How EPC Contracts Work?
The project owner’s choice of a project delivery system (PDS) is one of the first and most essential decisions for any capital project. The popular project delivery approach is engineering, procurement, and construction (EPC), design-build, or turnkey.
After the EPC contract is bid out, an EPC contractor like DTC works under a single contract with the project owner, planning and executing all design, procurement, and construction processes to deliver an efficient and effective turnkey solution. Early and frequent collaboration across the estimating, engineering, procurement and construction teams distinguishes this method.
This post will explain how an EPC contract works, including its benefits, whether to use one, typical EPC contract components, and an outline of an EPC contractor’s responsibilities throughout the project lifetime.
Components of EPC Contract
Under an EPC contract, a contractor like DTC may be required to carry insurance that covers physical injury, sickness, or death, property loss or damage, contractual requirements, and third-party responsibility for motor vehicles. The project owner may require the builder’s risk insurance, which covers all losses or damage to the contractor’s property, equipment, or fabrications.
Terms of Payment
DTC EPC contracts generally include payment conditions, such as what the contractor must do to get payment from the project owner (e.g., invoices). Overheads, earnings, transportation, handling, storage, and equipment are all expenditures that will be included in the contract price. Payment conditions may also have the project owner’s ability to deduct from the contractor’s payment any money owed to the owner by the contractor.
DTC contract also specifies the contractor’s scheduled tasks and obligations. The contractor, for example, may be required to offer procurement and fabrication services, on-site and off-site management, and delivery and transport schedules for all equipment. Contractors like DTC may also be obliged to guarantee that all hired staff and subcontractors are qualified, fit, and adequately trained for the task, they will be conducting. Another duty may be to prevent the demolition of existing structures or infrastructure.
The execution requirements for each phase of the project, such as mechanical completion deadlines, materials, equipment, and vendors to be used, design and engineering packages to be supplied by either the contractor or the project owner, and inspection and testing, will also be included in DTC EPC contract.
EPC Contractor Responsibilities
As previously stated, the DTC EPC contractor offers all services required to finish the project, ensuring a continuous workflow from engineering to completion. An EPC contractor typically provides detailed engineering and design, procurement, and construction services; however, some EPC contractors also include front-end planning and manufacturing.
An EPC contractor is not usually selected before beginning front-end planning. Planning might be performed internally or through a third-party contracting agency. On the other hand, bringing in an EPC contractor during the front-end planning stage improves time and cost predictability, limits future scope adjustments, improves operational performance, and assists owners in more efficiently achieving business goals.
Front-end planning, also known as front-end loading, is a vital stage in the lifespan of a capital project that lays the groundwork for project success. It entails developing strategic information and important papers that project owners will need to manage potential project risks, decide whether or not to proceed with the project and commit resources, and maximize the project’s chances of success.
The construction team may finish the building of various project components while work packages are still in the project’s engineering and design or fabrication phases with strategic planning and cross-departmental cooperation.
During the construction phase, all civil, structural, plumbing, equipment, electrical, and instrumentation operations necessary to satisfy established deadlines and goals per the project’s scope are completed. DTC is one of the best EPC contractors providing its services in Saudi Arabia. To discuss your projects, contact us at + 966 13 86 777 37.