When project owners are choosing an EPC contractor to complete their capital project, it is important to understand the types of risk involved and how prospective contractors mitigate risk. As for any capital project, there should be EPC project risk management procedures in place to reduce and alleviate risk in regards to:
- Schedule and financial risk
- Quality risk
- Safety and environmental risk
Let’s take a look into each type of risk involved in capital projects from planning to construction as well as EPC project risk management strategies.
EPC Project Risk Management
Working with an EPC contractor to complete a capital project can have significant benefits for project owners, such as price certainty, decreased schedule delays, and consistent quality across all project phases. However, receiving the benefits of a design-build approach depends highly on the contractor's ability to manage risk as it pertains to schedule, cost, quality, safety, and environmental concerns.
Detailed below is a checklist of the measures EPC contractors should take to mitigate each type of project risk.
Schedule and Financial Risk
Schedule and financial risk often go hand in hand. The ability to manage such risks depends on careful detailed planning by the contractor, including strong and early scope definition, early development of a detailed execution strategy, and sufficient project controls.
- Strong and early scope definition: It is critical to have as much of the project scope defined early within the project schedule and budget to place certainty around the work being performed. Scope definition is important for all capital projects but becomes especially crucial to the success of projects executed with an EPC delivery method.
- Early execution strategy: Understanding the critical path of the project and developing a detailed execution strategy early on can significantly reduce schedule and financial risks.
- Good project controls: In the execution stage, strong project controls are key to reducing schedule and financial risk. Tracking and reporting project stage progress weekly and comparing it to the original timeline allows the contractor and project owner to be on the same page and adjust accordingly to remain on schedule and within budget.
- “Float” in timeline: With any project, there will be non-descript delays, such as weather, that can throw off a project’s timeline. Consequently, a time buffer should be placed in the timeline during the planning stages.
- Isolation of risk: Contractors should be looking at individual project components in isolation to evaluate the risk, determine possible impacts of each risk, and develop a mitigation plan.
- Efficient change management procedures: While the scope should be well defined during front-end planning, minor changes to the scope are likely to develop throughout a capital project. Thus, efficient change management procedures can help reduce scheduling delays associated with scope change.
While quality standards for engineering and construction are typically established during the planning stages based on the budget and requirements of project owners, it is important to know that contractors are taking steps to ensure consistent quality across all disciplines and stages of the project.
- In-house capabilities: EPC contractors should have full in-house capabilities from planning to construction. Engineering and design should be done with a construction focus to ensure the design is feasible within the specified schedule and budget.
- Multi-disciplined quality inspectors: Quality inspectors should be multidisciplinary to understand the full scope of project requirements. In other words, they should not be disciplined in a single area such as piping or concrete but should understand the full spectrum of quality requirements. A contractor should employ a concept of Total Quality Management.
- Collaboration and communication: Across all disciplines and project phases, team members should communicate and work together to ensure consistent quality throughout the project. Outside of the integrated EPC team, contractors should only utilize as many vendors and suppliers that are preferred and trusted to deliver high-quality components.
- Analysis of individual work processes: Contractors should analyze individual work processes that are feeding specific activities of the job. When thoughtfully created and diligently followed, these roadmaps help drive consistent quality and ensure no steps or components are missed.
Safety and Environmental Risk
Safety and environmental risk can be minimized starting with a strong plan for project execution. Early identification of critical and high-risk activities is important, as such activities may require additional planning and the development of specific project processes and workflows. Senior management commitment is imperative to ensuring risks are taken seriously and mitigated effectively. Choosing a contractor who focuses on continuous safety improvement and education is important. Employees who receive extensive safety training can be proactive in recognizing hazardous risks and quickly develop a mitigation plan. Environmental risk can be alleviated by closely following facility guidelines provided by project owners.
Look to Capital Project Experts for Superior EPC Project Risk Management
At H+M Industrial EPC, the safety and quality of your capital project is our primary concern. We place focus on best practices for safety and quality control to meet your project’s needs. Our employees are required to complete safety training, from course work to practical work in the field. We provide all services in-house from engineering through construction to maintain the highest level of quality while meeting your timeline and budget requirements.