What is an EPC contract?
Contents |
[edit] Introduction
An engineering, procurement and construction (EPC) contract is sometimes referred to as a turnkey contract, although there are some differences between the two.
- In an EPC contract, the project company will do some basic engineering before handing over the project to the contractor. In a turnkey contract, the owner would specify certain technical aspects of the project, and then the turnkey contractor will have all the project controls until the contract is complete.
- A turnkey contractor is responsible for the design, procurement and construction of the project. The contractor is also responsible for commissioning and handing over the ready-to-use project to the owner or the client. In EPC, the commissioning is not a part of the contract as in a turnkey contract.
[edit] Engineering or designing aspects of an EPC contract
The design duties of EPC contractors are:
- Basic engineering.
- Detailed engineering.
- Detailed design.
- Planning.
- Construction engineering.
- Civil engineering.
[edit] Procurement aspects of an EPC contract
The responsibilities in procurement are:
- Logistics.
- Transportation.
- Purchasing.
- Invoicing.
- Receiving the materials.
[edit] Construction aspects of an EPC contract
The functions involved in the construction of a project are:
- An EPC contractor handles the design and construction management.
- Electrical installation.
- Water supply.
- Sanitation and drainage work.
- Carving cupboards and showcases.
[edit] Advantages of an EPC contract
By choosing an EPC contractor, the project owner may have several advantages, including:
- Single point of responsibility.
- Fixed contract price
- Fixed completion date
- Set performance specification.
- Performance guarantees.
- Security.
- Caps on liability.
- Rights to suspend the project.
- Flexibility in ordering variations.
- Force majeure
[edit] Limitations of an EPC contract
Like any other contract, an EPC contract also has some limitations. These include:
[edit] Difference between EPC and EPCM contracts
The definition of EPCM is engineering, procurement, construction and management. Although it sounds similar to an EPC project, an EPCM contract is very different from the former. An EPC contractor handles design, procurement, construction and hands over the project to the end-user. By comparison, the EPCM contractor is mainly concerned with the supervision of the project, although an EPCM contractor is also responsible for the detailed design and the overall project management.
See also: Engineering procurement and construction contract.
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