EPC Contractor’s Defined
The following is an extract from Wikipedia’s definition of EPC Contractors, of the type which build the majority of Biogas Plants (also often called “Turnkey” Contractors):
EPC is an acronym which stands for Engineering, Procurement and Construction. It is a common form of contracting arrangement within the construction industry.
Under an EPC contract, the contractor designs the installation, procures the necessary materials and builds the project, either directly or by subcontracting part of the work. In some cases, the contractor carries the project risk for schedule as well as budget in return for a fixed price, called lump sum or LSTK depending on the agreed scope of work.
When the scope is restricted to engineering and procurement, this is referred to as an EP, E and P or E+P contract. This is often done in situations where the construction risk is too great for the contractor or when the owner does the construction.
The EPC contractor (EPCC) agrees to deliver the keys of a commissioned plant to the owner for an agreed amount, just as a builder hands the keys of a flat to the purchaser. EPC is gaining importance worldwide. It requires good understanding by the EPCC to return a profit. An owner decides for an EPC contract for reasons that include:
- Reduced stress for owner
- Single point of contact for owner simplifies communications
- Ready availability of post-commissioning services
- Ensures quality and reduces practical issues faced in other ways
- Owner protected against changing prices for materials, labor, etc
- Cost is known at the start of the project
In addition to the plant siting, in an EPC contract the owner defines:
- Scope and the specifications of the plant
- Project duration
- The cost (the price to be paid to the EPCC) is negotiated and finalised and paid in mutually agreed installments.