EPCM

EPCM contractors are not approaching Traditional Owners to do joint venture projects or directly employ local people. 

Provide incentives for EPCM contractors to employ local Aborigines. 

Engineering, procurement, and construction management may be structured as a separate contract ( EPCM services or management contract ). The contractor s task is the engineering and management of the project and in the process competitively procuring the direct field cost (DEC) elements, that is, all the physical plant and its construction, on behalf of the client or on a reimbursable basis. The 80-or-so per cent of the plant costs composing the DEC are thus subject to competitive... 

An EPCM contract on a lump sum basis does not solve the problem of antithesis there is now every incentive for the contractor to minimize the EPCM input, but none to promote better EPCM performance. This goes even further in the contract, where the EPCM contractor is reimbursed by a percentage of DEC there is now a positive incentive to raise the DEC. If this can be done in ways which reduce the EPCM input, for instance by purchasing large packages or choosing more expensive suppliers and contractors who require less surveillance or expediting, the EPCM contractor scores twice. 

One of the most common systems to seek a balance between the conflicting needs is to split the EPCM work into two stages the feasibility study and the project. For the study work, the contractor is primarily motivated by the need to secure the project work, which will follow the study. Following the execution of the study, the project work should be... 

In our chosen model the owner is the entity which initiates the project, finances it, carries out the basic design and which will take possession of it and operate it once it is complete. Let us assume that this organization does not possess engineering, procurement and construction departments of sufficient size and capability to run the project in-house. Consequently, the owner engages an engineering, procurement and construction management (EPCM) contractor. 

Suppliers under the supervision of the EPCM contractor furnish the necessary materiel for the project. The work on site will be carried out by construction contractors who are also under the supervision of the EPCM contractor. Special service providers may be engaged by the owner, by the EPCM contractor or by a construction contractor for duties such as surveying, civil site and laboratory testing, for carrying out destructive tests and nondestructive examination associated with welding or for the interpretation of results obtained from these activities. 

These appellations of the parties involved and theirs roles as defined above will be assumed throughout this handbook. Whilst the perspective presented is essentially that of the EPCM contractor, the same principles can be adapted to the situation of the other participants. In Section 3.12 guidelines are given for applying the principles and procedures proposed in this handbook to the smaller construction site, where structures and facilities are present on a smaller scale. 

Concerning the process technology, it may be owned or licensed by the owner or by the EPCM contractor. For the sake of simplicity we have assumed that this technology is owned by the owner and embedded in the basic design. 

What are the depth and scope of the preliminary design to be provided by the owner to the EPCM contractor ... 

Will the EPCM contractor carry out all detailed design across all disciplines, or in certain specialized areas will this be part of the scope of work of the selected construction contractor, in the case of, for example, a complete water treatment plant or an electric substation ... 

Will related disciplines be separated contractually or combined For example, will mechanical equipment erection and piping prefabrication/erection be the subject of two distinct contracts or of a combined contract, which in effect shifts the interface between the two disciplines from the EPCM contractor to the single chosen construction contractor ... 

Very importantly, what will be the responsibility interfaces between the owner and the EPCM contractor towards project completion and how will they evolve over time What are the definitions of construction completion, commissioning, start-up, performance testing and commercial operation Which organization will be responsible for each of these phases and how will the work scope be shared ... 

Interfaces are potentially where mistakes occur, so they should not be excessive in number and should be placed logically in terms of physical works and documentation. Bitter experience shows that indiscriminate division of a project into a multiplicity of contracts with badly defined boundaries is detrimental to quality inter alia because the EPCM contractor s supervision is diluted over too large a number of suppliers and construction contractors with their associated interfaces. 

We can further examine the owner/EPCM contractor/ construction contractors model chosen in Section 1.3, with two alternatives illustrated in Figure 1.3. Option 1 shows a project where the EPCM contractor is responsible entirely and solely to the owner of the project, based on a lump-sum price. 

Supervision of construction contractors and materiel suppliers by the EPCM contractor for and on behalf of the owner . 

Effective QA enables the EPCM contractor to master quality issues, getting it right first time with the resulting economies of time, money and effort. Externally, QA exercised by the EPCM contractor helps give confidence to the owner in the capacity of the former to deliver the plant to specified requirements. The same reasoning can be applied concerning suppliers and construction contractors. Their own QA measures produce internal benefits and, in addition, contribute to convincing the EPCM contractor and the owner as to their capabilities and the conformity of materiel supplied and works carried out. 

Having already determined the project strategy as proposed in Section 1.4, which defines how the job is to be cut up and responsibilities for the various parts allocated, it is essential that at as early a stage as possible, the owner and the EPCM contractor formally review the project from start to finish in order to define relationships and interfaces. This joint exercise should include a review of the construction phase. Figure 3.1 outlines, in the form of a system, exchanges between the principal entities on site, that is, the owner, the EPCM contractor and the construction contractors. Also shown are the links to their respective head offices and with the utility companies, the insurer and the authorities, which together constitute the environment in which the site system is set. As the future arrangements take shape the discussion can focus onto a more detailed definition of who does what on site in the form of a matrix, an example of which is shown in Table 3.1. This anticipates a more detailed treatment presented in subsequent chapters and sections. 

This is a good place to remind ourselves that responsibility for effective quality management of construction is not just the concern of the EPCM site quality assurance manager and his or her staff, but implies the full and active cooperation... 

EPCM contractor SITE QUALITY RESPONSIBILITIES MATRIX Owner ... 

Activitv/subiect Construction EPCM Contractor Department Reference... 

EPCM contractor Name/Logo SITE QUALITY RESPONSIBILITIES MATRIX Updated / / Page 2/2... Owner Project no Project ... 

By the EPCM contractor head office Audited Audited Audited Audited ... 

A close working relationship between the representatives of the owner and of the EPCM contractor on site is essential for the smooth working of the project. However, requests on the part of owner s personnel for alterations and additions must be formalized otherwise they can get out of hand. The EPCM contractor must evaluate their technical impact as well as the impact on cost and delivery, and then the owner can decide... 

Chapter 4 presents a more detailed discussion concerning the EPCM contractor on site. 

Constmction contractors are chosen for their competence in the various disciplines. They bring to the site the necessary human and physical resources together with the stmcture, organization and procedures necessary to meet their contractual obligations. With the prior permission of the EPCM contractor, a construction contractor may subcontract part of its workscope, but in that case the construction contractor is entirely responsible for the quality of work of the subcontractor. The construction contractors receive engineering... 

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