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 - is a construction contract, commonly used

in large-scale construction works of complex
infrastructure projects.

 -the EPC contractor is required to deliver a

completely functioning facility to the
employer by carrying out the design,
engineering, procurement and construction
until a set date, in return for a pre-
determined price.

 – refers to companies that deliver EPC

Projects.
 a. detailed engineering design of the project;
 b. procure all the equipment and materials
necessary; and
 c. construct to deliver a functioning facility or
asset to their clients.

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 The EPC Contractor has to execute the
project within an agreed time and budget,
commonly known as Lump Sum Turn Key
(LSTK) Contract.
 An EPC LSTK Contract places the risk for
schedule and budget on the EPC Contractor.
 Turnkey
 Agreed upon date of completion
 Contracting type
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 The Project Owner or client to the EPC Contractors will
normally have a presence in the EPC Contractors’ offices
during the execution of the EPC Contract.
 The Client places what can be termed a Project
Management Team or PMT to overlook the EPC Contractor.
 The client PMT may require specialist help and bring on
board Project Management Consultants or PMC's to assist.
 The PMT / PMC will ensure the EPC Contractor is carrying
out the works in accordance with the agreed scope of
works and in accordance with the Contract.
 It is quite common for the Engineering and Construction
Contractor that delivered the FEED to be offered a Project
Management Consultancy (PMC) Contract.
 “Turnkey” means a completed product is ready
for immediate use. And that’s why an important
part of EPC contracts involves the passing of keys
to the developer. Under the terms of an EPC
contract, a contractor provides a fully outfitted
facility that is generally ready for operation upon
completion.
 In addition, EPC contracts also include a fixed
price and an agreed upon date of completion so
there are minimal surprises throughout and at
the end of the project.
 Moreover, there is most often a single point of
contact — the EPC contractor. The EPC contractor
is responsible for the engineering, procurement
and construction of a facility by a certain date
and under contract terms.
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1. Planning/Concept Development
2. FEED (Front End Engineering Design)
3. Engineering
4. Procurement
5. Construction
6. Commissioning
7. Handover

In addition , a conceptual design is prepared

by an EPC Contractor. The purpose of
feasibility studies are the following:
 EPC Contractor will provide services for study and
planning of new projects of the client.
 A. propose a process selection and optimum
 EPC Contractor prepares proposal which can equipment configuration that meets the
maximize client’s benefit on leading-edge technology needs of the client.
and it’s abundant past experience.

 The aim of planning is to achieve optimum  B. give a highly accurate estimate of

profitability and social environment as a measure construction costs.
against global warming.

Feasibility studies (investigation of a possibilities as a  C. provide an efficient investigation

supported by engineers of long experience .

business) are conducted by an EPC Contractor.

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 means Basic Engineering which is conducted after
completion of Conceptual Design or Feasibility Study.
 At this stage, before start of EPC (Engineering,
Procurement and Construction), various studies take place
to figure out technical issues and estimate rough
investment cost.

 The product of the activity is called “FEED Package” which
amounts up to dozens of files and will be the basis of
bidding for EPC Contract.
 It is important to reflect client’s intentions and project
specific requirements in to the FEED Package without fail,
in order to avoid significant change during EPC Phase.

 The procurement department has a very important
responsibility because it is at the middle position of
EPC. The procurement department connects
engineering and construction by cooperating closely
on projects.
 The main task of this department includes the
following jobs:
- procurement of materials within the working budget
of projects,
production progress control after order, and
-
- quality control by inspections and transportations to
sites according to a project schedule.
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 Engineering & Design works are performed through coordination and
teamwork among the specialized discipline engineers and project
engineers who manage overall EPC activities.
 Based on the Basic Design Package (FEED) and starting from Process
Design, facilities designs such as various Equipment/ Electrical/ Control
& Systems and space-integration designs such as Piping/ Civil/ Building
are performed in parallel manner.
 Close communication among the engineers is very important.
 The environmental and safety requirements and Plant operability/
maintainability considerations to be firmly incorporated. It is also
required to consider and incorporate natural conditions of the
construction site, such as geotechnical/ geophysical/ geological
conditions, climate conditions, etc. Design methodology.
 Plant construction starts with site survey,
water reservation, land formation, camp
construction to prepare for full-scale
operation.
 Then construction processes follow ranging
from foundation work, aboveground structure
framing, piping and equipment installation,
electric and instrument system setup, to
painting and insulation, etc.
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 EPC Contractors things to consider:

Safety is a must ; performance of non-

accident and non-disaster. Also, site safety
standards.
 Conformance to codes and regulations.
- Local construction codes, local
labor/environment/safety/health/hygiene
regulations must be observed and
followed.
 is performed before commercial operation after
completion of construction of the plant.
 Commissioning activities are intended to ensure
that the plant will operate in accordance with
design and project specifications.
Successful commissioning is the most important

phase of the project because it is directly linked
to client satisfaction and benefit.

 delivery stage. An EPC Contractor delivers

the project/facility to the client.

Engineering,
Procurement and
Construction (EPC)
Contract
Parties of an EPC
Contract

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Project
Legal Advisory
Owner/Client

EPC Contractor Design-Builder

Engineering Procurement Construction

Advantages
• Single point Responsibility
• Project cost is fixed and Project Schedule
guaranteed
• Performance of the contractor is regulated
Engineering, • The contract provides early precautionary measure
Procurement and
Construction (EPC)
Contract
Advantages and
Disadvantages

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Disadvantages
• The owner has a low degree of control over the
project.
• Risks are transferred to the EPC Contractors.
• Amount of costs in the risks
Legal Implications of EPCs
Philosophy of the EPC Contract
• Intent of the parties (e.g. how the parties
would have apportioned a risk)
• Prudent practices – define to reflect intent
• “Best” efforts and “Commercially Reasonable”
efforts – level of effort required
• “Good Faith” and “Good Intentions”

Legal Implications of EPCs Legal Implications of EPCs

Other Considerations Other Considerations:
• The EPC Contractor’s Obligations • Intellectual Property and Technology Transfer
• Subcontracting • Initial Phase Operation Responsibility
• Indemnities for overruns and delays • Warranties
• Rights to Extensions of Time (EOT) • Environmental Clauses
• Insurance
• Force Majeure

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