Engineering, Procurement & Construction (EPC) Contracts

Engineering, Procurement and Construction Contract is a contract where the contractor is responsible for all project delivery activities to implement project and submit it to the “employer” within a pre-set guaranteed time and price.

EPC Contracts create a foundation between owner (Employer) and contractor. According to EPC contract the owner transfers all design and construction risk to the contractor. EPC contracts mitigate risks for the owner and transfer risks to the contractor, making a would be contractor liable for all the activities, defects, remedies and the compensation to the Employer. The owner only turns the key at project delivery.

The EPC contractor manages the relationships with all the subcontractors whereas the project sponsors could assess both the performance and the progress.

Implementation and Contract Administration

As per the EPC contract the contractor can:

Control the design, engineering and the construction
Select the products and secure the materials necessary to complete the project
Select and work with subcontractors and suppliers
Lower construction costs
Hand the operable project over to the owner

If the EPC contractor hires and utilizes the services of the subcontractor, he will be responsible for the works performed by the subcontractor.

The parties need to specify in the EPC contract the governing law and the dispute resolution procedures.

In summary, single point of contact, a competent EPC contractor having necessary resources offers a turnkey solution to meet the Employers’ EPC objectives.

The EPC contract have both advantages and disadvantages for both parties and it is vital to negotiate the terms to ensure that all the major points are set out to minimize and mitigate the future possible issues between the parties.