EPC and traditional project management
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Ladies and gentlemen: We (an American company) intend to form a joint venture with a state-owned enterprise to build a chemical plant. The two parties have different opinions on the project management approach. We believe that the EPC approach saves costs, while the Chinese side thinks that traditional methods are more cost-effective. (Establish one’s own project department, bid for design institutes, contractors, procurement, etc.). Please share your opinions. Thank you.
When the owner handles the construction work themselves, it certainly saves costs, but it increases the workload significantly. In EPC, the profit margin for the P aspect is quite large; it’s of course better for the owner to purchase it themselves as this allows for better control. C is much more transparent under the current circumstances. Most engineering companies are willing to take on EPC 1# robin_s.q.luo
EPC is troublesome and costly; it requires people to do more work, so of course it costs money. If one has the ability and is willing to put in effort, they can of course save money. I’m afraid the same is true for projects abroad.
There are not many EPC engineering companies in China that meet the strict definition of such firms; most merely provide general contracting for projects under this model； Thus, the issue of profit sharing arises; subcontractors at each stage want to reap benefits from the project construction process, and preferably as large a share as possible, which leads to increased costs for the EPC project. This is perhaps why there are differences in views regarding the EPC management model both domestically and internationally. For reference!
Thank you all. My experience also shows that the EPC model in China increases costs, but my American colleagues base it on their own experience. It is believed that it will save costs. The reasons are as follows: 1. As mentioned above, the traditional approach would require our company to invest more manpower, and since most of our company’s engineering staff are in the United States, traveling back and forth between China and the U.S. would incur high costs. Reducing communication between American colleagues and contractors will **lower costs**. 2. Contractors, considering the greater opportunities for cooperation with EPC firms, are often able to offer lower quotes. 3. By utilizing the systematic procurement processes of EPC firms, it is possible to achieve high quality at competitive prices. 4. EPC firms are responsible for managing the project timeline, which helps in controlling the project and avoiding cost increases that could result from delays. 5. Project progress is easier to control. Theoretically, EPC should be more cost-effective. Because they are more professional and experienced. It is also a method commonly adopted in developed Western countries. Regarding procurement as well, we are still responsible for the main equipment. The secondary tasks are assigned to EPC.
:) Our company is in a situation similar to the original poster’s; foreign parties tend to prefer the EPC approach.
Participating in project construction and management is also a good opportunity for learning, and it serves as a way to develop technical personnel; therefore, for chemical companies, EPC is not necessarily a good choice
1# robin_s.q.luo EPC saves money and effort for owners, but domestic owners are not very receptive to it. For them, it should be explained that different people are needed for project construction and factory operation; building a project with only one set of personnel means that those involved in construction will have little role to play in the future. If those responsible for factory operation handle the construction work as well, the cost of trial and error will be very high