Project scope is the core of capital project planning that establishes a project’s deliverables, schedule, and budget. An early and strong scope definition not only considers the project requirements, the estimated budget, and the expected timeline but also identifies and addresses the gaps in project requirements to ensure the success of the project. On the other hand, a poor and delayed scope can result in increased change orders and significant changes to the scope itself, thereby jeopardizing the project’s outcome.
When hiring an engineering, procurement, and construction (EPC) contractor for capital project execution, the project scope is a critical component of the contract that limits cost and schedule overruns. Below, we discuss the EPC contract scope of work, its role in driving a Project Execution Plan (PEP), and how a project owner benefits from a well-defined scope in the EPC project delivery approach.
How an EPC Contract Scope of Work Drives Project Execution
The EPC contract scope of work documents a project’s objectives, features, requirements, and outcome by aligning all stakeholders right from the very beginning. A thorough contract scope of work ensures quality and consistency throughout each stage of the project while minimizing potential financial risks. Here is how the EPC contract scope of work drives project execution successfully.
Determining Project Requirements and Deliverables
During initial scoping meetings, a project owner might communicate a broader scope that captures an overview of the project’s driving factors, requirements, and deliverables. However, it has the potential to change, as all the owner’s stakeholders, including technical authorities, maintenance personnel, operations personnel, and commercial/ procurement teams, might not initially be aligned on the scope. This can result in rework during the later stages of a project's life cycle, leading to delays in schedule or budget overruns. To avoid this, all stakeholders need to be involved and engaged early in the process.
Once a project’s requirements and deliverables are properly documented, it helps an EPC contractor to better define the project scope and outline the work to be completed within the decided budget and timeline.
Verifying with the Project Owner
Project owners need to be heavily involved while defining, redefining, or changing the contract scope of work. A capital project is conceptualized to meet a project owner’s objective to produce an end product for sale to their customers. As a result, project owners are needed to help contractors define the EPC contract scope of work as well as confirm it before major project expenditures begin.
Establishing a Work Breakdown Structure (WBS)
A Work Breakdown Structure (WBS) covers all the project deliverables to be completed within the timeline and budget as stated by the contract scope of work. For an EPC contractor, a WBS helps sync a project’s schedule and performance against the budget. Establishing an effective WBS provides opportunities for structuring project control activities to compare the actual with the planned progress of the project and highlight the problem areas that need attention.
Outlining a Project Execution Plan (PEP)
A PEP establishes an EPC contractor’s strategy to execute, monitor, and control a project and is largely dependent on the contract scope of work. A well-defined project scope lets a contractor outline execution plans for each phase of the project and measures the progress of the project while adhering to administrative requirements including scheduling, reporting, invoicing, and technical and non-technical reviews.
When developing an EPC contract scope of work, it is important for contractors to ensure they do not overlook the interfaces and the division of responsibilities between the various parties involved in the project. Acknowledging the shared responsibility between different teams of a capital project and identifying it with RACI (Responsible, Accounted, Consulted, Informed) charts is critical to support and improve processes and activities at every stage of the project. Hiring the right EPC contractor with in-house capabilities ensures that all such components are captured to develop a robust contract scope of work.
Ensuring a Project’s Success Through EPC Methodology
At H+M Industrial EPC, we emphasize the alignment between the project owner and the contractor for project success. To develop a strong EPC contract scope of work, our bid team evaluates a client’s Request for Proposal (RFP), which typically states a project’s requirements and objectives, and then our in-house engineering, procurement, and construction teams firm up any soft spots in the scope. This forms the basis of the bid that defines and quantifies the scope and execution details.
With our strategic EPC services and our extensive experience in capital project management across various industries, we ensure your project meets your budget and vision.