Seeking advice on quotes for EPC systems
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As the title suggests, for projects that have already undergone basic engineering design and for which an EPC quote is to be prepared, in what aspects does the flexibility (operationality) of the EPC contractor’s quote lie? Thank you!
Design optimization, procurement costs of bulk materials, modular manufacturing, and project management capabilities.
The feasibility of EPC pricing can also stem from the following aspects: 1. Technical sources: There is more flexibility if one has its own proprietary technologies, or if there are reliable technical suppliers with whom cooperation is possible. 2. Mature application experience: It allows for greater flexibility in aspects such as technology selection, equipment selection, layout, and material choice. 3. Proven project management experience: By utilizing familiar construction teams capable of accelerating work progress and through strong project management, project timelines can be shortened, unnecessary investments reduced, and there is also ample room for flexibility.
Friends have told me that every time their company submits a bid for EPC projects, it calculates the costs strictly in accordance with the local pricing standards for such projects, determines the total price, and ends up coming up with a figure that is on the conservative side. But every time a quote is given, it’s significantly higher than that of competitors. It troubles them a lot.
Currently, in the bidding process for construction projects, the fees based on standard rates are all reduced, and labor costs are also lowered; as a result, the overall cost is significantly decreased. Therefore, if your friend’s company quotes prices based solely on those standard rates and adopts a conservative approach, its quotes will definitely be much higher, making it impossible for them to win the bid.
The problem is that construction costs and labor costs account for a relatively small proportion in the EPC quote. It seems that purchasing materials, machinery, and electrical equipment accounts for the largest portion. Logically, it doesn’t make much difference who purchases these things. A friend said that they submitted an EPC proposal, and after calculating based on the standard rates, the cost came to over 1.3 billion. As a result, the winning bidder’s bid was only a little over 1.1 billion. It’s almost 200 million short……
There is a great deal to know when it comes to quoting prices for equipment and materials; the more practical experience one has with similar projects, the greater the range of options available, which in turn leads to significant differences in costs. This is a common practice in the industry. Therefore, owners with strong engineering capabilities rarely engage in EPC projects. And with the quote being too low and the client making repeated requests, the actual profit turned out to be very poor!
Read the question carefully. The design for the project’s infrastructure on the 1st floor has been completed, leaving little room for choices in terms of technology, equipment, and layout.
In the basic design, material costs are generally based on market prices; where lies the expertise in determining such quotes?
Well, if it’s a process package that is being introduced, and the engineering company is working on such a project for the first time, it has very little experience in handling such packages. If pricing cannot be determined based on standard rates, then there aren’t really any good methods available
If the bid price is mainly based on reference prices, then why submit a bid at all? It’s just like the relationship between retailers, supermarkets, and wholesalers in the market – each level earns a profit.