One of the earliest and most crucial decisions project owners must make for any capital project is determining which project delivery system (PDS) to utilize to execute their project. The design-build, or EPC (engineering, procurement, construction), PDS is a method in which a single EPC contractor works under a single contract with a project owner, executing all project phases from start to finish. The EPC contractor is held accountable for capital project schedules, costs, and overall results, with the primary goal to decrease project risk among all stakeholders and increase execution success.
Below, we discuss what an EPC contractor does, including what to look for in the selection process and when it’s appropriate to work with an EPC contractor.
Working with an EPC contractor provides projects with complete oversight from concept to start-up and offers project owners many benefits—however, there is a time and place for every PDS. Here are some key indicators that working with an EPC contractor may be the optimal route for project success:
Many project owners choose to hire EPC contractors when working to execute highly schedule-driven projects, as the EPC method can allow for faster project delivery. Work can often be completed more quickly due to the elimination of the transactional nature of traditional methods, such as design-bid-build. The cohesive flow of work completed by a single team from front-end planning through construction allows EPC contractors to overlap project stages and optimize the sequencing of the project as a whole.
While some project owners choose to perform front-end planning before selecting an EPC contractor, integrating front-end planning after contractor selection can provide continuity through design and construction planning. Depending on the initial level of scope definition, project complexity, and other driving factors, project owners may choose to complete a formal stage-gate process.
During this phase, the EPC contractor and their team assess and evaluate the overall constructability of the project. The contractor should develop a robust definition of scope, assess the site and any existing structures, and establish all tasks that need to be performed before construction can begin. The early development of a strong scope definition is crucial for the success of any capital project. A well-defined scope reduces the likelihood of significant changes to the scope and the need for change orders during project execution.
If a formal stage-gate process is desired, there will likely be three stages, or gates: FEP 1, FEP 2, and FEP 3. Not only will this process help scope development, but it should also result in a highly accurate cost estimate that spans the full scope of work required for project completion. Each of the three gates must be passed before contractors may proceed to detail engineering and design.
Following scope development, work packaging can be defined, and the Work Breakdown Structure (WBS) and the Project Execution Plan (PEP) can be developed. The WBS is the central organizational hierarchy that syncs a project schedule, cost, and performance against a budget for all levels of a WBS. Within the WBS, contractors should include deliverable-oriented groupings of project elements and cover all project components. It also should contain the entirety of work dictated by the scope to cover all deliverables that must be completed during project execution.
After all of the scope parameters, including equipment selection, timeline, site, and budget, have been established and agreed upon by all involved parties, the EPC contractor can begin the detail engineering and design phase. All departments and disciplines work together to determine and produce the optimal design for project success. They should work to develop a design that strikes a balance between budget and efficiency. After the design has been developed, the contractor’s engineering team provides a set of highly disciplined drawings that will be used for construction.
Procurement is a highly detailed and complicated process that involves all sourcing, purchasing, and inspecting of products, materials, services, and equipment required for construction. The EPC contractor’s procurement team should be involved from the beginning of the project to develop a detailed and strategic procurement management plan.
This plan creates the framework for a strategic procurement schedule that ensures on-time deliveries to help maintain construction timelines. This plan determines the timeline for purchasing each item and identifies critical procurement milestones that should be updated as the plan progresses to assess any impacts on the project. Procurement management plans help the procurement team organize and prioritize all procurement activities at a commodity level while determining the optimal sequencing of activities. This plan should be shared with all involved parties to provide full transparency regarding critical procurement-related activities.
Key elements to an effective procurement management plan include the following:
Not all EPC contractors have in-house fabrication capabilities—however, working with an EPC contractor who can perform fabrication in-house helps maintain the cohesive workflow and communication stream as well as provides greater schedule certainty.
With strategic planning and cross-department communication, the construction team may complete the construction of various project components while work packages are still in the engineering and design or fabrication phase of the project. The remaining construction activities required to meet predetermined deadlines and goals per the scope of the project, including all civil, structural, piping, equipment, electrical, and instrumentation activities, take place during the construction phase.
If the EPC contractor has in-house fabrication capabilities, some project components may be prefabricated or preassembled off-site in the fabrication shop, while others may benefit from on-site construction. Regardless of whether off-site or on-site construction is utilized, contractors work to ensure all construction activities are performed safely and accurately.
In addition to key project phase-related responsibilities, EPC contractors are also responsible for several crucial aspects of managing the project, such as risk management, project controls and reporting, and change management.
EPC contractors are in charge of identifying, evaluating, mitigating, and monitoring project risks, such as schedule, cost, quality, safety, and environmental concerns, throughout a project’s life cycle.
From the beginning of the project, EPC contractors work to mitigate risk through best practices and strategies, such as those detailed below.
Capital project controls are an important element of capital project management. Project controls are the processes that include all resources, procedures, and tools required to plan, monitor, and control each phase of capital project life cycles. Project controls should be integrated throughout the entire project, including during the pre-contract and bid phase as well as the execution phase. They are critical for capital project reporting and risk management.
Throughout all project phases, the ability to see all aspects of a capital project’s progress in real-time is critical for making informed decisions. Utilizing an integrated location, such as a dashboard, to view all data in one place provides all parties with full transparency.
During the pre-contract and bid phase, key elements of project controls should include the following:
During the execution phase, key elements of project controls should include the following:
While the EPC method often reduces some of the challenges surrounding change management, there is always a possibility of change. Change management is the process of integrating a balanced procedure for recognizing, planning, and evaluating capital project changes effectively.
Project changes can introduce risk, cause delays, and increase costs. EPC contractors must identify and communicate changes as early as possible so a plan can be created and implemented to mitigate risks. Proper change management should include the following elements:
In this industry, safety is not negotiable and should be a top consideration when choosing between EPC contractors. Look for contractors with strong safety standards and a robust safety culture with a focus on continuous improvement. Other important aspects to look for in an EPC contractor include the following:
For more than 30 years, we have provided leading capital project management services to the energy, chemicals, and terminal and logistics industries using our proven EPC approach, highly established work processes, and highly experienced team.