Understanding the differences between EPC and EPCM contract models can be confusing. While similar in some respects, the two primarily differ in the way that project risk is skewed.Engineering, Procurement, and Construction (EPC)
The EPC company is contracted by the owner to essentially handle all aspects of the project from engineering and materials procurement, to the selection, hiring, and direct supervision of sub-contractors and equipment suppliers. In this capacity, risk relative to quality and adherence to specifications is skewed toward the EPC contractor and away from the owner. Essentially the EPC contractor is hired to design and build out the project for the owner.Engineering, Procurement, and Construction Management (EPCM)
An EPCM contractor basically provides engineering, procurement and construction management services to the owner rather than taking total/majority responsibility for the project. In this arrangement, the owner develops and enters into agreements with suppliers and sub-contractors with the EPCM contractor’s advice. Project execution management is then handled by the EPCM contractor. In this way, the owner is likely to save money because the risk cost is heavily skewed away from the EPCM company and toward the owner.
Benefits of EPC vs. EPCM ModelsEPC Benefits
- Approximates a turnkey engineering and construction solution
- Owner takes less risk – cost over-runs are borne by EPC company for example
- Complexity of negotiating and hiring sub-contractors removed
- Good solution for a project that is well understood and well defined up front
- Likely to cost less
- Better control over details of the project
- More likely to avoid costly unforeseen issues due to hands-on profile
- More suitable for a project that is less understood and defined up front
ReTech Resource Engineering is comfortable operating under either of these models, or can create a hybrid solution depending on the needs of the owner.