Navigating Time Extension Challenges in Real-world EPC Projects In the dynamic realm of Engineering, Procurement, and Construction (EPC) projects, every endeavor presents its unique set of trials, pushing all involved to their limits and testing their adaptability. Let me take you through a recent project in the heart of the Middle East that encapsulates the rollercoaster ride of complexities in achieving timely completion. At the project's onset, Client entrusted the Front-End Engineering Design (FEED) to a capable Contractor, and for the most part, they delivered commendable results. However, there was a crucial puzzle piece missing—the design of a Major Water Injection + Treatment system. Unfortunately, the expertise gap here morphed into a lingering EPC risk, throwing a wrench into our plans. Although our contract clearly outlined that the EPC contractor was responsible for the entire design process, things took an unexpected turn during execution. We found ourselves grappling with uncertainties stemming from ambiguities in the initial EPC Engineering , leading to the introduction of various equipment pieces that weren't initially accounted for. Additionally, underestimations in cost during the tendering phase added financial strain to an already intricate equation. One of the most challenging moments came when we needed to procure a Long Lead Package crucial for the Water Injection facility. This involved dealing with a monopolistic vendor based in Europe, as per our client's directive. Initially cooperative, the vendor's demeanor shifted dramatically once the purchase order was issued. They stopped providing monthly reports, and then came the bombshell—declaring bankruptcy and citing a dire need for funds to fulfill their obligations. With our backs against the wall, we had no choice but to involve our client in lengthy negotiations over fund disbursement. Eventually, we managed to secure the necessary funds, albeit after significant delays. However, this setback triggered a domino effect, elongating the timeline for delivering this critical component and becoming the project's longest path. While we acknowledge that some delays were attributed to our own actions, a thorough analysis conducted by us revealed a net excusable/compensable delay of 2 months, highlighting the multifaceted nature of project setbacks. Significantly, one of the milestones tied to liquidated damages (LD) was the commissioning of the Water Treatment/Injection system, perfectly aligning with the identified 2-month delay. This begs the question: Do you believe these circumstances warrant a valid claim for an Extension of Time? Let me know your views 😊
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Six types of contracts used in EPC industry: Lump Sum Contracts, Cost Plus Contracts, Unit Price Contracts, Guaranteed Maximum Price Contracts, Engineering Procurement and Construction Management Contracts ( EPCM) and Design-Build Contracts. Each of these contracts has its own advantages and disadvantages and is suited for different project scenarios. LUMP SUM CONTRACTS are a type of contract commonly used in the engineering procurement and construction EPC industry. They are typically used when the scope of work is well defined and there is low risk of changes or unexpected costs. One of the main advantages of a LSC is that it provides costs certainty and predictability for the client. With a LSC, the client knows exactly how much they will be paying for the project and can budget accordingly. This can be particularly important for clients with limited budgets or tight project schedules. However, there are also some potential disadvantages to LSC because the contractor assumes the risk of unexpected costs or changes to the scope of work. They may include contigencies or inflated pricing in the lump sum to account for risks and uncertainties. This can result in higher overall costs for the client. However, LSC are best suited for projects with a well defined scope of work and a low risk of changes or unexpected cost. They can provide cost certainty and predictability for the client but also may result in higher overall costs if the contractor includes contigencies or inflated pricing to account for risks and uncertainties. As with any type of contract it is important to carefully consider the specific terms and conditions of a LSC, before entering into it. #epc, #epccontracts, #lumpsumcontracts
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Contracts & Commercial Manager, M.Sc. | TQM | ISO® QMS-LA | LSSYB® | PRMG | PMP® | RMP® | LEED GA® | CCP® | PSP® | P3O® | MBA
A quick breakdown of key aspects you should consider in EPC (Engineering, Procurement, and Construction) Contracts. #EPC #Construction #ProjectManagement #Engineering #EPCProject #TurnkeyContract #CapitalProjects #ConstructionLaw
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An EPC (Engineering, Procurement, and Construction) Contract in the construction industry is a contractual agreement between a project owner and the contractor. The contractual framework in an EPC contract enables the owner to transfer the complete risk of design, procurement, and construction to the contractor.
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What's the Difference Between EPC and Turnkey Contracts? Both are essential in engineering and construction projects, but each comes with its own set of responsibilities and significance. In this video, we break down the key differences between these two types of contracts. Watch the full video and share your thoughts in the comments! #EPC #Turnkey #Engineering #ProjectManagement #Construction #BusinessInsights"
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Investor Relations Manager @ Eastlake Exploration & Production Limited, Treasury Manager, Finance Manager, Oil & Gas, Upstream, Financial Analyst, Banker,, Auditor, Planning & Forecasting, Budgeting, Financial Reporting
EPC (Engineering, Procurement, and Construction) contracts are commonly used in large-scale projects, particularly in industries such as construction, energy, and infrastructure development. These contracts involve a single contractor responsible for the design, procurement of materials, and construction of the project. Effective management of EPC contracts and claims is essential to ensure project success and mitigate risks. Here is a practical guide to EPC contracting and claim management: 1. Clear Scope Definition: Start by clearly defining the scope of work in the EPC contract, including project specifications, deliverables, timelines, and quality standards. A well-defined scope helps prevent misunderstandings and disputes during project execution. 2. Risk Allocation: Identify and allocate risks appropriately in the contract to ensure that each party (owner and contractor) assumes responsibility for risks within their control. Clearly outline risk management strategies and mitigation measures. 3. Performance Metrics: Establish key performance indicators (KPIs) and milestones to track project progress and ensure compliance with contractual obligations. Regular monitoring and reporting of performance metrics help identify potential issues early on. 4. Change Management: Develop a robust change management process to address modifications to the scope, schedule, or budget during project execution. Document all changes, assess their impact on the project, and obtain necessary approvals before implementation. 5. Claim Management: Implement a systematic approach to managing claims, including potential delays, cost overruns, and disputes. Promptly document and evaluate claims, engage in proactive communication with stakeholders, and seek amicable resolutions to avoid escalation. 6. Dispute Resolution: Include dispute resolution mechanisms in the contract, such as mediation, arbitration, or litigation, to address conflicts that cannot be resolved amicably. Establish clear procedures for resolving disputes to minimize project disruptions. 7. Compliance and Governance: Ensure compliance with regulatory requirements, industry standards, and contract terms throughout the project lifecycle. Establish effective governance structures to oversee project performance, risk management, and compliance. 8. Communication and Collaboration: Foster open communication and collaboration among project stakeholders, including the owner, contractor, subcontractors, and project team members. Regular meetings, progress updates, and feedback sessions enhance transparency and alignment. 9. Documentation and Record-Keeping: Maintain accurate and comprehensive project documentation, including contracts, correspondence, change orders, and meeting minutes. Proper record-keeping is crucial for substantiating claims, resolving disputes, and ensuring project accountability.
PhD (cand), MBA, BSc, PMP® | Contract & Commercial Management | Claims Management | Contract Administration | FIDIC Contract | CCP | RICS | PMO | Neom Approval
A Practical Guide to EPC Contracting and Claim Management Engineering, Procurement and Construction Contracts for Large Scale Projects.
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Project & Operations Management Professional ~Safety & Risk Focused ~ Motivating People To Want To Improve
When developing lump sum contracts for EPC construction projects what are your key points to include in scope definition? How have you designed the payment milestones to allow for cash flow for the EPC and protect the owner from paying too far in advance? What key deliverables do you annotate as required in your 30, 60, 90 day deliverables? I’ve got my list, what about you?
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There are several contracting models used in construction projects. In this article, we cover the Engineering, Procurement, and Construction (EPC) contracting model, which is widely used for large-scale infrastructure projects. The appeal of EPC contracts is due to the turnkey approach, which places the responsibility for design, procurement, and construction on a single contractor. An EPC contract aims to streamline project delivery, reduce interfaces, and allocate risk to the party best positioned to manage it. However, the adversarial nature of EPC contracts often leads to significant challenges and disputes, impacting project success. https://bit.ly/3WZUIs2 #constructionlaw #constructioncontracts #epccontracts
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Grid work delivery manager at National Grid.sa (HVDC, Transmission line, Substations,Renewable energy & BESS)
7moInformative . Lesson learn 1. Subcontractor qualification & capability should reviewed properly before awarding the work . 2. Regarding long-lead procured material design should be approved on priority base so that that material will be JIT (just in material ) as per the schedule and material vendour development needed backup plan should be developed by all contractor. 3.Most often contracts doesn't states how to deal with concurrent delay. So classify the delays Excusable ,Non excusable ,Compensable & non compensable . But several contracts stipulate that if an execusable delay occurs concurrently with non excusable delay then contractor is not entitled for EOT on most of time if it not defined on contract .