The term EPC CONTRACT is being mentioned a lot recently. In this article, we will learn about the concept of EPC as well as the advantages of EPC.
What is EPC?
As we all know, in every business activity, if you want to be professional, you need a contract. This is considered a legal document to ensure safety and has a close relationship between businesses and businesses, partners, between businesses and employees,… In the construction field, the concept of EPC is heavily used. So what is EPC?
EPC ( Engineering Procurement and Construction) is called the contract to design, provide the technical equipment, and execute the work. This is a kind of contracts that the investor will implement the entire work as follow:
- Technical design/construction drawings: Technical design/construction drawing: Make sketches, design ideas for the project. The drawings will be saved as paper or PDF files. In this stage, the contractor can initially determine the number of materials needed for the project. By counting material quantities directly on a paper drawing or using automated counting software, an estimator or developer can make an almost accurate estimate of the quantity and cost of his project. At AnyBim, we have researched and developed SmartMTO software, a solution with the application of AI (Artificial Intelligence) technology, bringing artificial intelligence to automatically recognize objects in drawings, helping to save the most time, accuracy, human resources, and cost in aggregating the number of raw materials.
- Supply materials and equipment to prepare for the construction of works: Contractors are responsible for purchasing and selling materials for the construction process.
- Construction: After completing the stage of consulting and supplying materials, the contractor will move to construction.
Normally, EPC usually applies to large construction projects with more than 30% of investment capital provided by the state. The EPC contract is a form of contract to supply materials, design engineering and construction. The terms of construction time, construction quality, engineering technology, completion time are specified in the EPC contract.
- Lump-sum turnkey (LSTK): In addition to design, supply materials, and construction, the selected contractor also needs to undertake the construction investment project.
- EPIC contract ( Engineering, Procurement, Installation & Commissioning): The contract is to design, supply technology equipment, design, supply the technical equipment, install, and demo.
The advantages of the EPC contract
With the integration of many features, the EPC contract overcomes many disadvantages, brings benefits to both investors, contractors, and consultants as well as promotes the full role, initiative, and creativity of entities participating in the implementation process, improving the efficiency of project implementation or bidding package.
For the investor, the EPC contract allows taking advantage of the contractor’s technical level and management experience when implementing the project or bidding package during the implementation process, because there is only one responsible contact point. Investors need less manpower and project management costs. At the same time, it will limit the risks for the investor in the process of coordinating activities because the responsibility has been assigned to one term as the EPC contractor at this time.
In addition, the financing of the project or contract is also more convenient, the progress of the project is also faster. If a part of the risks occurs during the design, supply, and construction of the project, it will be shared by the contractor.
On the contractor side, The EPC contract creates conditions for the contractor to be more proactive and flexible in coordinating and inspecting the work on-site according to the contract’s progress without depending on the regular inspection and supervision of the investor.
In short, the processes and transactions are also reduced, saving time and costs for stakeholders. The EPC contract is increasingly popular, becoming a contract “Hot” in the construction field. Currently, there is also a similar concept to the EPC contract that makes us easy to confuse. It is an EPC bidding package. Similar to the definition of an EPC contract, EPC bidding packages are used to refer to general packages. This package will include some basic items such as inspection, commitment in the contract to be properly implemented, or not?
In general, the contractor needs to implement fully the terms signed in the EPC contract.