EPC Contract
An EPC Contract is a risk mitigation and management tool in the form of a project document. In fact, EPC Contracts were specifically conceived to transfer risk to the contractor. They make the contractor responsible for all project activities from the design phase through the construction phase. Specifically, they make the contractor responsible for all design, engineering, procurement, construction, commissioning, and handover activities of the project, leaving the owner with no responsibilities save for turning the key at project delivery.
Another reason for the widespread use and acceptance of EPC Contracts is that they are strongly preferred by project finance lenders. Project lenders are much more comfortable providing project financing when construction contracts have fixed prices and required dates for completion. Less risk to the lender means the likelihood of your project finance loan being approved increases substantially.
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EPC Contract for Bulk Material Handling and Cargo TransitionEPC: Engineering Procurement Construction, emphasizes and gives full play to the leading role of design in the whole project construction process.read more -
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EPC Contract for Bulk Cargo Handling and Conveying ProjectThe main body of construction project quality responsibility is clear, which is conducive to investigating the project quality responsibility and determining the undertaker of the project quality...read more
Advantages of EPC Contract
Single point of responsibility
The EPC contractor is responsible for the entire project, which simplifies communication and coordination between different parties.
Fixed price
EPC contracts typically have a fixed price, which provides certainty for the owner in terms of project costs.
Fixed timeframe
EPC contracts typically have a fixed timeframe for completion, which provides certainty for the owner in terms of project schedule.
Our factory
Ifima Technology (Shanghai) Co., Ltd.(YFM) was established as an agent subsidiary of Jiangsu YFM group company focuses on expanding oversea market of the crane business. The factory covers an area of 18,000 square meters, with a scientific management team, advanced production equipment, exquisite technology, professional testing and inspecting equipment, as well as completed management system.
Our product
The company's main products are Marine cranes, port cranes, bulk cargo handling grab, and related customized steel structure products.
Our service
There is a skilled sales and R&D team focuses on providing solution-based services pre and after sale to our clients. In order to extend the service life of equipment, Our dedicated team will provide regular maintenance and repair service for your crane , this service is not limited to our products.
Our certificate
As a design and production enterprise of Marine and port equipment , it has been certified by Chinese CCS, American ABS, French BV, Norwegian DNV, British LR, Korean KR, Japanese NK, Russian RS and other classification societies.
Types of EPC Contract
There are several different types of EPC contracts, including:
Lump sum
In a lump sum EPC contract, the EPC contractor agrees to complete the project for a fixed price. This type of contract provides the most certainty for the owner in terms of project cost.
Cost plus
In a cost plus EPC contract, the EPC contractor is reimbursed for the actual cost of the project, plus a fee for their services. This type of contract provides more flexibility for the owner in terms of project scope changes but also carries more risk for the owner in terms of project cost.
Guaranteed maximum price
In a guaranteed maximum price EPC contract, the EPC contractor agrees to complete the project for a fixed price, but the owner agrees to pay any additional costs up to a certain limit. This type of contract provides a balance between cost certainty and flexibility.
Target cost
In a target cost EPC contract, the EPC contractor and owner agree on a target cost for the project, with the EPC contractor receiving incentives for completing the project under budget and penalties for going over budget. This type of contract incentivizes the EPC contractor to control costs while still providing flexibility for the owner.
Front-End Planning
While some project owners choose to perform front-end planning before selecting an EPC contractor, integrating front-end planning after contractor selection can provide continuity through design and construction planning. Depending on the initial level of scope definition, project complexity, and other driving factors, project owners may choose to complete a formal stage-gate process. During this phase, the EPC contractor and their team assess and evaluate the overall constructability of the project. The contractor should develop a robust definition of scope, assess the site and any existing structures, and establish all tasks that need to be performed before construction can begin. The early development of a strong scope definition is crucial for the success of any capital project. A well-defined scope reduces the likelihood of significant changes to the scope and the need for change orders during project execution.
Detail Engineering and Design
After all of the scope parameters, including equipment selection, timeline, site, and budget, have been established and agreed upon by all involved parties, the EPC contractor can begin the detail engineering and design phase. All departments and disciplines work together to determine and produce the optimal design for project success. They should work to develop a design that strikes a balance between budget and efficiency. After the design has been developed, the contractor’s engineering team provides a set of highly disciplined drawings that will be used for construction.
Procurement
Procurement is a highly detailed and complicated process that involves all sourcing, purchasing, and inspecting of products, materials, services, and equipment required for construction. The EPC contractor’s procurement team should be involved from the beginning of the project to develop a detailed and strategic procurement management plan. This plan creates the framework for a strategic procurement schedule that ensures on-time deliveries to help maintain construction timelines. This plan determines the timeline for purchasing each item and identifies critical procurement milestones that should be updated as the plan progresses to assess any impacts on the project. Procurement management plans help the procurement team organize and prioritize all procurement activities at a commodity level while determining the optimal sequencing of activities. This plan should be shared with all involved parties to provide full transparency regarding critical procurement-related activities.
Fabrication and Construction
Not all EPC contractors have in-house fabrication capabilities—however, working with an EPC contractor who can perform fabrication in-house helps maintain the cohesive workflow and communication stream as well as provides greater schedule certainty. With strategic planning and cross-department communication, the construction team may complete the construction of various project components while work packages are still in the engineering and design or fabrication phase of the project. The remaining construction activities required to meet predetermined deadlines and goals per the scope of the project, including all civil, structural, piping, equipment, electrical, and instrumentation activities, take place during the construction phase. If the EPC contractor has in-house fabrication capabilities, some project components may be prefabricated or preassembled off-site in the fabrication shop, while others may benefit from on-site construction. Regardless of whether off-site or on-site construction is utilized, contractors work to ensure all construction activities are performed safely and accurately.
Other Key Responsibilities
In addition to key project phase-related responsibilities, EPC contractors are also responsible for several crucial aspects of managing the project, such as risk management, project controls and reporting, and change management.
Risk Management
EPC contractors are in charge of identifying, evaluating, mitigating, and monitoring project risks, such as schedule, cost, quality, safety, and environmental concerns, throughout a project’s life cycle.
Key Considerations of EPC Contract
Single Point of Responsibility
One of the main distinctive features of an EPC Contract is that the EPC Contractor is solely responsible for the Project. An EPC Contractor would undertake works such as designing, engineering, procurement, construction, commissioning and testing works. Hence, in the event there is an issue arising out of or in connection with the Project, the Employer will only need to refer the said issue to the EPC Contractor.The EPC Contractor would then be liable for any defects and rectifications of the same or to provide compensation to the Employer. In cases where the EPC Contractor is a consortium comprising several entities, the EPC Contractor will typically state in the EPC Contract that such entities are jointly and severally liable to the Employer. The EPC Contractor will also be responsible for the works carried out by any appointed Subcontractor (as defined below) and for any acts or omissions of the Subcontractor.
Fixed Contract Price
An EPC Contract requires the Works to be carried out and completed at a fixed price, which means that the EPC Contractor will be responsible for cost overruns and cost savings ("Contract Price"). However, the EPC Contractor may be able to claim additional costs in circumstances where the Employer has caused a delay to the completion of the Project or has placed a change order to the Works. Although it is common for Employers to receive a lump-sum payment, this does not prevent the EPC Contractor from negotiating with the Employer for a schedule of payments to be included to cater for an alternative payment method such as milestone payments.
Security
In most, if not all, construction contracts, it is common that the contractor provides a performance bond to protect the interests of the employer in the event the contractor fails to comply with its obligations under the contract.
Performance Guarantees
Performance Guarantees are in direct relation to the EPC Contract's feature of having a guaranteed quality, in view of the EPC Contractor's performance of its obligations under the EPC Contract. It is common for an EPC Contract to contain a provision stating that the EPC Contractor is required to provide performance guarantees backed by performance liquidated damages payable by the EPC Contractor to the Employer in the event of an under-achieving performance.
Handover, Testing and Commissioning
The concept of handover under an EPC Contract is of fundamental importance given the turnkey aspect. Testing and commissioning are the EPC Contractor's responsibilities, which are part of the Works, before the handover and completion of the Project. Clauses pertaining to handover, testing and commissioning will set out the procedure as to when the Employer will take possession of the site and the facility constructed.
Fixed Completion Date
The Completion Date comes in the form of either a fixed date or a specified period from the commencement of the EPC Contract, by which the EPC Contractor is required to complete the Project. If the Guaranteed Completion Date is not achieved, the EPC Contractor will be liable for liquidated damages. The Employer does not need to prove that it has suffered actual losses to claim liquidated damages.
Limitation of Liability
A limitation of liability clause limits the liability of the EPC Contractor up to a specified percentage of the contract sum. Although different contracts have different percentages of limitation, the common limitation of liability is capped at 100% of the contract sum. A limitation of liability is the best method for the EPC Contractor to limit its total exposure.
Subcontracts and Assignment
The EPC Contract may allow the EPC Contractor to subcontract or assign some of its obligations to third-party subcontractors ("Subcontractors"). It is common for the EPC Contractor to notify the Employer of its intention to appoint a Subcontractor and to obtain the Employer's approval towards the appointment of the Subcontractor. However, the Employer may reserve the right, for reasonable cause and in good faith, to object to the intended appointment of the Subcontractor. In the event a Subcontractor is appointed for a specified portion of the Works, the EPC Contractor will be fully responsible for the specified portion of the Works performed by the Subcontractor and for any act or omission of the Subcontractor. This is in direct relation to the EPC Contract's feature of a single point of responsibility.
How Does An EPC Contract Work?
After the EPC contract is bid out, an EPC contractor works under a single contract with a project owner, planning and executing all design, procurement, and construction activities to deliver an efficient and effective turnkey solution. The early and frequent collaboration between estimating, engineering, procurement, and construction teams is a key defining factor for this approach.
Every PDS offers unique benefits to project owners—and the EPC approach is no different. Project owners are likely to see benefits such as those detailed below: A potentially faster timeline due to the elimination of the bidding process for different project phases and the ability to overlap those project phases. Risk transference from the project owner to the design-build contractor. A generally reliable budget and high certainty of maintaining ROI. EPC contracts are often used for schedule-driven capital projects with tight timelines as well as for large-scale, high complexity, private-sector capital projects.
Our factory
Ifima Technology (Shanghai) Co., Ltd.(YFM) was established as an agent subsidiary of Jiangsu YFM group company focuses on expanding oversea market of the crane business. There is a skilled sales and R&D team focuses on providing solution-based services pre and after sale to our clients, The company's main products are Marine cranes, port cranes, bulk cargo handling grab, and related customized steel structure products. The factory covers an area of 18,000 square meters, with a scientific management team, advanced production equipment, exquisite technology, professional testing and inspecting equipment, as well as completed management system. As a design and production enterprise of Marine and port equipment , it has been certified by Chinese CCS, American ABS, French BV, Norwegian DNV, British LR, Korean KR, Japanese NK, Russian RS and other classification societies. "Quality first, Good faith, Be Customer-centric" as the corporate culture, YFM is committed to provide oversea customers with high-quality product and perfect services.
Certificate
FAQ
As one of the leading EPC contract manufacturers and suppliers in China, we warmly welcome you to buy CE Approved EPC contract for sale here from our factory. All customized products are with high quality and low price.
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