engineering procurement construction -...
Post on 01-Feb-2018
264 Views
Preview:
TRANSCRIPT
www.nabilabbas.com; Email: nabil@nabilabbas.com
Engineering Procurement Construction
Dr. Nabil Abbas FIDIC Certified Trainer Fellow of the Chartered Inst. of Arbitrators FCIArb – MACostE - AIA
www.nabilabbas.com; Email: nabil@nabilabbas.com
www.nabilabbas.com; Email: nabil@nabilabbas.com
The Federation Internationale des Ingenieurs Conseils
(“FIDIC”) published in August 1999, the first edition of its
standard form, “Conditions of EPC and Turnkey Projects”,
commonly referred to as the “Silver Book”.
Publication of the Silver Book followed its earlier distribution
of the test edition of this form, following which FIDIC
amended certain provisions to take account of the comments
received.
www.nabilabbas.com; Email: nabil@nabilabbas.com
EPC Standard Forms of Contract The major EPC/EPCM forms of contract are as follows: FIDIC Silver Book
Orgalime Turnkey Contract
ICC Turnkey Task Force
ENAA
ICE 7th Edition
ECC 3rd Edition
MDB Harmonised
www.nabilabbas.com; Email: nabil@nabilabbas.com
EPC Contractor The EPC Contractor is considered to be an expert in this form of contracting and this is onerous in international construction projects and must provide: a project that is ‘fit for purpose’
Engineering and design is to a unique standard
not carry out wilful misconduct
not be grossly negligent
www.nabilabbas.com; Email: nabil@nabilabbas.com
www.nabilabbas.com; Email: nabil@nabilabbas.com
www.nabilabbas.com; Email: nabil@nabilabbas.com
Business Culture
Most countries embrace market economics (in theory)
In practice there are exceptions – helpful and
otherwise
So relationships are to some extent
adversarial/competitive
And negotiations can be complex (especially if
lenders are involved)
www.nabilabbas.com; Email: nabil@nabilabbas.com
Legal/Regulatory
Legal system is part of business culture
The rule of law/contract is important, especially in
project financed deals
Civil and common law systems differ in form and
substance
Impact of procurement rules
On owner’s behaviour
On bidding tactics
www.nabilabbas.com; Email: nabil@nabilabbas.com
10
Where does EPC fit in?
Construction
Management
Owner
assumes
risk
Contractor
retains risk
Traditional Design &
Build LSTK/
EPC
R I S K S P E C T R U M
EPC Structure (cont’d)
www.nabilabbas.com; Email: nabil@nabilabbas.com
www.nabilabbas.com; Email: nabil@nabilabbas.com
Benefits of EPC
The contractor bears the risk of integrating the
performance of all package contractors, including
designers
The contractor bears supply chain solvency risk
The transfer of other construction risks is maximised
relative to other procurement methods
A high degree of certainty (on paper) can therefore
be attained as to cost, time and quality
www.nabilabbas.com; Email: nabil@nabilabbas.com
Benefits of EPC
Remedies (such as LDs), liability caps and
bond amounts are all sized relative to the
total cost of the works and thus likely to
cover a significant proportion of the owner's
losses
Administrative burdens on the owner are
minimised
The documentation is relatively simple and
standardised
EPC procurement is widely used and
understood and is the most "bankable"
procurement method
www.nabilabbas.com; Email: nabil@nabilabbas.com
Cost –contractors will add a substantial risk
premium to the price
Control –the contractor controls the detailed
design and construction process
Quality –the contractor will aim for the minimum
compliant standard
Bidder resistance –EPC has been unpopular
among some contractors (though market
conditions are rapidly changing)
Disadvantages of EPC
www.nabilabbas.com; Email: nabil@nabilabbas.com
Disadvantages of EPC
Duration –total construction time may be prolonged by
required FEED→EPC sequence
Capacity/competition –few contractors have the
balance sheet capacity to accept (and bond) the risk
of large projects on an EPC basis
Claims –contractors are motivated to make claims to
alleviate risk transfer
Caps –EPC risk transfer is in reality limited by express
liability limits and by balance sheet and bonding
limitations of contractors
www.nabilabbas.com; Email: nabil@nabilabbas.com
EPC Challenges
Execute EPC “mega-projects” within budget and on
schedule
Minimize construction delays due to lagging
information, material or equipment.
Track progress and maintain contingency plans to stay
on schedule.
Document project progress in terms of installed
quantities.
www.nabilabbas.com; Email: nabil@nabilabbas.com
EPC Contract
www.nabilabbas.com; Email: nabil@nabilabbas.com
Advantages:
More certainty regarding cost and schedule
Less owner’s staff required
Reduce finger pointing
Transfer of experience
www.nabilabbas.com; Email: nabil@nabilabbas.com
EPC and Owner do not see the Project
exactly from the same point of view:
EPC manages margins and
contingencies
Owner manages the full cost of the
operation (Investment + Operation)
Risks:
www.nabilabbas.com; Email: nabil@nabilabbas.com
Definition of the scope of supply (clear and
frozen)
A strong Owner’s team is still needed
Transfer of responsibilities is a key point
Risks mitigation:
www.nabilabbas.com; Email: nabil@nabilabbas.com
The first target is to have in the EPC contract a
clear definition of performances, timing and
safety requirements.
EPC contractors also have responsibilities
regarding operations:
Operability and maintainability
Operation and maintenance (O&M) costs
Preparation and Transfer to Operation
Team
Warranties and support to Operation Team
Definition of scope of supply:
www.nabilabbas.com; Email: nabil@nabilabbas.com
Key factor Rationale
1- Clear definition of scope of supply is essential
1- Disputes and/or “scope creep” are potentially very costly
2- Even within the EPC framework a strong owner’s team is vital
2- Owner will maintain many responsibilities (e.g. regulatory liaison)
3- Crucial to understand which responsibilities are transferred to the owner and when
3- Failure to have clear “ownership” of responsibilities at all stages can be costly
Conclusion:
www.nabilabbas.com; Email: nabil@nabilabbas.com
Typical EPCM Arrangement
www.nabilabbas.com; Email: nabil@nabilabbas.com
top related