长江洪涝灾害的原因:EPC (contract)

EPC stands for Engineering, Procurement and Construction.

It is a common form of contracting arrangement within the construction industry. Under an EPC contract, the contractor will design the installation, procure the necessary materials and construct it, either through own labour or by subcontracting part of the work. The contractor carries the project risk for schedule as well as budget in return for a fixed price, called lump sum or LSTK depending on the agreed scope of work.^[1]

When scope is restricted to engineering and procurement only, this is referred to as an EP or E and P (E+P) contract. This is often done in situations where the construction risk is too great for the contractor or when the Owner has a preference for doing the construction himself.

In an EPC contract, the EPC contractor (EPCC) agrees to deliver the keys of a commissioned plant to the owner for an agreed amount, just as a builder hands over the keys of a flat to the purchaser. The EPC way of executing a project is gaining importance worldwide. But it is also a way that needs good understanding, by the EPCC, for a profitable contract execution. An owner decides for an EPC contract for several vital reasons. Some are:

• The owner puts in minimum efforts for his project and, so, has less stress
• EPC gives the owner one point contact. It is easy to monitor and coordinate
• It is easy for the owner to get post-commissioning services
• EPC way ensures quality and reduces practical issues faced in other ways
• Owner is not affected by the market rise
• Investment figure is known at the start of the project

Besides the plant siting, in an EPC contract the owner will define the following:

• Scope and the specifications of the plant
• Quality
• Project duration, and
• Cost

The cost, that is the price to be paid to the EPCC, will be negotiated and finalised and paid in mutually agreed installments.

Contents

• 1 Owner and contractor liabilities
• 2 Global arena
• 3 Cost variation
• 4 Monitoring by owner and EPCC
• 5 Regarding owners
• 6 See also
• 7 References

Owner and contractor liabilities

Once an EPC contract is done, the EPC contractor becomes liable for completing the project according to the conditions mentioned in the tender. The EPC contractor, in turn, may hire several sub-contractors or sub-vendors to complete different portions of the project. The payment in such contracts commensurate with the work done though an up-front advance is normally preferable by a contractor.

The essence of such contracts is that the owner, due to inexperience in EPC, doles out the whole contract of building up the project to a contractor. Hence, the major risk faced by an owner in such a contract is that of delay by the contractor. On the contrary, an EPC contractor now takes all the risk and attempts to complete the task as and when required.

In case of multiple EPC contracts, where an owner divides the complete project into smaller projects, several EPC contractors may come into play. In such cases, coordination among the contractors becomes a major issue. The owner or the project consultant in such cases has to continuously monitor and maintain the progress of the work and iron out differences or coordination issues, if any.

 Global arena

An EPC contract is a complex phenomenon. It involves various agencies and characteristics. So the EPC contract, especially in global context, needs thorough understanding. The EPCC must know about the various factors that will affect the working, the results and success or failure of the contract, in global arena. The EPCC must have data and expertise in all the required fields. A thorough knowledge of many aspects is required. Some important areas are:

• Local (where the plant will be located) market conditions for the materials supply and labour availability and performance
• Local code, statutory etc., requirements
• Availability of local supervisory personnel
• Availability of local and global engineering services
• Local and global contractors, their experience and performance

Cost variation

An important factor that can affect the EPCC's performance is cost variation. An EPC contract normally has no price escalation clause, so, any variation in prices from the contract stage is on the account of the contractor.

The cost variation to the EPC Contractor can occur on various accounts, main being:

• Change in scope of work

Change in scope of work either addition or omission will result in change in cost variation.

Regarding materials' prices oscillation or exhange rate oscillation: in most cases the contract contains a clause that eliminate this issue and bear this risk on the contractor's shoulders.

 Monitoring by owner and EPCC

The following points will be helpful to the owner for monitoring the project:

• Define guarantees well
• Define scope and quality very carefully
• Define milestones meticulously
• Have the LD/penalty clauses well-defined

The handling of an EPC contract is a complicated and complex phenomenon for the EPCC management. Some important points to know are:

• Have payment terms very specific
• Have similar terms and conditions regarding quality, guarantee etc., as demanded by owner's with various vendors
• Do not keep terms open-ended
• Coordinate vigilantly to reduce chances of errors at site

 Regarding owners

The owner must clearly define the project as any changes after the EPC contract has been signed will be costly. In order to ensure quality, the owner must also select a reputed and experienced EPC contractor. The owner should also utilize a third-party or in-house consultant to verify the design of major structures and inspect the main plant machines.

See also

• EPCM
• EPCI
• LSTK

References

1. ^ Loots, Phil; Nick Henchie (2007-11). "Worlds Apart: EPC and EPCM Contracts:Risk issues and allocation" (PDF). Mayer Brown. http://www1.fidic.org/resources/contracts/epcm_loots_2007.pdf. Retrieved 2009-04-15.