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BEST PRACTICES

The basis to create

a construction company

for complex plants

With this series, we will analyze the
transformation of an engineering
company into an organized one for
EPC or EPCM contracts, starting with
understanding the difference between
these definitions and their impact on
Project Finance

Determining the correct form of construction contract
to pursue can have a great effect on the cost and risk
associated with the construction project. The cost of
construction varies inversely with the amount of busi-
ness risk the “owner / financers” are willing to accept.
Massimo Rebecchi, The less business risk the owner wishes to assume,
President and CEO the higher the cost of construction and management.
Xylem This follows the “risk-reward” motto for business.
Determining the correct form of
ith this series, we will analyze the
transformation of and engineering construction contract can have
company into an organized EPC “a great effect on the
or EPCM. The first step is to un- cost and risk associated with
derstand the difference between
Wthese definitions, which will im- the construction project
pact deeply the Project Finance.
An EPC or EPCM Contractor will perform the fol- The two most common types of construction con-
lowing main activities: tacts are EPC “turn-key” and EPCM. Each of these
- Feasibility Studies methods have variations that can be adapted to each
- Project Financing project as needed; example (EPCC Engineering, Pro-
- Contracting curement, Construction, and Commissioning), etc.
- Basic and Detailed Engineering Services/FEED
- Project Management
- Procurement and Manufacturing EPC / EPCM Definition
- Construction & Comparison
- Commissioning, Startup, Training and Operations
The EPC (Engineering, Procurement and Construc-
Many different terms are tossed around the construc- tion): means the company is contracted to provide
tion industry loosely describing the different methodo- engineering, procurement and construction services
logy used to design and construct new facilities and by the owner. Think Design & Construct style con-
turnarounds. Unfortunately, there are no tried and true tracts, where the project is largely Contractor mana-
definitions for the different methods and numerous ged and the cost risk and control are weighted to-
variations of each of the most popular methods. wards the Contractor and away from the Owner. The

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