Company Profile
Products
Inspection Report
Reference List
Association Membership
Quality Policy
HSE
EPCM
News
Steel Pipe Stock
Pipe Specs
API Specs
Australian Standard
GOST Specs
CS Pipe Specs
Stainless Steel Specs
Coating Specs
Fittings Specs
Fasteners Specs
Steel Plate Specs
Contact Us

EPCM 

EPCM 
  (ENGINEERING, PROCUREMENT, CONSTRUCTION MANAGEMENT)
http://layout.ninenic.com/default/home_5.jpg

 

Metals International Limited will  provide engineering, procurement and construction management services.  Other suppliers and sub contractors are contracted by the Owner directly to provide construction services and they are usually managed by the EPCM contractor on the Owner's behalf.  

Included is a simplified Chart showing the differences in the type of contracts and how each would differ under the same situations:  The list below is not a complete list of differences between EPC and EPCM contracts but it does address many of the major contractual differences.  The way each of these issues is handled can be modified during contract negotiations to suit the situation and overall goals of the project.

 

 

 

Task / Issue

 

 

EPC (Engineering, Procurement and Construction)

 

EPCM (Engineering, Procurement and Construction Management)

Equipment Supply Contracts

Negotiated & Signed solely between EPC contractor & Supplier

Negotiated & signed between  Owner and Supplier /with EPCM contractor’s advise and assistance

On-Site Construction Contracts

Negotiated & Signed solely between EPC contractor & Supplier

Negotiated & signed between Owner and Contractor /with EPCM contractor’s advise and assistance

Supplier Selection

Suppliers chosen solely by EPC contractor with no input from Owner

Suppliers chosen by mutual agreement of Owner and EPCM contractor

Scope of Supply

EPC Contract only as good as the original project specifications presented during bidding process. Changes to specifications / scope of supply after awarding of contract can be expensive, due to EPC contractor’s sole contract with Owner and Owner’s inability to “Shop Around” for multiple quotations from independent contractors / suppliers

Owners can modify project specifications with little or no trouble.  Owner, with the assistance of the EPCM contractor can negotiate independent contracts with suppliers / vendors at any time due to the fact that project is under multiple (independent) contracts and not one (1) all encompassing contract  

Equipment Supply Warranties

Warranties negotiated by Suppliers & EPC contractor and issued to EPC Contractor directly.  
Warranty to Owner from EPC contractor is negotiated separately between Owner and EPC Contractor and issued to Owner by EPC Contractor

Warranties negotiated individually with each supplier by Owner with EPCM contractor’s advice.  Issued directly to Owner from the suppliers and contractors

Process Warranties

Warranties negotiated by Suppliers & EPC contractor and issued to EPC Contractor directly.
Warranty to Owner from EPC contractor is negotiated separately between Owner and EPC Contractor and issued to Owner by EPC Contractor (Usually in the form of a performance Bond)

Warranties negotiated individually with each supplier by Owner with EPCM contractor’s advice.  Issued directly to Owner from the suppliers and contractors (Usually in the form of a Performance Bond)

Construction Site Safety
(General Liability Insurance, Workman’s Compensation, Accident, etc.)

Site Safety solely the responsibility of the EPC contractor and sub contractors; in accordance with Contractual Agreements

Site safety is monitored by EPCM contractor but site safety is the legal responsibility of Owner and Sub Contractors; in accordance with Contractual Agreements

 

Permitting (Environmental, Construction, etc.)

 

Permitting is the responsibility of the EPC contractor with the exception of permits that are required by law to be issued in the name of the Owner of the project

Permits are issued to the Owner directly with EPCM contractor assisting in filing the necessary paperwork

Project Budget Cost Overruns

The cost risks for a project are borne by the EPC contractor. Any cost overruns, for equipment and/or services within the EPC contractor’s scope of supply, are for their own account and can not be passed onto Owner unless “change conditions” occur  or contractual agreements to the contrary

The cost risks for a project are borne by the Owner. Any cost overruns, for equipment and/or services are for the Owner account (with the exception of fixed price supply contracts) i.e. Final equipment pricing bids / on site cost higher than originally budgeted.

Project Budget Cost Savings

The cost risks for a project are borne by the EPC contractor. Any cost savings, for equipment and/or services within the EPC contractor’s scope of supply, are for their own account and are not passed onto Owner unless contractual agreements to the contrary

The cost risks for a project are borne by the Owner. Any cost savings, for equipment and/or services are for the Owner account ie. Equipment/Services bids are returned lower than budgeted.

Project Day-to-Day Expense

The day-to-day expenses for the project, within the EPC contractor’s scope of supply are borne by the EPC contractor.

The day-to-day expenses for the project are borne by the Owner but are managed and administered by the EPCM contractor (up to pre-determined quantities, without Owner’s need for intervention).  Usually a small fund is established by Owner for day-to-day expenses

Project Financing

Project Financing is usually accomplished by substantial down payment by Owner to EPC contractor and the remainder of the fees issued with Irrevocable Letter of Credit (with partial payments) from Owner to EPC Contractor.  This requires Owner to have all financing in place at the onset of the Project so as to secure letter of credit (LC).

Project Financing can be any combination of down payments, open accounts, and Irrevocable Letters of Credit from Owner to suppliers / contractors; whatever method is negotiated during contract negotiations.  EPCM contractor will assist in all negotiations on Owner’s behalf. This allows Owner to have partial financing in place at the onset of the Project with the remainder available as needed, dependant on contractual requirements.

Legal Cost

Legal Costs are low for Owner. Owner negotiates only one detailed supply contract with EPC contractor.
EPC contractor must negotiate individual contracts with suppliers / vendors.  EPC contractor’s legal costs are high due to multiple contracts.
In the event of legal action is taken, Owner must sue EPC contractor, who in turn must bring legal action against appropriate suppliers / contractors. (Usually a longer process than EPCM legal actions)

Legal Costs are higher for Owner.  Owner negotiates multiple supply contracts directly with suppliers / contractor; with the assistance of EPCM contractor.
In the event of legal action is taken, Owner must bring legal action against individual suppliers / contractors. (Usually a shorter process than EPC legal actions)

Administration

Owner’s administration costs are low with EPC contract.  Only minimal staff (management, QC, legal, etc.) needed to administer/monitor project.  May have negative effect on project “ownership” feeling within Owner’s organization (Hands off).

Owner’s administration costs are higher with EPCM contracts. Substantial staffing levels needed to assist/compliment EPCM contractor in administering/monitoring project. Promotes “ownership” feeling within Owner’s organization.  Project staff often transferred to operational staff after project completion.

 

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 project’s 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 but both methods have their place in business today.

EPCM Advantages:

  • Lower Overall Cost
  • 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 EPCM style of construction contracting. 


Company Profile  |  Products  |  Inspection Report  |  Reference List  |  Association Membership  |  Quality Policy  |  HSE  |  EPCM  |  News  |  Steel Pipe Stock  |  Pipe Specs  |  API Specs  |  Australian Standard  |  GOST Specs  |  CS Pipe Specs  |  Stainless Steel Specs  |  Coating Specs  |  Fittings Specs  |  Fasteners Specs  |  Steel Plate Specs  |  Contact Us  |  Sitemap  |  Mobile Version
  English     简体版     繁體版
Powered by DIYTrade.com