Advantages of EPC contracts:

 All the conditions are decided from beginning compared to new scope work and
deviation in item rate contracts. Better knowledge of scope of work.
 Better budgeting for client and contractor.
 Payments in EPC contracts are linked to specified stages (milestones) of construction as
compared to payment for individual items/ units under the item rate contracts which
ensures more priority to essential components of project.
 Ex: in epc: money will be released when a floor is completed or a building while in item
rate , money will be released after each item (walls, tiles, doors etc)

 EPC Contract ensures implementation of the project to specified standards with a fair
degree of certainty relating to costs and time while transferring the construction risks to a
Contractor.

 It ensures timely completion of projects without overrun costs.

 Contractor is responsible for designing and constructing the project while adhering to
output specifications and guidelines provided by the client, which leaves him enough
room for innovation, implementing new technologies and using standard designs in
the construction to achieve lower costs and higher pace.

 Better planning of the construction schedule for efficient use of manpower, equipment
and other resources as compared to item rate contracts.

 Detailed design of project is not required for the tendering, client just need to provide
output specification.

 It assigns risk to the party who is in a better position to mitigate it e.g. land, statutory
clearances assigned to client whereas design, site uncertainty, sub-contracting are
assigned to contractor.

 Significant reduction of claims and disputes between contractor and clients.

 Minimal supervision is required by client and is limited to quality and pace of work of the
project.

 Offer multiple choices of design of project to clients.

Disadvantages:

 Compromise between cost and project design while awarding contract when
multiple designs meet output specifications.

 Selection of contractor in EPC projects is much complex as compared to item rate

contracts.

 Loss of control and reduced client involvement in design.

 Disputes tend to be larger and more complex.

 Cost of risks and contingencies increases project cost.

 Less EPC contractor choices.