EPC vs EPCM - DMS Energy Forum: Debates

Report
Salah Jebara Al Bu Falah
Abu Dhabi June 2010
Oil and Gas Forum Debate
Presenter: Salah J. Al Bufalah
1
 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 slightly more expensive,
to the Owner, due to the shift of project risk away
from the Owner and to the EPC Contractor.
This however was not evident in the latest EPC
tenders we have seen.
Presenter: Salah J. Al Bufalah
2
 EPCM Advantages:
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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
Presenter: Salah J. Al Bufalah
3
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EPC Advantages:
One Stop Shopping “One point of Contact”
“Hands off” approach to project
Minimal Staffing Requirements
Minimal Legal Risk
Best for Well defined projects with Engineering
Complete before EPC Contractor selected
(Minimal Unknowns).
Presenter: Salah J. Al Bufalah
4
EPC has a lot more predictability of outcome
Owner
is more disciplined with changes
(Changes require Higher level approval and
therefore needs to be really justified)
Owner maintain small organization that can be
retained after project completion without major
changes to the organization.
Warranties has one focal point with the EPC
contractor.
Presenter: Salah J. Al Bufalah
5
What do we do to
make EPC more
attractive;
Presenter: Salah J. Al Bufalah
6
Well defined FEED , Unrushed Reimbursable FEED
to insure completion.
Balanced Terms and Conditions. Liabilities, LD’s,
Bonds, etc…
Compensation for FEED Verification Report
Realistic Schedule, with reasonable period for
Bid preparation.
Comprehensive Vendor List.
Presenter: Salah J. Al Bufalah
7
 Sharing some of the risks and rewards, Multi-
Currency Bid, Commodities Indexing, Exchange
Rates fluctuation, etc..
 Cost and Schedule improvement incentives.
 More balanced and neutral payment terms.
 Detailed Change Management Mechanism.
 And the list goes on, However we are not debating
how to improve EPC T&Cs but this can be a topic for
next year’s Debate.
Presenter: Salah J. Al Bufalah
8

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