EPC and OM

Question 1

EPC vs EPCM (4)

Answer 1

accountability:

• EPC: contractor are fully accountable
• EPCM: owners have multiple points of accountability

risk:

• EPC: contractor hold all risk
• EPCM: owners hold all risk

time:
- EPC: first date of completion
- EPCM: no fixed completion schedule

price:
- EPC: fixed price or lump sum contract
- EPCM: material and time contract

Question 2

EPC service (4)

Answer 2

• end to end contract arrangement to ensure project is complete
• engineer: preparing, and survey
• procurement: scope and requirement
• construction: coordinate activity with subcontractor

Question 3

Total cost of ownership (TCO) (4)

Answer 3

• what you see: direct cost
• what you don’t see: indirect cost, total lifecycle cost
• external: over time charge, holiday charges
• internal: opportunity cost, resource cost

Question 4

Time and material (1)

Answer 4

• contract guarantee profit for supplier, creates schedule, and cost overrun for buyer

Question 5

Typical project value leakage area (6)

Answer 5

• contract structure does not align with project strategy
• lack of specification and evaluation
• design change
• lack of experience
• limited and non-existent
• change order management

Question 6

Mitigating project risk (6)

Answer 6

• scope change: technical issues sometimes due to lack of supplier analysis
• design delay: outsource of project supplier should be overviewed
• new technology: provision of technology or construction wrap
• financial stability: supplier qualification
• supplier delay delivery: build a relationship
• insufficient skilled labour: agree with key labour agencies

Question 7

Reason for contract change (4)

Answer 7

• market conditions
• technical issues
• government/regulatory
• requirement change

Question 8

Liquidated damage (3)

Answer 8

• delayed LD: delay completion by 15-20%
• performance LD: working in process with plant or equivalent. failure to meet specification
• overall LD: 25-30% of contract value for EP contract, higher than usually found in non project finance

Question 9

EPC contract (1)

Answer 9

• contractor is the supplier of equipment which forms the greater part of project cost and it further subcontract civil work (preparation of project site)

Question 10

DB contract (2)

Answer 10

• Civil work form the main part of contract cost, equipment supply is procured through sub-contractors
• supply of equipment difference

Question 11

Other EPC consideration (3)

Answer 11

• environmental guarantee
• bonuses
• position to contracting authority and offtakers: charges LD with late completion, incentive to ensure on time completion

Question 12

Project company termination (2)

Answer 12

• LD alone may not cover project against poor performance

- may require construction contractor to restore the site to its original conditions and repay all sums

Question 13

Why do engineer do anywayd (4)

Answer 13

• due diligent report
• monitor EPC
• monitor plant/assets
• assist during commercial operation date and asset handover