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stands for Engineering, procurement and


EPC overview

 EPC contract the contractor designs the
EPC is
gaining installation, procures the necessary materials
importance and builds the project, either directly or by
worldwide. It subcontracting part of the work. In some cases,
requires good the contractor carries the project risk for
understandin schedule as well as budget in return for a fixed
g by the price, called lump sum or LSTK depending on
EPCC to the agreed scope of work.[1]
return a profit

 When the scope is restricted to engineering
An EPC and procurement, this is referred to as an EP,
contract is a E and P or E+P contract. This is often done in
agreement. situations where the construction risk is too
In a global great for the contractor or when the owner does
context, EPC the construction
is more


Comparison of EPC/EPCM

EPCM (engineering,
EPC (engineering, procurement, and
construction ) procurement, and

construction management
 EPC company is able  EPCM company is

to manage all levels only managing build

on site, with site as a Site
Engineer (Supervisor

Construction as well
on behalf of final

 EPC contract is more customer.
critical and destined

 EPCM contract is
to the biggest smaller type of
companies – it is contract than EPC,
advantage indeed. but safer for EPCM




An owner decides for an EPC contract for reasons that

 Reduced stress for owner
 easy work and growth of the company.
 Single point of contact for owner simplifies

 Ready availability of post-commissioning services
 Ensures quality and reduces practical issues faced in

other ways[clarification needed]

 Owner protected against changing prices for
materials, labor, etc.

 Cost is known at the start of the project


Owner defines to the EPC contract :

 Scope and the specifications of the plant

 Quality

 Project duration

 Cost

 The cost (the price to be paid to the EPCC) is
negotiated and finalised and paid in mutually
agreed installments.



Engineering Functions Procurement

 Initiation Functions

 Planning  Purchasing

 Estimating ->  Expediting

Request for Quote  Receiving

 Design  Invoicing


Construction Functions

 Construction Schedule

 On-site Material Handling

 Building Activities

 On-site Client Communications

 Closing


Projects Success by the owner and
the EPC contractor
Owner Defines EPC Contractor

 Defines guarantees

well  Adopts similar terms
and conditions as

 Defines scope and
quality very carefully owner regarding

quality, guarantee
 Defines milestones

etc., for

 Defines LD/penalty

 Do not keep terms

 Makes payment terms

 Coordinate vigilantly
very specific

to reduce chances of
errors at site.


Global arena

The EPCC  Local market conditions for
must have materials and labour availability and
data and
expertise in capabilities
all the

 Local code, statutory etc.,
fields. Some requirements
areas are  Availability of local supervisory

 Availability of local engineering

 Local and global subcontractor

experience and performance


Cost Certainity & Owner
 Cost certainty  Owner responsibility
 One main reason an owner may  To ensure quality, the owner

prefer an EPC arrangement is must select an experienced EPC
“certainty of cost”. An EPC contractor. A third-party or in-
contract binds the Contractor to house consultant can verify the
deliver the project at a firm, design of major structures and
predetermined price regardless inspect the main equipment
of any increase in costs that the installations.
Contractor may incur after the

 Changes in scope of work can
contract is signed. However, affect project schedule, cost and
changes to specifications risk. Such changes are the
initiated by the owner (better responsibility of the owner
finishes for example) may be
incorporated through a “change
order”. Here, the owner and the
Contractor negotiate the price to
make the changes and these
changes/prices are recorded in
the change order document



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