Engineering, procurement, and construction

Engineering, procurement, and construction (EPC) contracts are the most common form of contract used to undertake construction works by the private sector on large-scale and complex infrastructure projects. Under an EPC contract a contractor is obliged to deliver a complete facility to a developer who need only turn a key to start operating the facility, hence EPC contracts are sometimes called turnkey construction contracts. In addition to delivering a complete facility, the contractor must deliver that facility for a guaranteed price by a guaranteed date and it must perform to the specified level. Failure to comply with any requirement will usually result in the contractor incurring monetary liabilities. The EPC contractor coordinates all design, procurement and construction work and ensures that the whole project is completed as required and in time. She/he may or may not undertake actual site work. Various abbreviations used for this type of contract are LSTK for lump sum turn key, EPIC for engineering, procurement, installation & commissioning and EPCC for engineering, procurement, construction and commissioning. Use of EPIC is common e.g. by FIDIC and most Persian Gulf countries. Use of LSTK is common in Kingdom of Saudi Arabia. Use of EPCC is common in Qatar and some other countries.

The engineering functions include;

• Basic engineering
• Detailed engineering
• Planning
• Construction engineering

The procurement functions include;

• Logistics & transport
• Receiving
• Procurement
• Invoicing
• Purchasing

The construction functions include;

• Electrical installation
• Mechanical erection
• Civil engineering

The commissioning functions include;

• After-sales-service
• Testing & commissioning
• Modernization of plants

An EPC, LSTK, or EPCC are all same types of contract. This form of contract is covered by the FIDIC (International Federation of Consulting Engineers) Silver Book [1] containing the title words EPC/turnkey. The initials EPCM are also encountered frequently on international projects, but this is very different from EPC. EPCM is a services-only contract, under which the contractor performs engineering, procurement and construction management services. In an EPCM arrangement, the client selects a contractor who provides management services for the whole project on behalf of the client.