What is epc?

EPC stands for Engineering, Procurement, and Construction. It is a common form of contracting agreement in the construction industry. In an EPC contract, the contractor is responsible for all the activities from design, procurement, construction, to commissioning and handover of the project to the end-user or owner.

Here's a breakdown of each component:

  • Engineering: This phase encompasses all design activities, including conceptual design, basic design, detailed design, and obtaining necessary approvals. It ensures that the project aligns with the client's specifications and all applicable regulations.
  • Procurement: This involves sourcing and purchasing all necessary equipment, materials, and services required for the project. This phase often includes vendor selection, contract negotiation, quality control, and logistics.
  • Construction: This is the physical construction phase, where the project is built according to the approved designs and specifications. It includes site preparation, installation of equipment, testing, and commissioning.

Key characteristics of EPC contracts include:

  • Turnkey Projects: The contractor delivers a fully functional facility, ready for operation, hence the term "turnkey."
  • Fixed Price (often): EPC contracts are frequently fixed-price contracts, meaning the contractor agrees to complete the project for a pre-determined sum. This transfers a significant amount of risk to the contractor.
  • Single Point of Responsibility: The client deals with a single contractor for the entire project, simplifying management and communication.
  • Risk Allocation: EPC contracts involve careful allocation of risks between the client and the contractor. The contractor typically assumes responsibility for design errors, procurement delays, and construction issues.