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Engineering, procurement, and construction (EPC) contracts (a type of turnkey contract) are a form of contract used to undertake construction works by the private sector on large-scale and complex infrastructure projects. [1]
Under an EPC contract, a contractor is obliged to deliver a complete facility to a developer who needs only "turn a key" to start operating the facility; hence EPC contracts are sometimes called turnkey construction contracts.[ citation needed ] In addition to delivering a complete facility, the contractor must deliver that facility for a guaranteed price by a fixed date and it must perform to the specified level. Failure to comply with any requirement will usually result in the contractor incurring monetary liabilities. The EPC contractor coordinates all design, procurement and construction work and ensures that the whole project is completed as required and in time. They may or may not undertake actual site work. EPC companies are often used in large-scale projects, such as power plants, refineries, chemical processing facilities, infrastructure projects, and more. Clients turn to EPC companies because they offer a one-stop solution for the entire project lifecycle, streamlining the process and reducing the complexity of managing multiple contractors and suppliers. These firms play a crucial role in delivering complex projects on time and within budget.[ citation needed ]
Various abbreviations used for this type of contract are LSTK for lump sum turn key, EPIC for engineering, procurement, installation & commissioning and EPCC for engineering, procurement, construction and commissioning.[ citation needed ] Use of EPIC is common, e.g., by FIDIC and most Persian Gulf countries. Use of LSTK is common in the Kingdom of Saudi Arabia. Use of EPCC is common in Qatar and some other countries.[ citation needed ]
EPC contracts cover the following issues.[ citation needed ]
An EPC, LSTK, or EPCC all are the same types of contracts. This form of contract is covered by the FIDIC (International Federation of Consulting Engineers) Silver Book [2] containing the title words EPC/turnkey. The initials EPCM are also encountered frequently on international projects, but this is very different from EPC. EPCM is a services-only contract, under which the contractor performs engineering, procurement and construction management services. In an EPCM arrangement, the client selects a contractor who provides management services for the whole project on behalf of the client.
A turnkey, a turnkey project, or a turnkey operation is a type of project that is constructed so that it can be sold to any buyer as a completed product. This is contrasted with build to order, where the constructor builds an item to the buyer's exact specifications, or when an incomplete product is sold with the assumption that the buyer would complete it.
Construction is a general term meaning the art and science of forming objects, systems, or organizations. It comes from the Latin word constructio and Old French construction. To 'construct' is a verb: the act of building, and the noun is construction: how something is built or the nature of its structure.
Build–operate–transfer (BOT) or build–own–operate–transfer (BOOT) is a form of project delivery method, usually for large-scale infrastructure projects, wherein a private entity receives a concession from the public sector to finance, design, construct, own, and operate a facility stated in the concession contract. The private entity will have the right to operate it for a set period of time. This enables the project proponent to recover its investment and operating and maintenance expenses in the project.
Design–build, also known as alternative delivery, is a project delivery system used in the construction industry. It is a method to deliver a project in which the design and construction services are contracted by a single entity known as the design–builder or design–build contractor. It can be subdivided into architect-led design–build and contractor-led design–build.
Construction management (CM) aims to control the quality of a project's scope, time, and cost to maximize the project owner's satisfaction. It uses project management techniques and software to oversee the planning, design, construction and closeout of a construction safely, on time, on budget and within specifications.
Larsen & Toubro Ltd, abbreviated as L&T, is an Indian multinational conglomerate company, with business interests in engineering, construction, manufacturing, technology, information technology, Military and financial services, headquartered in Mumbai & Technical services, headquartered in Chennai. The company is counted among world's top five construction companies. It was founded by Henning Holck-Larsen and Søren Kristian Toubro, who were two Danish engineers taking refuge in India.
Project finance is the long-term financing of infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of its sponsors. Usually, a project financing structure involves a number of equity investors, known as 'sponsors', and a 'syndicate' of banks or other lending institutions that provide loans to the operation. They are most commonly non-recourse loans, which are secured by the project assets and paid entirely from project cash flow, rather than from the general assets or creditworthiness of the project sponsors, a decision in part supported by financial modeling; see Project finance model. The financing is typically secured by all of the project assets, including the revenue-producing contracts. Project lenders are given a lien on all of these assets and are able to assume control of a project if the project company has difficulties complying with the loan terms.
The International Federation of Consulting Engineers is an international standards organization for construction technology and consulting engineering. The organization is best known for the FIDIC suite of contract templates.
Samsung Engineering Co., Ltd. is a Korean construction and project management (EPC&PM) company, it provides a full range of engineering services including feasibility studies, design, procurement, construction, and commissioning.
Building services engineering (BSE) is a professional engineering discipline that strives to achieve a safe and comfortable indoor environment whilst minimizing the environmental impact of a building.
Construction bidding is the process of submitting a proposal (tender) to undertake, or manage the undertaking of a construction project. The process starts with a cost estimate from blueprints and material take offs.
Aibel is a service company within the oil, gas and offshore wind industries. The company provides engineering, construction, modifications and maintenance through a project's life cycle.
Ausenco Limited is a multinational engineering, procurement, construction management, and operations service provider to the energy and resources sectors. Its head office is in Brisbane, Australia. The company's name is an amalgamation of "Australian Engineering Company."
The New Engineering Contract (NEC), or NEC Engineering and Construction Contract, is a formalised system created by the UK Institution of Civil Engineers that guides the drafting of documents on civil engineering, construction and maintenance projects for the purpose of obtaining tenders, awarding and administering contracts. The NEC contract is widely used in both the United Kingdom. There have been attempts, largely unsuccessful, to introduce the NEC contract into both Australia and New Zealand from at least 1994 but the contract remains relatively obscure in both countries.
Lump sum turnkey (LSTK) is a combination of the business-contract concepts of lump sum and turnkey. Lump sum is a noun which means a complete payment consisting of a single sum of money while turnkey is an adjective of a product or service which means product or service will be ready to use upon delivery.
EPCI stands for Engineering, Procurement, Construction and Installation, a common form of contracting arrangement within offshore construction. The acronym EPIC for Engineering, Procurement, Installation & Commissioning is also used.
Wison Group is an engineering, procurement, and construction company, or EPC firm which focuses on the industries of energy and high-technology. The company attracted significant international coverage in the first half of 2012 by winning a contract to “engineer, procure, construct, install, and commission” (EPCIC) the world's first “floating LNG liquefaction, regasification, and storage unit” off the coast of Colombia. Wison also formed a consortium with Hyundai Engineering & Construction Co. to sign a contract with PDVSA, Venezuela's state-owned oil company, to expand PDVSA's Puerto la Cruz refinery.
Nobel Energy is a group of companies concentrated in the energy industry providing integrated engineering, construction, procurement and supply chain management, and drilling services. Nobel Energy is a part of NEQSOL Holding, an international group of companies, acting in energy, telecommunications, high-technology, and construction industries in the UK, the USA, Turkey, Azerbaijan, Ukraine, Georgia, Kazakhstan, and the UAE.
A construction contract is a mutual or legally binding agreement between two parties based on policies and conditions recorded in document form. The two parties involved are one or more property owners and one or more contractors. The owner, often referred to as the 'employer' or the 'client', has full authority to decide what type of contract should be used for a specific development to be constructed and to set out the legally-binding terms and conditions in a contractual agreement. A construction contract is an important document as it outlines the scope of work, risks, duration, duties, deliverables and legal rights of both the contractor and the owner.
In general, a resident engineer is a person who works at or from the clients' side of a project. He or she possesses a high degree of technical and social skills. One of the main goals of the designated role is to foster knowledge transfer. The role exists across various industries with historic roots in the construction business.
