Engineering Management Tips------How many different models are there for general project contracting!

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This post was last edited by “Hasty Passerby” on September 14, 2018, at 21:39. What are the various models of general contracting for projects? Over the past 20 years, China’s construction industry has experienced unprecedented growth; by 2016, its output value exceeded 18 trillion. Based on the current trends, the market will not continue to grow at the same pace, and the rate of growth is expected to slow down significantly. The new normal for the construction industry began to emerge in 2016 ； It is no longer effective for companies to stick to old ways of thinking and patterns; new changes in the market and new policy approaches inevitably lead to major transformations in construction methods. Companies that failed to get involved in PPP projects in 2016 have already witnessed the harshness of the market, and the EPC model may further divide construction firms. How should construction companies view the future of EPC? What preparations should be made for this? How difficult is it to transform into an EPC contractor? The general contracting of construction projects refers to the practice whereby a company that specializes in general project contracting, entrusted by the project owner, undertakes the entire process or certain phases of a construction project – including surveying, design, procurement, construction, and commissioning – in accordance with the terms of the general contract. The general contractor for the project must possess qualifications for surveying, design, or general construction contracting; those who undertake general construction contracts must be enterprises that have obtained such qualifications. General construction contracting refers to the situation where the client assigns all construction tasks to a construction company that possesses the qualifications for general construction contracting. Such a company is then responsible to the client in accordance with the terms of the contract, and it is tasked with completing the construction work. The general construction contractor can have only the general construction qualification, without needing surveying or design qualifications. The methods of engineering general contracting include the E+P+C model, the E+P+CM model, procurement general contracting (E-P), design+construction general contracting, design–procurement general contracting (E-P), and procurement–construction general contracting (P-C), among others. 1. E+P+C model (Design, Procurement, and Construction): EPC – which stands for Engineering (design), Procurement (purchasing), and Construction – refers to a contract-based approach in which the general contractor is responsible for the design, procurement, construction, and commissioning of a project. The contractor is fully accountable for the quality, safety, timeline, and cost of the project. This is currently the most common form of general contracting model used in China. Turnkey EPC is an extension of the design, procurement, and construction EPC services and responsibilities; ultimately, it involves delivering a project to the owner that meets the required functional requirements and is ready for use. 2. E+P+CM mode: Design, procurement, and construction management turnkey contracting (EPCM – a combination of Engineering, Procurement, and Construction management) is one of the commonly used project payment and management methods in the international construction industry; it is also one of the turnkey contracting models currently being adopted in China. The EPCM contractor is selected either by the owner’s assignment or through bidding; the contractor enters into a direct contract with the owner and takes full responsibility for the project’s design, supply of materials and equipment, and construction management. Based on the owner’s investment intentions and requirements, the most suitable subcontractor is selected and recommended through bidding to carry out the tasks of design, procurement, and construction. The design and procurement subcontractors are accountable to the EPCM contractor, while the construction subcontractors do not enter into a contract with the EPCM contractor; however, they are under the management of the EPCM contractor, and the construction subcontractors have a direct contractual relationship with the owner. Therefore, the EPCM contractor does not need to bear the construction contract risks and economic risks. When the EPCM turnkey contract model adopts a lump-sum payment approach, the economic risks faced by the EPCM contractor are kept within certain limits; the contractor assumes relatively low economic risks and enjoys more stable profits. 3. Design + Construction General Contracting (D+B): Design-construction general contracting refers to the practice where a general contracting company, in accordance with the terms of the contract, is responsible for both the design and construction of a project, and bears full responsibility for the quality, safety, timeline, and cost of the project. 4. Depending on the different scales, types of engineering projects and the requirements of the clients, EPC can also take the forms of Design-Bid-Construct (E-P) and Procure-Construct (P-C).