Some questions and answers about EPC projects
Q1: Is "EPC" type of contract only dedicated to construction projects or it is a common type of contract and can use in all type of projects like IT projects?
A1:"EPC" is a global type of contracts, which recognize by FIDIC organization. EPC is a brief name of Eigineering, Procurement and Construction but generally, it means all scope of works should do by one selected contractor.
All risks, duties and job completion works transfer to a contractor. Employer should define its requirement and Scope of project completely. After that, select a contractor and that requirements detailed by contractor in basic and detail design phase and all execution works will done by this company.
Usually, this type of contract use for huge projects such as manufacturing a factory, Oil & gas or dam construction projects but, it is not a law and rarely a few projects in other disciplines such as IT, works under the conditions of EPC contracts .You can't see any construction job in this projects but it means selected contractor have all scope of client's works and is responsible to fulfill all commitments of project.
I know a few projects in Software programming which executing with an EPC contract. For more information, refer to "FIDIC EPC contract type".
Q2: assume we are an employer and sign an "EPC" contract with one of our contractor. How we can control its works?
A2: there are some important advice about EPC contracts which each employer and contractor should consider them:
- If the client can't define its requirements completely or don’t have any time to do it or its organization is not expert in this type of projects , it is strongly suggest to avoid EPC contracts because all future designs will done according to predefined client's requirements or uncompleted basic design by contractor. In such projects such as underground projects the client cannot prepare mentioned documents to bring a vivid understanding of scope of work then, should select other types of contract. This is first step to satiety of day-by-day control in EPC projects!
- As I mentioned above the most powerful tools for employer for control its contractor is this: define client's requirements completely and detailed it!
- In the bill of Quantity (BOQ), client consider some items such as Quality Control (QC), Management services and etc in job descriptions .After that, assign a quantity of total value of project to them (for example 2 percent of total value).In the future they will prepare a breakdown for this items and make an agreements about it .It can use for client as a lever to control quantity and quality of contractor's proceeds.
- In execution phase, employer uses its hidden power on payment monthly statements of contractor (It is not legal but works!)
Q3: In oneof contract types, all staffs, materials, design and execution team belong to client. It means client hire all teams and implement its project by own team .What is this type of contract?
A3: We named this type of contracts "In-House".There is not any specific type of project management style in this kind of projects but, please note that relationships among project teams is a little different from another types and it is suggested to use this type of contract for short works or works that don’t need a high quality. Iranian government call this type of contract "amani"