EPC contracts are agreements that provide for the engineering, procurement and construction of a project. They have become an industry standard agreement for the construction of P&E facilities. Essentially, such agreements provide companies in the energy and energy sector with a single point of responsibility – the EPC contractor – who manages all aspects of the project. They also define the relationship between the P&E company and the EPC contractor and state important details such as timing, liability and remedies. Leading energy companies around the world, whether crude oil and natural gas companies or others dealing with LNG (liquefied natural gas), LPG (liquefied petroleum gas) or NGLs (natural gas liquids), use Matrix Service for our EPC (engineering, procurement and manufacturing) expertise. Indeed, as a leading EPC contractor, we understand the complexity of planning, sourcing and building a large infrastructure. Most importantly, we know what it takes to complete EPC efforts safely, on budget and on time. Whether it`s oil and gas terminals to power pipelines or critical infrastructure such as crude oil storage terminals, we can help you identify opportunities and develop solutions with our proven EPC services. In this article, we`ll break down each part of an EPC agreement and highlight our expertise with the help of examples. EPC contracts are now an essential part of agreements in the energy and energy sectors. Indeed, an EPC agreement between the parties transfers responsibility for the design and construction of an entire plant to a single supplier.
Ultimately, the EPC contractor often hands over a set of keys to the developer, who can begin operations immediately. This is a closer look at the words behind this commonly used chord. As you can see, EPC contracts are very complex but advantageous agreements. While the time and cost of developing an EPC contract increases the start of the project, the downstream savings can more than offset the initial investment, provided the energy and energy company chooses a competent lawyer to help shape the contract. Another distinguishing feature of the EPC contract is that the EPC contractor enters into separate agreements with contractors, sellers, subcontractors, subcontractors, etc. This is beneficial to the owner or client of the project, as it expects the EPC Contractor to assume full responsibility for the project and, in the event of a dispute between the EPC Contractor and any party to the sub-agreements, resolve the dispute without the owner or client having to be involved in the dispute in a partisan manner. In most cases, the EPC Contractor has a right of recourse against a party to a subcontract that was liable for the loss or damage. The EPC contractor must ensure that its contracts are consistent with those it has with the client`s owner. Pricing structures may also vary depending on the needs of the owner of the asset. The most predictable pricing model for P&E businesses is a fixed price, where the EPC contractor is hired at a single, fixed price for the entire scope of work.
Alternatively, P&D companies could opt for a less predictable structure that offers additional flexibility, such as .B. a fixed pricing model in which the agreement sets a fixed price for the entire scope of the project`s work, but includes room for adjustments for escalation if certain criteria are met. Additional pricing models beyond fixed and fixed are also possible. In addition to delivering the complete installation, the EPC contractor must deliver it within a guaranteed time and price. A limitation of liability clause limits the general contractor`s liability to a certain percentage of the contract amount. Although different contracts have different limitation periods, the usual limitation of liability is limited to 100% of the contract amount. A limitation of liability is the best method for the EPC contractor to limit their overall exposure. Here is an example of a “limitation of liability clause” from the FIDIC Contractual Terms for EPC/Turnkey Projects: The EPCM Contractor is responsible for entering into contractual agreements with other contractors, vendors, subcontractors and subcontractors on behalf of the owner or customer as part of a tendering process. The EPCM contractor is entrusted by the owner or client with the management of the construction, while the owner or client is bound to various contractual relationships for the construction-related work.
From the point of view of an owner or customer, it is disadvantageous to be bound by various contractual relationships in the event of a dispute. Unlike the EPC model, in most cases, the owner or customer will be involved in a legal dispute with one or more of the other parties related to the construction of the project to which the EPCM contractor must offer assistance. The fundamental difference is the role of the EPC or EPCM contractor. In an EPC contract, the EPC contractor develops the project from start to final completion. The owner or client of the EPC project provides the EPC contractor with a detailed design, including technical and functional specifications, so that the EPC contractor can build the project within a certain time frame and deliver it at the “key turning point”. For this reason, EPC contracts are often referred to as “turnkey” projects. The scope of work should be clearly defined in the terms of reference; therefore, changes in the scope of services should not be a common feature of EPC contracts. For this reason, an EPC contract is often a fixed-price contract or a global lump sum contract. Any cost outage is a risk that falls on the EPC contractor, so cost control is a top priority. Performance guarantees are directly related to the epc contract`s characteristic of having guaranteed quality because the EPC contractor fulfils its obligations under the EPC contract.
It is common for an EPC contract to include a provision that the EPC contractor is required to provide guaranteed performance guarantees by a performance replacement payable by the EPC contractor to the employer in the event of below-average performance. The EPCM contractor has a duty to ensure that the engineering and design of the project conform to the technical and functional specifications of the project. The monitoring, management and coordination of the construction interface according to a detailed schedule is the primary responsibility of the EPCM contractor. If you would like to learn more about EPC contracts, Judah Lifschitz and Daniel Kapner will present an EUCI training course entitled “EPC Contracts for Power and Energy Projects” in January. . . .