How we see it EPC vs EPCM

Transcription

1 How we see it EPC vs EPCM

2 To EPC or Not to EPCM EPC and EPCM contracting are both very prevalent types of contracts within the construction industry. Dependent on the level of risk the Owner of a project is willing to accept, budget constraints, and the Owner s organization core competencies, will determine which method is best for their project. EPC contracting tends to be more expensive, to the Owner, due to the shift of project risk away from the Owner and to the EPC Contractor. On average, a project s cost 10% - 20% more using EPC style of contracting than a project using the EPCM style of contracting. This is due in large part to the projects risk being more evenly distributed between the Owner and contracts / suppliers. Construction contracting trends have been leaning towards the EPCM style of contracting and away from EPC contracting for several reasons and are showing signs of coming back to the EPC route but both methods have their place in business today. Construction contract methods can be tailored to the individual projects / owners needs. We can go as far as breaking up each portion of the EPC / EPCM (Engineering, Procurement, Construction / Construction Management) to separate companies. One company can do the engineering; another can do the procurement, while still another can do the construction / project management). The Owners must decide for themselves, with the advice of legal and financial counsels, as to which method of construction contracting would best suit them for their particular project and situation. EPC EPCM

3 EPCM EPCM (Engineering, Procurement and Construction Management) means the company is contracted to provide engineering, procurement and construction management services. Construction companies are contracted by the client directly to provide construction services and they are usually managed by the EPCM contractor on the clients behalf. EPCM contracts resemble the professional services contracts, where the project is largely client managed and the cost risk and control is weighted towards the client. EPCM Advantages: Lower Overall Cost (however this can be abused) Staff s Sense of Ownership More Control over Process Better for less defined projects with anticipated changes to scope of supply Less Legal Litigation (Identify issues early and remedy situation before larger problems arise) Owner s Financing Flexibility These are just a few of the advantages of the EPCM style of construction contracting.

4 EPC EPC (Engineering, Procurement and Construction) means the company is contracted to provide engineering, procurement and construction services by the owner and are also often called LSTK (Lump Sum Turn Key) projects. The project is largely contractor managed and the cost risk and controls are weighted towards the contractor and away from the client. Most EPC contractors have direct contracts with the construction contractors. EPC contracting has it place in the construction industry as well. Under certain situations, it makes better sense to use this type of construction contracting than other methods. EPC Advantages: One Stop Shopping One point of Contact Hands off approach to project Minimal Staffing Requirements Minimal Legal Risk Best for Well-defined projects with Detailed Engineering Complete before EPC Contractor selected (Minimal Unknowns). These are just a few of the advantages of the EPC style of construction contracting.

5 Contact Us Carne Reed Managing Director Tel: Tel: Cell: Skype: Carmakyengineering Proud Supporters of PO Box Brackengardens 1452 Gauteng, Republic of South Africa