When it comes to an industrial, power or infrastructure project, the question of whether you are going to use the EPC model and what kind of EPC partner you will have is a simple matter on the face of it but also very critical in terms of its consequences.
The notion of what is EPC does not merely concern definitions. It is concerned with knowledge of the distribution of risk, responsibility, cost, and timelines in your project.
This paper will outline what is EPC, the way EPC projects operate in real life on the ground and how the decision-makers can select an appropriate EPC partner to prevent delays, conflicts and cost overruns.
What Is EPC?
EPC is known as Engineering, Procurement, and Construction. An EPC model has one body that does all the work connected to the project design, where all the necessary materials and equipment are procured and the construction is carried out to the end and handed over.
Simply stated, EPC implies the existence of a single responsible party rather than several disjointed contractors.
When individuals inquire what EPC project is, they are likely attempting to determine whether EPC minimizes complexity. There is truth in the fact that EPC actually lowers the coordination headaches, though, again, this only happens when the EPC contractor possesses actual execution capability and not merely contractual authority.
What Is an EPC Contract?
To see what is EPC contract you must see risk ownership.
The nature of an EPC contract is usually to define:
A definite or well laid out project scope.
- There are set schedules and targets.
- Performance guarantees
- Delays or Non-performance penalties.
The EPC contractor takes the liability of providing the project as a unit and not merely as a single unit. This is because EPC contracts are used in large-scale infrastructure, industrial and power projects where the cost of coordination failure is high.
The EPC contracts are however not equal. Some transfer risk cleanly. Other people just pass the paperwork as the execution risk quietly remains with the owner.
What Is an EPC Company and EPC Contractor?
In the event that individuals query what is EPC company or what is EPC contractor, they are most likely to distinguish between a genuine EPC participant and one who is a broker-type player.
A genuine EPC company:
- Has in-house engineering capability
- Controls procurement networks
- Maintains experienced site execution teams
- Takes responsibility for integration, not just delivery
An EPC contractor who merely subcontracts all is superficially seen to be okay on paper but hardly works when the site conditions vary. The conditions in real EPC projects change all the time.
This difference is not seen in bidding, but in execution.
What Is EPC Construction Projects?
The issue of what is EPC in construction comes in when the project goes beyond a mere civil work.
Most EPC projects involving construction projects are intensive in nature and are driven by various disciplines: civil, electrical, mechanical, instrumentation, utilities and occasionally automation. EPC is effective in such situations since design decisions are undertaken keeping an understanding of their implementation limitations.
For example, a good EPC contractor will modify engineering drawing depending on crane access, material handling or commissioning sequence. A weak EPC arrangement considers drawings as complete and entrusts site teams to sort out conflicts in the future.
Such difference is what can determine whether a project will be completed within time or a project will be postponed years.
What is really happening in EPC Projects?
EPC projects appear to be linear on paper: the design, followed by the procurement, followed by construction. As a matter of fact, they are parallel and iterative.
Early construction is extended into engineering. Approvals overlap with procurement. Small changes in design are imposed by site conditions. This is cushioned in good EPC systems. The bad ones create variation orders and blame circles.
That is why it is not sufficient to know what is EPC projects. You have to know how EPC partners act in a stressful situation.
Case Insight: Why EPC Selection Matters More Than EPC Definition
Take the case of a medium scale industrial project whereby the owner chose the lowest EPC bidder. The bid was based on normal soil conditions and rosy procurement schedules.
In the process of implementation, the foundation had to be redesigned due to the requirements of the soil conditions. There is a single vendor dependency which results in delays in procurement. Individual issues appeared to be manageable. Together, they added months.
The EPC contractor alleged variations. The owner presented the case of scope clarity. Meetings increased. Progress slowed.
Conversely, in a comparable project where the EPC partner had more experience the initial engineering had conservative assumptions built into it. Alternatives with vendors were pre-qualified. Where site realities were revealed, execution modified and there was no contract conflict.
In both projects, EPC contracts were employed. The results were drastically distinct.
Which EPC Model Should You Choose?
The actual choice is not between EPC and non-EPC. It is what EPC strategy best suits your risk ethos.
If your project has:
- Tight timelines
- High coordination complexity
- Regulatory or safety sensitivity
A powerful execution-oriented EPC partner is then the safest bet.
When your EPC contractor is selected based on the lowest price without consideration of engineering thoroughness and procurement management, EPC is not a solution but rather a brand name.
The trustworthy EPC partners price risk in the short term. Others defer it to execution.
The Way Decision-Makers Must Be Evaluating an EPC Partner.
The decision-makers ought to assess the way the EPC contractor thinks rather than just concentrating on price only.
Enquire about changes in design during construction. Inquire about the way the procurement risks are handled. Enquire about the manner in which site teams liaise with engineers. Such responses are worth more than a brochure.
An effective EPC contractor will describe trade-offs in a relaxed manner. A new one will be dependent on promises.
This is the point at which what is EPC company ceases being definition and becomes a strategy of selection.
Why EPC Understanding Saves Money Before Construction Starts
Majority of EPC issues cannot be remedied later at a low cost. After the construction starts, leverage is less, timelines are in charge and rational decisions are reactive.
Knowledge of what is EPC, what is EPC contract and what is EPC project at the evaluation stage will enable the owners to avoid escalation instead of controlling it.
It is there in prevention that real savings lie.
Talk to an EPC Team Before You Finalize
When you are considering EPC alternatives or you are reviewing EPC bids on an upcoming industrial or infrastructure project, a brief technical discourse can identify the risks of execution at the earliest.
Multiinfra’s EPC team works closely with clients to assess scope clarity, engineering assumptions, and the feasibility of the execution of the contract prior to finalizing the contracts.
This assists a decision-maker to proceed with certainty and justify him/herself internally.
The EPC decision warrants something more than a price comparison in case your project is important.
A conversation at the right time often saves months later.