【Haichuan EPC】10 Derivative Models of EPC

The F+EPC model is a new type of project management approach that has emerged in response to the needs of owners and the market. Here, F stands for financing and investment, while F+EPC refers to financing EPC; this approach involves providing the owner with partial funding for the project. It represents a very important direction for the development of international engineering in the future. China Harbour Engineering Company and Kish Investment Tirajeh, a subsidiary of Iran’s Tablis Municipality, signed an EPC+F contract for the Iran Tirajeh City Complex project in Tehran (financed under a financing agreement between China and Iran), with a contract value of approximately 118 million euros.

F+EPC+O model: F+EPC+O stands for financing + EPC + operation, a turnkey service model in which the contractor provides the financing and is also responsible for operations. The 100MW heavy oil power plant project in Nawabganj, Bangladesh, undertaken by Hubei Electric Power Survey and Design Institute, is an international project awarded under the F+EPC+O model. They obtained low-cost, long-term export buyer’s credit from third countries through international inter-bank financing platforms, and secured the project by bidding on a turnkey engineering and four-year operation service model, with an investment of 125 million US dollars.

The EPC+O&M turnkey contract model involves the contractor being responsible for the design, procurement, and construction of the project, and continuing to handle its operation and maintenance once it is completed.

I+EPC model: I+EPC is an investment-led engineering general contracting model that relies on investment as a driving force, with design playing a key role, in order to achieve integrated management of the entire industrial chain encompassing design, production, procurement, and construction. Tianjin Residential Group adopted the I+EPC model in the commercial housing construction project in Tianjin Ecocity.

PPP+EPC model: PPP+EPC is not a specific variant of PPP; rather, it is a combination that leverages private capital to address funding issues, while employing the EPC model for the construction phase. The advantages of this mode mainly lie in: ① improving production efficiency. Production methods that are funded and managed solely by the government tend to be inefficient, as government funds are public funds; using such funds means spending someone else’s money on tasks that belong to others, which inevitably leads to inefficiency. Adopting the PPP project model transforms the situation of using other people’s money to carry out tasks for others into one where the enterprise uses its own money to handle its own affairs, which will surely improve production efficiency. ②**Support has increased. During the construction of PPP model projects, the project owner and local authorities provide considerable support for the project’s development, especially in coordinating efforts with departments such as those responsible for land use, electricity, and water resources. ③Companies are paying more attention to cost control. Since this project is an investment-oriented one, in terms of site management, the construction contractor will place greater emphasis on cost control while ensuring safety and quality. ④It helps improve the overall quality of managers. Under the PPP model combined with the EPC model, when the design institute designed this project, it was not possible to simply apply previous design methods to certain parts of the project; instead, more detailed and cost-effective design plans were required that complied with relevant standards. Therefore, it is required that construction companies engage in thorough communication and close cooperation with design firms during the design phase, which greatly contributes to improving the comprehensive capabilities of the company’s management staff. ⑤It reduces the risk of capital recovery. For investment projects, whether the funds can be recovered on schedule is the biggest concern for businesses. However, in the case of this project, the local authorities **provided properties with full disposal rights as collateral, thereby reducing the risk of delayed payment to the construction companies and ensuring that they could receive their payments on schedule.

In this wave of PPP projects with Chinese characteristics, the concept of “PPP+EPC” has emerged and is frequently mentioned; it is currently a major focus of attention. The PPP+EPC project for the infrastructure development in Hangzhou Dajiangdong Industrial Cluster is led by PowerChina Road & Bridge Corporation; a consortium is formed by combining forces with units such as PowerChina East China Institute, Sujiaoke, and China Securities Fund. Together with Hangzhou Dajiangdong Investment and Development Co., Ltd., they establish a PPP+EPC project company to invest in, construct, and hand over eleven municipal projects in the Dajiangdong area of Hangzhou. The total investment for these projects amounts to approximately 14.258 billion yuan.

The BOT+EPC model: Under this model, a concession is granted to a certain enterprise (or organization), allowing it to carry out the construction and operation of public infrastructure over a specified period. During the construction phase, the enterprise (or organization) uses a turnkey contracting approach. Once the concession period comes to an end, the enterprise (or organization) hands over the facility to the relevant authorities. The advantage of this model is that **it allows infrastructure construction to be carried out through this financing method, with the help of some financially strong and technologically advanced enterprises (or institutions). BOT is the abbreviation for the English phrase “Build-Operate-Transfer”, which is usually translated literally as “build-operate-transfer”. A B O T is essentially a method for investing in, building, and operating infrastructure, and it is most appropriately translated as “infrastructure concession”. The Guangfozhao Expressway (Zhaoqing section) project (hereinafter referred to as the “Guangfozhao project”) is the first project in Guangdong Province’s expressway construction sector to adopt the “BOT+EPC” construction management model. It completed its construction one year ahead of the scheduled timeline, setting a new record for expressway construction in Guangdong Province. The Nanchong-Dazu-Luzhou Expressway (within Chongqing), the expansion project of the Chongqing-Guizhou Expressway (within Chongqing), and the Shizhu-Qianjiang section of the Chongqing Liangping-Qianjiang Expressway, all of which were won by China Railway Construction, also employ the BOT+EPC model; the total bid price for these projects amounts to approximately 40.4 billion yuan.

RD+EPC mode: RD+EPC is a turnkey project contracting model commissioned by the owner. It is the practice of Wang Ke’s team in exploring the path toward architect accountability in China. In 2008, Professor Zhuang Weimin established the Tsinghua Weibang Construction Research Center. Under Professor Zhuang’s leadership, with Wang Ke, Zhang Yonggang, Zhu Xiaodong, and Liu Yichuan as key members, research was conducted on the topic of architect responsibility in China. Although the efforts made between 2009 and 2011 were not successful, after 14 years of practical work and theoretical exploration in China, the RD+EPC model was finally developed in 2012 with the Tenglongge project as a milestone. Subsequent improvements through five more projects – the Tongren Phoenix Airport, the Weibang Office Building, the Nanhu Hotel (structure completed), and the Nanjing Beiwai Office Building – led to closer collaboration between Professor Zhuang Weimin and architect Wang Ke. With the addition of Associate Professor Deng Xiaomei, the RD+EPC theoretical framework was finally established in 2016, and it was named the “Tsinghua Weibang Construction Method (RD+EPC Model)”. Practice has shown that this model can serve as a transitional approach for the architect’s responsibility system in China during the transition period.

The EPCM model, namely Engineering Procurement Construction Management, refers to a situation in which the contractor is fully responsible for the design and procurement of a project, as well as for managing the construction phase. It is a project delivery method that is widely used in the international construction industry today. At the same time, the EPCM manager is also responsible for managing other aspects of the project, such as the schedule for the design, procurement, and construction phases, communication with relevant departments, as well as preparing cost plans, cost estimates, and handling document control. Due to the high requirements it places on the general contracting capabilities, overall competence, as well as technical and managerial skills of engineering contractors, and given that most domestic construction companies still fall short of international standards in terms of project management, technological innovation, and information technology development, the EPCM model has not yet been widely adopted in China.