling into "your own disruption trap", what is the reasonable minimum level of advancement in engineering development to start works on an EPC?

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    Ricardo Fierro - Aff.M.ASCE
    Partner & Senior Consultant
    GEDD CONSULTORES
    Santiago de Chile
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  • 2.  RE: EPC Contracts: advantages and difficulties

    Posted 01-25-2021 05:48 PM
    At the very least Mr Fierro, you should have completed an indicative design with associated engineering documents so that you then can go to bid and select the most responsive, and preferably, the least cost construction contractor.  Then you also need the engineering resources to fully review the detailed designs submitted as the "E" part of the EPC contract.

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    Alfred Cranston M.ASCE
    Retired
    AECOM New Zealand Limited
    RD6, Warkworth
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  • 3.  RE: EPC Contracts: advantages and difficulties

    Posted 01-27-2021 10:57 AM
    Hi Alfred

    Thans for your answer.

    I was thinking of the typical case where the contract is already awarded to an EPC contractor and that company is developing the engineering as part of their contract. That same company is responsible for the "E", the "P" and the "C".

    In this situation, the right time to start work on a large project is a complex decision with considerable risk.

    best regards
    Ricardo Fierro

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    Ricardo Fierro Aff.M.ASCE
    Partner Senior Consultant
    GEDD CONSULTORES
    Santiago
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  • 4.  RE: EPC Contracts: advantages and difficulties

    Posted 02-02-2021 01:15 PM

    EPC contracts have been used extensively for industrial projects – pre-planning and project execution documents generated, the overall layout established, the underground systems' material purchased with documents issued for installation and the main equipment and materials purchased so construction may proceed while the balance of the engineering is completed.  It is critical for the coordinated engineering, design, procurement and construction team to understand the fixed parameters and to "begin with the end in mind" and understand the "end point" of the contract – i.e. what, when and how the turnover of the completed work to the owner or third party is accomplished; the sequence of construction is established and supported by the engineering/design/procurement activities; the interfaces between disciplines and construction activities defined; all the required deliverables are delineated; and the risk profile for the project known and to be continually reviewed/updated during execution.  The commencement of field activity must provide continuous work for the construction team. The execution team will be adjusted as needed to accomplish the work defined by the issued for construction documents. Summary:  Early planning, full scope definition and team organization are keys to success – nothing new, just attention to detail and adequate resources for project management.



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    Michael Kozinetz Aff.M.ASCE
    Construction Manager
    Murrells Inlet SC
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  • 5.  RE: EPC Contracts: advantages and difficulties

    Posted 02-02-2021 07:45 PM
    Hi Michael,

    Very interesting contribution, thanks.

    It seems to me that the EPC contract model is also applicable in some civil works contracts and large facilities, but the difficulties and risks associated with the decision of when to start the work implies, in all cases, a risk for the EPC contractor, precisely for the continuity of the site works.

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    Ricardo Fierro Aff.M.ASCE
    Partner & Senior Consultant
    GEDD CONSULTORES
    Santiago de Chile
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  • 6.  RE: EPC Contracts: advantages and difficulties

    Posted 02-08-2021 01:36 PM
    This is a complicated question with multiple factors to be considered. Seasonality plays a role depending on the nature of the work to be performed, but the most important thing is for the engineering to be advanced enough to rule out major changes.  This means resolving critical components of the design, such as utility corridors, access points and stormwater management, on the civil side, but this must coordinate with other aspects of the project and may involve electrical engineering, process engineering, architecture, landscape architecture mechanical engineering, and structural engineering.  You really do not want to begin site work until you are confident that the plan will not change appreciably as a result of ongoing engineering.  The schedule can be expedited for certain tasks such as site work, off-site improvements, Consideration may be given on large sites to subdividing the project in phases.

    The real challenge with EPC projects is proper planning and estimating in the proposal stage.  That is when all of the designers and the contractors should sit down and work out the optimal sequence and schedule.  If it is not done then, it can be really difficult if not impossible to get a project on track.  One of the great advantages of EPC is that the designers can take advantage of the contractors specific knowledge of means and methods and create a design that meets the owner's requirements making most efficient use of contractor capabilities.  If the first time the design consultants and contractor are meeting together is after award, there could be real issues and time consumed in getting all of the considerations worked out so everyone is aware of the limitations and assumptions made by different designers and can reconcile them into a workable plan.

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    Michael Byle P.E., D.GE, F.ASCE
    Tetra Tech Inc.,
    Langhorne PA
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