【Haichuan EPC】How to get started from C to EPC?

Secondly, one can try starting with small projects. ““A journey of a thousand miles begins with a single step”; when starting out in EPC, one can begin by attempting small projects. The project is small, requires few resources, and its risks are manageable. Through the implementation of small projects, companies can learn about the procedures involved in carrying out EPC projects, gradually master the key aspects of this business, develop and train a basic team of professionals, and accumulate experience in executing EPC projects. 3 Launch another strong initial combination attack. Companies that wish to engage in EPC work often ask themselves this question: Should they take on projects first and then build up their capabilities? Should we build capabilities first, and then take on business? This is an eternal question of whether the chicken or the egg came first, and different companies have different approaches. Overall, the two should start simultaneously, or capacity building should be initiated slightly earlier to ensure smooth progress once a turnkey project is undertaken. Having taken on a project, I further improve my abilities in various areas through practical project work, mobilize more resources, and promote a positive cycle for business development. When taking on business, one should start by choosing the field in which they have the most experience. For example, enterprises whose main business is construction should start out with general contracting for construction projects as much as possible, rather than beginning in areas such as municipal works or road construction ； Similarly, enterprises with road and municipal engineering as their main focus that engage in general contracting must start from the road and municipal sector. In one’s area of greatest expertise, the most resources can be mobilized; the main challenges arise from extending the value chain. If one is not familiar with the business itself, then they have to face challenges related both to extending the value chain and to their lack of knowledge about the business. Furthermore, if a company can start with the business of existing customers, it will also help to communicate effectively with them under the new model, **reducing risks.

In the early stages, in addition to actively taking on projects, companies need to strengthen the development of their core capabilities. What are the basic skills? Build a basic team of personnel. This includes forming design teams or design management teams, as well as enhancing the capabilities of existing teams, such as marketing teams, project management teams, procurement teams, etc. The knowledge, skills, and experience of existing teams are often limited to general construction contracting; they have little understanding of the business, legal, cost control, and procurement management aspects of EPC projects, or their understanding in these areas is inaccurate. Adjust the organization of enterprises and project departments. At the corporate headquarters, it is necessary to establish design management departments and procurement management departments. These new departments must define their functions and design management positions in line with the requirements of project general contracting ； In line with the requirements of EPC for restructuring the responsibilities of other functional and business departments, additional positions are created to meet the needs of those departmental functions. Design a project management system for engineering general contracting at a simple level. Generally speaking, as a company transitions from general construction contracting to EPC contracting, the development of its management system typically goes through five stages: chaotic stage, simple stage, standardized stage, lean stage, and strategic stage. In the early stages of the business, it is necessary to avoid internal chaos, while also preventing the system from becoming too complicated, so that it is not unfamiliar to everyone or difficult to use. To this end, a simple-level EPC system can be established to link the management of key nodes and major interfaces in the EPC process, ensuring the smooth progress of the project. With a basic team, organizational, and management framework, and through continuous refinement through projects that involve ongoing adjustments, improvements, and enhancements to this framework, a company’s capabilities can be elevated to a higher level, thereby creating a positive cycle in which capabilities and business operations reinforce each other. Of course, companies must realize that strengthening training is a prerequisite for building teams, as well as organizational and management systems. In China, it was the design institutes that first undertook EPC projects. Today, the revenue generated from EPC activities in the survey and design industry has exceeded one trillion yuan. Design institutes in industries such as chemicals, non-ferrous metals, ferrous metals, and power generation have accumulated considerable experience in EPC projects. PanChengDe has helped more than 30 design institutes establish EPC project management systems, and these experiences are worth learning from by construction companies that are aiming to transition to EPC business.

Is there a difference in the starting points between large enterprises and small and medium-sized enterprises? Pan Chengde predicts that over the next 10 years, more than 1% of construction companies may engage in general contracting services ； In 10 years, the total revenue from EPC services by enterprises will reach around 7 trillion, with construction companies accounting for over 4 trillion in revenue. Some large construction companies have made strong strides in the field of engineering general contracting. According to a survey by Pan Chengde, in 2017, China State Construction Third Engineering Bureau and China State Construction Eighth Engineering Bureau signed new engineering general contracting contracts worth over 100 billion yuan each, while Beijing Urban Construction Group signed contracts worth over 300 billion yuan. These leading construction companies have managed to develop rapidly in this area, with annual contract values of 100 billion yuan – a figure that far exceeds that of the established players in the survey and design industry who are also engaged in engineering general contracting. Due to its long-term cooperation with these outstanding enterprises, Pan Chengde has conducted investigations and research into the business transformation strategies of China State Construction Third Engineering Bureau and China State Construction Eighth Engineering Bureau. These large enterprises have given considerable strategic attention to this issue; their 12th Five-Year Plan outlined a strategy for transitioning toward general contracting. They began building up their capabilities even when they had little experience in general contracting ； It was the substantial development of team, organizational, and management system capabilities in the field of EPC during the 12th Five-Year Plan period that led to the significant growth in business in 2016 and 2017. For small and medium-sized construction companies that lack resources in various areas, how can they get started? As mentioned earlier in this article regarding the integrated approach, small and medium-sized construction companies should choose as narrow a business scope as possible and start with smaller projects. A construction company in Guangdong chose to start with smaller municipal projects; its first EPC project was worth only 50 million ； A professional contracting company in Jiangsu that specializes in hospital cleanrooms decided to start with projects in small and medium-sized hospitals. These companies have progressed from handling single, small-scale EPC projects to undertaking multiple such projects. The professionalism of their teams and their ability to integrate resources continue to improve, indicating a strong trend of growth. For construction companies determined to get started in the EPC business, I think this phrase is the most appropriate: \"Be resolute, not afraid of sacrifice, overcome all difficulties, and strive for success.\" Written by Li Fuhe (WeChat official account: Architecture Frontiers)

Is there a difference in the starting points between large enterprises and small and medium-sized enterprises? Pan Chengde predicts that over the next 10 years, more than 1% of construction companies may engage in general contracting services ； In 10 years, the total revenue from EPC services by enterprises will reach around 7 trillion, with construction companies accounting for over 4 trillion in revenue. Some large construction companies have made strong strides in the field of engineering general contracting. According to a survey by Pan Chengde, in 2017, China State Construction Third Engineering Bureau and China State Construction Eighth Engineering Bureau signed new engineering general contracting contracts worth over 100 billion yuan each, while Beijing Urban Construction Group signed contracts worth over 300 billion yuan. These leading construction companies have managed to develop rapidly in this area, with annual contract values of 100 billion yuan – a figure that far exceeds that of the established players in the survey and design industry who are also engaged in engineering general contracting. Due to its long-term cooperation with these outstanding enterprises, Pan Chengde has conducted investigations and research into the business transformation strategies of China State Construction Third Engineering Bureau and China State Construction Eighth Engineering Bureau. These large enterprises have given considerable strategic attention to this issue; their 12th Five-Year Plan outlined a strategy for transitioning toward general contracting. They began building up their capabilities even when they had little experience in general contracting ； It was the substantial development of team, organizational, and management system capabilities in the field of EPC during the 12th Five-Year Plan period that led to the significant growth in business in 2016 and 2017. For small and medium-sized construction companies that lack resources in various areas, how can they get started? As mentioned earlier in this article regarding the integrated approach, small and medium-sized construction companies should choose as narrow a business scope as possible and start with smaller projects. A construction company in Guangdong chose to start with smaller municipal projects; its first EPC project was worth only 50 million ； A professional contracting company in Jiangsu that specializes in hospital cleanrooms decided to start with projects in small and medium-sized hospitals. These companies have progressed from handling single, small-scale EPC projects to undertaking multiple such projects. The professionalism of their teams and their ability to integrate resources continue to improve, indicating a strong trend of growth. For construction companies determined to get started in the EPC business, I think this phrase is the most appropriate: \"Be resolute, not afraid of sacrifice, overcome all difficulties, and strive for success.\" Eyeglass dividing line. This article is original, written by Li Fuhe from Shanghai PanChengDe Enterprise Management Consulting Co., Ltd.

The path from C to EPC is difficult; the municipal and construction industries are relatively easy to enter, while petrochemical projects seem to be rare.

There are mainly some issues related to process packages and the like; learning from others’ experiences can be useful

Reporters from the Daily Economic News found that Beijing Petrochemical Engineering was already under the control of Yanchang Petroleum Group, the parent company of Yanchang Chemical Construction, in 2010; if the acquisition is completed, it will essentially represent an internal integration within the Yanchang Group. According to the official website of Yanchang Petroleum, in July 2010, Yanchang Petroleum acquired control over Beijing Petrochemical Design Institute through an increase in capital and share expansion; the latter was then renamed Beijing Petrochemical Engineering Co., Ltd., with Yanchang Petroleum Group holding 51% of its shares. According to reports by China Economic Net at the time, Beijing Petrochemical Engineering, as an important design entity within the Yanchang Petroleum Group’s engineering sector, will further enhance the overall capacity of the group in carrying out engineering projects. In particular, by combining with the construction capabilities of Yanchang Huajian, which belongs to Yanchang Petroleum, it is possible to gradually develop a large-scale engineering construction sector that integrates R&D, design, and construction. “Acquisitions can improve the industrial chain of listed companies; previously it was PC (Procurement-Construction General Contracting), and after the acquisition of design firms, it became EPC (Design-Procurement-Construction), thereby extending the industrial chain. ”An industry analyst told a reporter from Daily Economic News, “Furthermore, the business areas of the two companies overlap significantly, and the acquisition can also help avoid potential competition among companies within the group.” ” According to the official website of Beijing Chemical Engineering, the company is an engineering firm that offers a range of services including feasibility studies for engineering projects, technical consulting, design, equipment procurement, construction management, turnkey project delivery, project management services, technical support, information technology solutions, and the development of engineering technologies. The main business activities of Yanchang Huajian include the construction of petrochemical projects, building construction projects, general contracting for municipal public works, installation of mechanical and electrical equipment, anti-corrosion and insulation work, earthwork projects, specialized contracting for steel structure projects, equipment manufacturing and sales, equipment lifting and transportation, material sales, as well as engineering technology services. Comparing the businesses of the two companies, Yanchang Chemical Construction lacks upstream business segments of the industry chain such as project design and equipment procurement. The industry analyst mentioned above said, “Integration is also beneficial for the development of listed companies; with design qualifications in place, they will have a greater advantage in winning engineering projects.” ” It is worth noting that Beijing Chemical Engineering describes in its official website’s history section that in 2015, as the company continued to grow, it began to plan for an IPO in accordance with the directives of the Shaanxi State-owned Assets Supervision and Administration Commission and the parent company. This was done in order to enhance the company’s ability for sustainable development and to strive to become a first-class, competitively strong innovative engineering company in China.

After many attempts, BPEC finally found an enterprise group with provincial state-owned assets backing and sold itself to them.

It has already had the support of a major entity; this time it’s about integration – perhaps Sinopec is taking over CNPC and combining design and construction into one engineering company