About EPC Business

EPC stands for Engineering, Procurement, Construction and is a prominent form of contracting agreement in the construction industry. The engineering and construction contractor will carry out the detailed engineering design of the project, procure all the equipment and materials necessary, and then construct to deliver a functioning facility or asset to their clients. Companies that deliver EPC Projects are commonly referred to as EPC Contractors.

The EPC phase of the project is also known as the Execution phase which normally follows what is know as a FEED or Front End Engineering Design phase. The FEED is a basic engineering design used as the basis for the EPC phase. The FEED can be divided into separate packages covering different portions of the project. The FEED packages are used as the basis for bidding on when the client offers the EPC work to the market.

Normally the EPC Contractor has to execute and deliver the project within an agreed time and budget, commonly known as a Lump Sum Turn Key (LSTK) Contract. An EPC LSTK Contract places the risk for schedule and budget on the EPC Contractor.

The Project Owner or client to the EPC Contractors will normally have a presence in the EPC Contractors offices during the execution of the EPC Contract. The Client places what can be termed a Project Management Team or PMT to overlook the EPC Contractor. The client PMT may require specialist help and bring on board Project Management Consultants or PMC's to assist. The PMT / PMC will ensure the EPC Contractor is carrying out the works in accordance with the agreed scope of works and in accordance with the Contract. It is quite common for the Engineering and Construction Contractor which delivered the FEED to be offered a Project Management Consultancy (PMC) Contract.

In some instances which can be related to the time a project owner would like the project delivered, an engineering and construction company can be given work on a direct reimbursable basis to start with followed by conversion to LSTK once sufficient time and resources can be allocated to quantifying and pricing the scope of works. One method to convert from a reimbursable to LSTK Contract is called an Open Book Estimate or OBE in which the Contractor will open all their working documentation or books for representatives of the client to assess what the total scope of works for delivering the project will be. An agreed LSTK scope of works and price will be negotiated and agreed between EPC Contractor and Project Owner during the execution of EPC activities.