Issues that Party A or the owner should consider and pay attention to when adopting EPC

　　The work carried out by the EPC general contractor must fully meet the contractual requirements and the objectives specified in the contract. The scope of work of the general contractor shall include all works necessary to meet the owner’s requirements, as well as those that are required by the contractor’s proposal and specifications, or that are implied by the contract or result from the contractor’s obligations. It also includes all works that, although not mentioned in the contract, are necessary for the stable, complete, safe, reliable, and efficient operation of the project by inference. In simple terms, the general contractor is responsible for the engineering design, procurement, and construction, as well as bearing warranty responsibilities for the project; they are also in charge of most of the project management tasks involved in the construction process. 　　Under an EPC turnkey contract, the owner only bears the risks associated with natural conditions and force majeure, while all other risks are taken on by the general contractor. This post was last edited by laiqi on 2008-12-4 20:34]

A very meaningful question that many property owners these days are thinking about, especially those in China! What exactly should I do? In fact, the EPC project is entirely handled by the general contractor alone; they play a crucial role in the construction process. It is absolutely unacceptable if they lack experience in project construction or do not have the necessary capabilities, after all, there is a bidding process involved when undertaking an EPC contract. As the owner, one just needs to pay attention to quality and schedule; everything else is about paying them on time :) . At the end of the project, there is a handover process, which requires the owner to have a relatively professional team to handle it; for the other aspects, it is sufficient to follow the provisions of the \"general contract\". I feel that many property owners think that others are using their money to carry out tasks, and they don’t feel confident unless they keep an eye on things (Actually, it’s not necessary.) This post was last edited by guozongduan on 2008-6-29 at 21:52.]

Guiding Opinions on Fostering and Developing General Contracting and Project Management Enterprises, Jian Shi No. 30: To the Departments of Construction of all provinces and autonomous regions, the Construction Commissions (Planning Commissions) of municipalities directly under the Central Government, the relevant construction departments of State Council agencies, the Infrastructure and Barracks Department of the General Logistics Department of the Chinese People’s Liberation Army, the Construction Bureau of the Xinjiang Production and Construction Corps, and other enterprises under central administration:

In order to deepen the reform of the methods used to organize engineering construction projects in China and to foster the development of specialized general contracting and project management enterprises, the following guiding opinions are put forward:

I. The importance and necessity of adopting general contracting and project management
General contracting and project management are internationally recognized methods for organizing engineering construction projects. Actively promoting EPC and project management is an important measure to deepen the reform of the organizational methods for engineering construction projects in China, improve the level of project management, ensure project quality and investment efficiency, and regulate the order of the construction market ； It is an inevitable requirement for survey, design, construction, and supervision enterprises to adjust their business structures, enhance their overall capabilities, accelerate their integration with international engineering contracting and management practices, and adapt to the new circumstances resulting from the development of the socialist market economy and China’s accession to the World Trade Organization ； It is an effective way to implement the development strategy of \"going global\" outlined at the 16th National Congress of the Party, to actively explore international contracting markets, to boost the export of China’s technologies, mechanical and electrical equipment, and engineering materials, to promote labor exports, and to enhance the international competitiveness of Chinese enterprises. 　　Construction administrative departments at all levels should unify their thinking, raise their awareness, take effective measures to strengthen guidance on general contracting of projects and project management activities, promptly summarize experience, and promote the healthy development of general contracting of projects and project management in China. 　　II. Basic Concepts and Main Methods of EPC 　　(1) EPC refers to the practice in which an enterprise engaged in EPC (hereinafter referred to as an EPC enterprise) is entrusted by the owner to undertake, in accordance with the contract terms, the entire process or certain stages of a project, including investigation, design, procurement, construction, and commissioning (final acceptance). 　　(II) The general contractor is responsible to the owner, in accordance with the contract provisions, for the quality, schedule, cost, and other aspects of the construction project. EPC contractors may, in accordance with the law, subcontract some of the work involved in the projects they undertake to subcontractors with the appropriate qualifications ； The subcontractor is liable to the general contractor in accordance with the terms of the subcontract. 　　(III) The specific methods, tasks, and responsibilities of the turnkey project contract shall be agreed upon by the owner and the turnkey project contractor in the contract. The main forms of engineering general contracting are as follows: 1. Design, Procurement, and Construction (EPC)/Turnkey General Contracting. Design, Procurement, and Construction general contracting means that the general contracting company undertakes the tasks of design, procurement, construction, and commissioning of the project in accordance with the terms of the contract, and is fully responsible for the quality, safety, timeline, and cost of the project. 　　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. Design-Build Contracting (D-B) Design-Build contracting refers to a situation in which the general contractor assumes responsibility for both the design and construction of a project as stipulated in the contract, and is fully accountable for the quality, safety, timeline, and cost of the project. 　　Depending on the scale, type of engineering project, and the requirements of the client, EPC can also take the forms of Design-Bid-Construct (E-P) and Procure-Construct (P-C). 　　III. Basic Concepts and Main Approaches of Project Management (1) Project management refers to the process in which a company engaged in project management (hereinafter referred to as a project management company), entrusted by the client, carries out management and services for the entire process or certain phases of the project’s implementation, in accordance with the terms of the contract. 　　(II) Project management enterprises do not enter into contracts directly with the general contractor of the project, or with enterprises responsible for surveying, design, supply, construction, etc., but may, as stipulated in the contract, assist the owner in entering into such contracts, and supervise the fulfillment of those contracts upon the owner’s commission. 　　(III) The specific methods of project management, as well as the services provided, authorities, fees, and responsibilities, shall be agreed upon by the owner and the project management company in the contract. The main methods of project management include the following: 1. Project Management Services (PM). Project management services refer to the activities carried out by project management companies in accordance with the terms of the contract; during the decision-making phase of a project, these companies prepare feasibility study reports for the client, conduct feasibility analyses, and carry out project planning ； During the implementation phase of engineering projects, services such as tendering agency, design management, procurement management, construction management, and commissioning (completion acceptance) are provided to the owner. The owner is represented in managing and controlling aspects of the project such as quality, safety, schedule, costs, contracts, and information. Project management companies should generally assume the corresponding management responsibilities as stipulated in the contract. 　　2. Project Management Contracting (PMC) Project Management Contracting refers to a situation where a project management company, in accordance with the terms of the contract, not only carries out all the tasks related to project management services (PM), but also takes responsibility for completing tasks such as the preliminary design of the project (foundation design) as specified in the contract. Project management companies that need to carry out the preliminary engineering design (foundation engineering design) must possess the appropriate engineering design qualifications. Project management contracting enterprises should generally assume certain management risks and financial responsibilities as stipulated in the contract. 　　Depending on the different scales, types of engineering projects, and the requirements of the clients, other project management methods can also be employed. 　　IV. Measures to Further Promote EPC and Project Management (1) Encourage survey, design, and construction enterprises with qualifications for engineering survey, design, or general construction to establish organizational structures and project management systems suitable for EPC operations through restructuring and reorganization. They should strengthen their team of project management professionals, improve their financing capabilities, and develop into engineering companies with comprehensive functions in design, procurement, and construction (construction management), so as to carry out EPC projects within the scope permitted by their qualifications for survey, design, or general construction. 　　Engineering survey, design, and construction firms can also form consortia to undertake the joint general contracting of engineering projects. 　　(II) Enterprises with qualifications in engineering survey, design, construction, and supervision are encouraged to establish organizational structures and project management systems suitable for project management activities, to recruit more professionals in project management, and to carry out such project management tasks within the scope of projects permitted by their respective qualification levels, in accordance with relevant qualification management regulations. 　　(III) Break down industry barriers by allowing enterprises in engineering survey, design, construction, supervision, etc. to apply for other relevant qualifications in accordance with relevant regulations. 　　(IV) An EPC contractor may, upon the entrustment of the owner, undertake project management services in accordance with the contract terms. However, it shall not take on both EPC and project management responsibilities for the same project, nor shall it have any hierarchical relationship or other interest ties with another party that is responsible for either the EPC or project management aspects of the project. 　　(5) For construction projects that are required by law to have supervision, project management enterprises with the appropriate supervision qualifications carry out project management on behalf of the owner; in such cases, the owner is not required to appoint separate project supervisors. These project management enterprises exercise supervision rights and assume supervision responsibilities in accordance with the law ； If a project management company lacking the corresponding supervision qualifications undertakes project management on behalf of the owner, the owner shall appoint a supervisor. 　　(VI) Construction administrative departments at all levels should strengthen coordination with relevant departments, earnestly implement the spirit of the \"Notice from the General Office of the State Council Transmitting the Opinions of the Ministry of Foreign Trade and Economic Cooperation and Other Departments on Vigorously Developing Overseas Contracting Projects\" (Guo Ban Fa No. 32), ensure that policies regarding financing, guarantees, taxation, etc., are applied to the project general contracting enterprises and project management enterprises that are given priority support for development, enhance their international competitiveness, and encourage them to actively explore international markets. 　　Large enterprises in the fields of design, construction, supervision, etc. are encouraged to form international engineering companies or project management companies through joint ventures or collaborations with large international engineering firms, in order to compete on the global stage. 　　(7) It is encouraged that, where conditions permit, construction projects be organized through engineering general contracting or project management approaches. 　　Engineering general contracting enterprises with the capability for investment and financing are encouraged to organize and implement projects that meet the relevant criteria, in accordance with the owner’s requirements, through models such as Build-Transfer (BT), Build-Operate-Transfer (BOT), Build-Own-Operate (BOO), and Build-Own-Operate-Transfer (BOOT). 　　(8) Give full play to the roles of industry associations and institutions of higher education by further carrying out professional training in EPC and project management, so as to cultivate professionals in these fields and meet the market demands for engineering construction both domestically and internationally. 　　Conditioned industry associations, institutions of higher education, and enterprises should strengthen theoretical research on EPC and project management, develop software for project management, and promote the improvement of the level of EPC and project management in China. 　　(IX) These guiding principles shall come into effect as of the date of issuance. The \"Regulations on the Management of the Qualifications of Design Units for General Contracting of Projects\" (Construction No. 805), issued by the Ministry of Construction on November 17, 1992, was simultaneously repealed. Ministry of Construction of the People’s Republic of China, February 13, 2003

There are some mature experiences that can serve as a reference: http://www.cin.gov.cn/jyjl/200611/t20061101_8621.htm

The EPC model, namely the Engineering-Procurement-Construction model, is also referred to in China as the “general contract for engineering” model. This model first emerged in the United States in the 1980s, attracting the attention of owners who wanted to determine the total investment amount and construction period as early as possible, and its use in the international engineering contracting market has gradually expanded. In 1999, FIDIC developed standard EPC contract conditions, which facilitated the widespread adoption of the EPC model. In the EPC model, Engineering encompasses not only the actual design work but may also include the overall planning of the entire construction project, as well as the planning and practical tasks related to the organizational management of its implementation. Under the EPC model, the owner only needs to outline their investment intentions and requirements; all other tasks are carried out by the EPC contractor ； The owner does not hire a supervision engineer to manage the project, but manages it themselves or by appointing a representative of the owner ； The contractor assumes most of the risks, including design risks, risks related to natural forces, and unforeseen difficulties ； A lump-sum contract is generally used. Under the traditional contracting model, materials and construction equipment are usually purchased by the general contractor of the project, but the owner can retain control over the procurement of certain key construction equipment and special materials in order to manage the associated risks during the project execution phase. The EPC standard contract conditions stipulate that the contractor is responsible for all design work and bears full responsibility for the project, therefore the owner cannot interfere excessively with the contractor’s work. There are also certain clauses that increase the risks for the contractor; for example, the “site data” provision in the EPC contract conditions states that: “The contractor is responsible for verifying and interpreting such data (provided by the owner).” The Owner assumes no responsibility whatsoever for the accuracy, sufficiency, and completeness of such data…” The basic premise of the EPC contract terms is that the Owner’s involvement in the project management is minimal, as the Contractor assumes most of the risks associated with project construction; the Owner’s role is primarily to carry out the final acceptance procedures. The EPC model is suitable for projects of large scale, with long construction periods and considerable technical complexity, such as infrastructure projects like factories, power plants, and oil exploration facilities.

This is a very broad issue; roughly speaking, it involves knowing how to carry out the preliminary approval procedures for a project, controlling the safety, quality, and schedule aspects of its design, procurement, and construction, ensuring proper commissioning, and handling the handover process. These require the joint efforts of a project team and professionals.

The focus for EPC owners is on the early stages of the project and the EPC bidding process: call:

Today, EPC projects in China are confined to the industry circle

Some are related to the political environment and unspoken rules; they cannot be understood from purely technical or market-based professional perspectives

The primary considerations remain schedule, quality, safety, and whether costs are under control

EPC – Design, Procurement, Construction; PMC – Project Management. Design: 1. Selection of process packages and design timeline, 2. Procurement schedule, 3. Construction quality and progress, 4. Responsibilities and capabilities of project supervision. EPC focuses on 1. Differences between the actual design and the contract specifications, 2. Omissions in the design； 3. Technical changes ； 4. Rigorous basic design ~~~~~~~~

In the past, all EPC projects in China involved fake P and fake C. The owner wants to act as both father and mother.

An important feature of the EPC model is to give full play to the role of market mechanisms. Not only do owners consider the project as an investment project first and foremost, but architects and contractors also proceed from this priority. When selecting a specialized subcontractor, only basic requirements are usually specified, allowing the architect and contractor to work together to find the most cost-effective solution. To participate effectively in competition, the entire project is generally divided into several relatively independent work packages. Different specialized subcontractors are responsible for the design, manufacturing, or supply of materials and components for each work package, as well as for the construction and installation. The designer’s work on subcontractors is coordinated by the architect, while the manufacturing or supply of construction components and equipment, as well as the construction work itself, are coordinated by the general contractor; in large projects, this coordination is usually carried out by the Construction Manager (CM). Although such coordination provides detailed regulations for the construction process, there are still many issues that are difficult to determine at the time or that were not anticipated, leaving them to be resolved by the specialized subcontractors as the project progresses. Professional contractors must ensure that the construction of their subcontracted portions is accurately integrated, in terms of design and management, with the works carried out by other subcontractors. This dual coordination feedback relies on all parties involved in the project adhering to recognized control procedures, norms, and technical standards.

The most important issues are quality problems and claims issues

The main issues are quality and schedule; these are the things that the owners are most concerned about

I don’t know if every leader (decision-maker) likes new things (by ‘new things’ I mean nothing more than half-understood use of foreign terms), but I do know that what works is the best. As far as I know, in the oil industry, EPC projects are nothing but a facade – they claim to offer one thing but actually provide something else. The owners with decision-making power essentially monopolize these opportunities and never delegate them. In EPC projects where the design sector plays a key role, there can be deep integration and effective cooperation; whereas in those where the construction sector is dominant, the design side tends to prioritize self-protection and relies on contract terms to regulate things. Which oil industry contractor can actually do that? The same is true for c as well. When it comes to management matters, it is first necessary to rely on the contract, with its terms based on the FIDIC Silver Book. Generally speaking, the preliminary phase of a project involves a large amount of work, the investment analysis process is complex, and it is difficult to ensure work quality when relying on external expertise; during the implementation phase of the project, the workload for the owner decreases relatively. 1. Preliminary work: Organization of the preparation of project proposal and feasibility study ； Project approval process ； Select preliminary design agencies (through bidding or negotiation) ； Review of the preliminary design of the organization ； Entrust a unit with the appropriate qualifications to prepare special assessment reports on the environment, soil and water conservation, safety, earthquakes, geological disasters, and fire protection, and submit them to **the relevant authorities for approval ； 2. Implementation phase: Organize the bidding process for the supervision unit ； Organize EPC bidding ； ； Organize the first coordination meeting among all parties to define their respective management interfaces ； Urging the supply of equipment and materials provided by the client prior to their arrival, checking upon delivery, opening the packages upon arrival at the site to participate in the inspection, and replacing or having faulty equipment and materials repaired ； Spot checks on quality, HSE, and progress during on-site implementation ； The supervisor reviews the comparison between the completed work volume and the planned schedule, and issues the payment notice (abroad, the supervisor acts as the full representative) ； Participate in the handover inspection and organize the completion acceptance ； Participation in quality and HSE incident handling ； Project completion tasks (mainly the disbursement of the quality guarantee fund and matters following commissioning)

By the way, there is one more important aspect that runs throughout the project implementation phase: claims and counterclaims

It may sound a bit blunt, but it is indeed quite in line with reality. In the P/C process, many clients are involved (the reasons are well known), which often poses risks to the quality of the project.

There are more and more EPC projects in the domestic market these days, so competition has intensified~