EPC Contractor Research Articles

The practice of using benchmarking as a method of evaluating an EPC(M) contractor in preparation for the implementation of a major project in the petrochemical industry

the article examines in detail the importance of using benchmarking as a tool for assessing the qualifications of EPC(M) contractors during the preliminary stage of the implementation of large construction projects in the petrochemical industry of the Russian Federation. Taking into account fluctuations in the geopolitical environment, there is still a need to implement projects in accordance with integrated contract terms, despite the reduction in the number of contractors who are able to cope with these tasks. This circumstance also leads to the emergence of new players who occupy free space in the market, focusing on the need to strengthen control in the evaluation and selection of applicants. This article examines in detail the use of benchmarking as an effective means for preliminary evaluation and selection of contractors, emphasizing its role in project management through an analysis of their competence and abilities. статья детально рассматривает значение использования бенчмаркинга как инструмента для оценки квалификации EPC(M)-подрядчиков в ходе предварительного этапа реализации крупных строительных проектов в нефтехимической отрасли Российской Федерации. С учетом колебаний в геополитической среде, продолжает сохраняться потребность в реализации проектов в соответствии с интегрированными условиями контрактов, несмотря на сокращение числа подрядчиков, которые способны справиться с этими задачами. Это обстоятельство также ведет к появлению новых игроков, которые занимают свободное пространство на рынке, акцентируя внимание на необходимости усилить контроль при оценке и выборе претендентов. Данный материал подробно рассматривает использование бенчмаркинга как эффективного средства для предварительной оценки и отбора подрядчиков, подчеркивая его роль в управлении проектами через анализ их компетентности и способностей.

Strategy for Building Sustainable Performance of EPC Contractor Companies in Indonesia

This research is motivated by the problems faced by national EPC contractor companies, such as small market share, weak capital and cash flow, low human resource capacity, and limited networking, resulting in low competitiveness. This study aims to evaluate the sustainable performance of national EPC contractor companies in Indonesia. This research approach is qualitative. The research location is in Jakarta in relation to the location of the national EPC company head offices which have their head offices in Jakarta. The research time is one time, namely 2023. The research model uses the sustainable balanced scorecard (SBSC) model, and benchmark analysis uses the competitive professional index (CPM) with the key success factor (KSF). The results of the study show that based on measurements using the SBSC, the sustainable performance of national EPC companies is still in the poor category. Likewise, the results of CPM and KSF analysis show that the performance of national EPC contractor companies is still far behind that of foreign EPC contractors from newly industrialized countries.

Analyzing Contingency Cost Risks in a Pipeline EPC Project Using a Monte Carlo Simulation

Indonesia was the eighth largest exporter of liquefied natural gas in 2021, with a total export volume of 14.6 billion m3. Therefore, transporting natural gas becomes an essential program to support the increase of liquefied natural gas. Through the Cooperation Contract Contractors (CCC), a cooperation contract between government of Indonesia (GoI) and Oil Company, the government appoints the engineering, procurement, and construction (EPC) contractor to build the pipeline. However, EPC contractors are at significant risk in calculating contingency costs resulting in cost overruns. This study identified contingency risk factors, determined the most effective risks, and developed contingency costs for EPC pipeline projects. A literature review was conducted, a probability matrix for risk ranks was developed, and Monte Carlo simulation was used. The results indicated that there are risk factors significantly influencing the calculation of contingency costs for EPC pipeline projects, namely changes in the scope of work, delays in permits from the government or regulatory authorities, issues with local communities and the project environment, delays in the construction work, and the material delivery of long-lead items. Based on these factors, the contingency cost risk in a pipeline EPC project determined using Monte Carlo simulation was 14.87%. Before utilizing risk modeling, an efficiency of 4.23%, or a cost savings of $3,323,064.71, was achieved. For future research, it would be preferable to simulate more than three sample EPC projects to analyze variances in contingency costs.

A Study of Design Change Management for Infrastructure Development Projects in New Zealand

Design changes seem to be an inevitable part of engineering, procurement and construction EPC projects. Such changes create a need for a proactive approach to adjusting project scope, cost and time (the triple constraints) for efficiency and effectiveness in overall delivery. This study investigates the causes and implications of design changes in order to improve design change management practices. Data for the study were obtained through online interviews with New Zealand industry practitioners. Thematic analysis was used to collate the results into meaningful data. The study found that design changes were predominantly caused by clients’ inadequate strategic planning, insufficient attention to design, EPC contractors’ inadequate design ability, and on-site variations. There were three categories of such design changes: direct impact on the project, the reciprocal and complementary effect on stakeholders, and the far-reaching impact on the community. The study concludes by suggesting improvements, such as strengthening the integration of project teams to enhance design quality, strategic alignment of stakeholders at the planning stage, early contractor involvement (ECI) between the planning and design phases, and improving collaboration between design and construction teams. Further, a combination of high technical skills (e.g., design ability) and soft skills (can-do attitude, interpersonal skills, problem-solving skills, documentation skills, etc.) are needed to generate the desired improvement in design change management.

Means of mitigating the risks assigned to the contractor in the EPC contract: the experience of the International Federation of Consulting Engineers and Russian civil legislation

The subject of the study is the legal conditions of mitigation (mitigation) of project risks, the bearing of which is assigned to the contractor by the terms of the EPC contract. One of the key features of the EPC contract, an agreement concluded for the implementation of an investment and construction project on a turnkey basis, is the maximum assignment to the contractor of risks associated with the failure to achieve the goals of the project. It is believed that the EPC contractor, as a professional and highly qualified representative of the construction industry, is able to manage project risks more effectively than the customer. The assignment of risk by the terms of the contract proforma to one of the parties implies the need to use organizational, economic and legal means to mitigate (mitigate) the burden of risk. This work is aimed at identifying civil legal means used by the contractor to mitigate the harmful effects of events and actions, the risk of which is assigned to him by the terms of the EPC contract and establishing the possibility of using these means in the conditions of the Russian legal system. Its achievement involves a comparative analysis of the model EPC contract - a model contract of the International Federation of Consulting Engineers for turnkey projects (FIDIC Silver Book 2017) and the norms of Russian civil legislation. В В В В В The results of the study indicate that it is possible in principle to apply the conditions of the 2017 FIDIC Silver Book, which establish means of mitigating the contractor's burden of bearing risks, in the conditions of Russian legislation, taking into account the following exceptions: (1) a security payment cannot be used as a means of mitigating the consequences of non-fulfillment by the contractor of a natural obligation; (2) compensation for property losses cannot be applied in the event of an unlawful claim by the customer for a guarantee of performance of contractual obligations provided by the contractor. The interrelated application of several civil legal means is aimed, ultimately, their application contributes to the achievement of the project goals, which is in the sphere of interests of both parties to the contract.

Role of an architect in projects involving EPC contracts

Purpose: Engineering, procurement, and construction (EPC) contracts are on their way to becoming the most common type of contract used by the private sector for large-scale infrastructure projects. Every project requires a strong relationship between all of the experts participating in EPC projects and the client. This relationship must be solidly established by an architect; otherwise, the project may fail for all parties involved, including the client, contractor, lenders, government, and others. The purpose of this study is to identify if the working of the EPC contracts is favourable for the architectural profession, and to identify the way in which the working could be improved.
 Methodology: A qualitative approach was applied to analyze the critical points of EPC contracts based upon reviews of related case studies from the public sector and supplementary interviews with professionals in the field.
 Main Finding: The architect's role in an EPC contract is not crucial and is equal to other stakeholders involved in the project. Also, EPC contractors have the power to dictate the workflow of the project and hence, architects might have to compromise in terms of the design, compensation, etc.
 Implications: It is very important for every project to have an outcome based on each stakeholders/consultants inputs specially on larger projects, this article is a step towards understanding the role of architects under an EPC contract as the future projects will come under its purview. 
 Novelty: The study is done under the lens of a newly graduated architect and not as any other professional, thereby trying to develop an understanding for fresh architects.

Piping & Instrumentation Interface Optimization

Interface Management is a critical requirement for any huge project, and it becomes more critical when it comes to an EPC contractor. Each stage/phase of an EPC project has numerous stakeholders across various disciplines. Interface items are all those elements, within the scope of work under the responsibility of one stakeholder (Discipline/Department, Contractor, Supplier, Fabricator, etc.) which may be impacted by the scope of work of the other stake holder/s. The lump-sum type of projects has further increased the importance as ineffective interface management is generally one of the main factors of project cost over-run and schedule delays. This paper will mainly be focusing on the Piping / Mechanical / Instrumentation interfaces in a large EPC lump sum project. It is important to establish the communication/procedure promptly at every stage of an EPC project so that the proper information is exchanged through close collaboration between these disciplines (along with their contracts/vendors/suppliers) so that each one can perform their scope of work efficiently. Each discipline shall understand the importance of the information exchange and shall also be able to appreciate the criticality of their respective data/information concerning cost and schedule aspects. This paper will highlight the importance of the collaboration between these departments/disciplines while covering the interfaces at each phase of the project. This will also identify the critical requirements at each stage and will highlight the advantages of a good interface while also highlighting the concerns if the interface management is inefficient. The paper will cover the Consideration of piping and instrumentations interface during: 1. Study of Feed Documentation & Conceptual Development 2. Critical Stages / Milestones of Engineering (like 30%, 60% Model Review) 3. Finalization of the Mechanical Packages Vendors. 4. Construction and Commissioning Phase. The paper will also discuss some typical issues/concerns along with the mitigation of these concerns with practical examples. The paper will conclude some important findings from the project experience of the Authors related to this interface along with the most appropriate mitigation ways and means to correct &/or prevent these at an appropriate stage of the project.

A Digitalized Design Risk Analysis Tool with Machine-Learning Algorithm for EPC Contractor’s Technical Specifications Assessment on Bidding

Engineering, Procurement, and Construction (EPC) projects span the entire cycle of industrial plants, from bidding to engineering, construction, and start-up operation and maintenance. Most EPC contractors do not have systematic decision-making tools when bidding for the project; therefore, they rely on manual analysis and experience in evaluating the bidding contract documents, including technical specifications. Oftentimes, they miss or underestimate the presence of technical risk clauses or risk severity, potentially create with a low bid price and tight construction schedule, and eventually experience severe cost overrun or/and completion delays. Through this study, two digital modules, Technical Risk Extraction and Design Parameter Extraction, were developed to extract and analyze risks in the project’s technical specifications based on machine learning and AI algorithms. In the Technical Risk Extraction module, technical risk keywords in the bidding technical specifications are collected, lexiconized, and then extracted through phrase matcher technology, a machine learning natural language processing technique. The Design Parameter Extraction module compares the collected engineering standards’ so-called standard design parameters and the plant owner’s technical requirements on the bid so that a contractor’s engineers can detect the difference between them and negotiate them. As described above, through the two modules, the risk clauses of the technical specifications of the project are extracted, and the risks are detected and reconsidered in the bidding or execution of the project, thereby minimizing project risk and providing a theoretical foundation and system for contractors. As a result of the pilot test performed to verify the performance and validity of the two modules, the design risk extraction accuracy of the system module has a relative advantage of 50 percent or more, compared to the risk extraction accuracy of manual evaluation by engineers. In addition, the speed of the automatic extraction and analysis of the system modules are 80 times faster than the engineer’s manual analysis time, thereby minimizing project loss due to errors or omissions due to design risk analysis during the project bidding period with a set deadline.

Steel Structure Prediction Model for Fixed Roof Oil Tanks

AbstractThis paper will focus on fixed roof storage tanks and its sub‐category cone roof tanks. Paper presents major factors and outputs of tank design process. Theoretical analysis is done for a cone roof tank model and correlation between tank surface, shell thickness and total steel weight used. Detailed algorithm for tank design was realized using MathCAD software using Eurocode standards. Using this algorithm, 432 hypothetical tanks were designed. Data analysis of the collected output data was analysed using R statistics programming language. Using regression models and testing them led to the optimum statistical model.For the purpose of this work, data for 21 real world tanks including fixed roof and floating roof tanks were collected. The data was collected with help of MOL, INA and few other EPC contractors. Paper compares real world data with outputs of the model.Model can be used for quick estimates and control of material consumptions. Taking few input parameters and applying minimal effort can lead to a very accurate steel consumption prediction. With additional real‐world data, acceptable ranges of deviation from the mean could be set‐up. Thus, allowing for better control on Client part or EPC companies.

EPC project owner and contractor design decision analysis based on game theory

EPC project owner and contractor design decision analysis based on game theory

Research on the coordination mechanism of major industrial project engineering and construction multi-agents based on structural holes theory.

Industry is an important pillar of the national economy. Industrial projects are the most complex and difficult projects to control in the construction industry, and major industrial projects are even more complex and difficult to control. Multi-agent coordination is one of the core issues of industrial projects. Based on an analysis of the engineering and construction chains and agent relationships and agent networks of industrial projects, a complex network of the engineering and construction agents of industrial projects is established, and the complex network structural holes theory is applied to study the nonrepeated relationships among agents in industrial projects. Assuming agents are linked through contract relations and the most critical contract index between the agents in the contract amount, through structural hole analysis considering the EPC and PMC model, the aggregate constraint list is obtained, 2D network diagram and 3D network diagram are shown. According to the aggregate constraint value, the EPC contractor with the minimum aggregate constraint value and the project management company with the minimum aggregate constraint value are the critical agent in EPC and PMC model. By analyzing the complex network comprising different models of industrial projects, it is concluded that the characteristics of the agent maintain an advantage in competition, the coordination mechanism of the integration of agent interests, and multi-agent relations are considered to solve the multi-agent coordination problem in major industrial projects.

Risk modeling at the pre-investment phase of nuclear powerplant construction on the international market

Involvement in the construction of nuclear power plants worldwide is a promising direction for developing the re-search and technological potential of engineering and general contracting companies in Russia. Nevertheless, Russian companies, involved in the construction of nuclear power plants (NPPs) abroad, need to adapt to foreign jurisdictions, their requirements and rules applied to the construction of hazardous industrial facilities, as well as unique social, economic and physical environments. In this regard, international activities, performed by Russian companies, are associated with uncertainty and risks that require the study and systematization of risk factors and development of risk management models.
 The statistical data, covering the recent ten-year period, illustrates the level of uncertainty and problems arising in this area. Over 60 % of nuclear reactors worldwide are built with a delay in construction. The consequences of such delays boost project costs. Major international corporations, implementing nuclear power plant construction projects abroad, consider the insufficient pre-project study of project organization and management issues at the stage of entering into an EPC (M) contract to be the risk factors arising in the pre-investment phase.
 Risk management modeling is considered as the main element of the system designated for managing the organizational and economic reliability of the pre-investment phase of NPP construction in the international market. It includes: (a) structuring a multiparametric risk factor space based on four sources, including, on the part of the customer, the EPC (M) contractor, the contract and the external environment; (b) a pre-investment risk management model, applicable to NPP construction abroad, to be based on the overall project risk P(rt1); (c) a mathematical model for selecting a project implementation option based on the multicriterial optimization of the future-oriented project plan-schedule.

Design aspects, consideration for modularization layout and piping design for optimization of modularization project

In chemical, petrochemical and Oil and Gas industry, few decades back Modularization concept was executed for remote site location, extreme climatic conditions but now a days Modularization concept is becoming popular and extensively utilized irrespective to site location and climatic conditions because of its potential to reduce schedule, minimizing cost, effective utilization of skilled labor, for better quality with maximum safe environment, reduction in space requirements for plant layouts and reduction in installation cost. This paper will discuss Modularization design approaches, Consideration for Modularization layouts, consideration of piping design for optimization of modularization project. During modularization, size, weight and the center of Gravity (COG) of the module play’s important role for finalizing layouts and piping with in module, still constructability, Equipment sizing, equipment layout and piping design are critical factors in modularization. Successful execution of modularization highly depends on the modularization design approach hence the factor stated in paper will help EPC contractors for optimization of construction by eliminating later changes in design which will be further reduction in cost and schedule impact. In general construction schedule is largely impacted by piping installation and the cost is increased by rework, which reduces certainty on cost and schedule, the piping design and layout consideration stated in this paper will help construction to minimize on schedule and cost, by eliminating the rework done on the field.

EPC 4.0: The quest for reducing CAPEX in EPC projects

Abstract Engineering, procurement and construction (EPC) business in Europa is increasingly under pressure. Lack of productivity, low or negative profit margins for investors, and the lack of adopting necessary innovations and digitalization—from engineering activities through operations and maintenance to decommissioning—have caused significant deprivation of business and competitiveness compared to emerging providers in Asia. The quest for reducing capital expenditures (CAPEX) in EPC projects is intensifying. In May 2018, a research project was started to analyze the situation and key trends through desk research, to research how the challenges of the business could be tackled and to derive practical guidance for EPC contractors as well as for investors, owners, and operators (O/O). The project aimed to propose innovative ways of improving the EPC business model to reach the next level (“EPC 4.0”). In doing so, lessons learned from the automotive and aviation industry were considered. A key objective of the research project was to challenge statements of international EPC experts to cut CAPEX by 40–50% in EPC projects. With this statement in mind, the research focused on identifying measures with potential in six areas: (1) digitalization, (2) partnering, (3) flat supply chains, (4) flexible organizations, (5) core competences, and (6) the human factor. Summarizing the findings in these areas, the EPC 4.0 project came to a savings potential of up to 50% of the total budgeted project costs.

Advanced Work Packaging in capital projects: a standardized model for EPC Contractors

The international context in which the major EPC Contractors operate is going through a period of profound transformation. The increasing complexity of the plants, the increasing costs of labor, the increasingly binding contractual requirements, have forced companies around the world to adapt to these market laws and raise the level of competitiveness through targeted business strategies. The main EP&C realities, national leader in the Oil & Gas sector, are constantly moving towards new process management techniques. The following work fits into this context by analyzing and deepening the process of breaking down the scope of work into the so-called Work Packages according to the Advanced Work Packaging methodology. AWP envisages a prioritization of the work, initially agreed between the various disciplines, with the ultimate aim of increasing performance in terms of time, cost, quality and alignment of the three macro-phases: Engineering, Procurement and Construction. After a thorough research on the previous bibliography, we analyzed the current process of management and decomposition of the scope of work. The result is an AWP application model, which, through modifications to the current management processes, provides a quantitative calculation tool to assess the amount of construction work related to a plant. The proposal is also extended to the engineering and procurement phase. This completely standardized process has a general validity and has been demonstrated through the application of two main projects. In the final part, the procedure was extended to all the types of systems made by Tecnimont, further demonstrating the extreme versatility of the methodology.

A Forecast Model for the Level of Engineering Maturity Impact on Contractor’s Procurement and Construction Costs for Offshore EPC Megaprojects

This paper focuses on the influence of detailed engineering maturities on offshore engineering, procurement, and construction (EPC) project procurement and construction cost performance. The authors propose a detailed engineering completion rating index system (DECRIS) to estimate the engineering maturities, from contract award to beginning of construction or steel cutting. The DECRIS is supplemented in this study with an artificial neural network methodology (ANN) to forecast procurement and construction cost performances. The study shows that R2 and mean error values using ANN functions are 20.2% higher and 19.7% lower, respectively, than cost performance estimations using linear regressions. The DECRIS cutoff score at each gate and DECRIS forecasting performance of total cost impact were validated through the results of fifteen historical offshore EPC South Korean mega-projects, which contain over 300 procurement cost performance data points in total. Finally, based on the DECRIS and ANN findings and a trade-off optimization using a Monte-Carlo simulation with a genetic algorithm, the authors propose a cost mitigation plan for potential project risks based on optimizing the engineering resources. This research aids both owners and EPC contractors to mitigate cost overrun risks, which could be continuously monitored at the key engineering gates, and engineering resources could be adjusted per optimization results.

EPC总承包商和小额股权投资方的义务、责任与风险分析

EPC总承包商和小额股权投资方的义务、责任与风险分析

A new approach for evaluating international EPC contractors in Iran’s energy sector

Ever since the sanctions on economic and financial cooperation with Iran have been lifted, leading EPC contractors in the field of energy have expressed their interest in Iran’s energy sector. This study sought to formulate a model for assessing and ranking foreign EPC companies which are willing to cooperate with Iran. To accomplish this, the best-worst method was used. In this study, the required data were collected through a questionnaire that organized the opinions of 8 experts in the field of oil, gas and petrochemicals. Results the final assessment revealed that leading European and American companies, along with popular Korean companies, had higher ranks, compared to the others and those which cooperated with Iran during the sanctions.

Detail Engineering Completion Rating Index System (DECRIS) for Optimal Initiation of Construction Works to Improve Contractors’ Schedule-Cost Performance for Offshore Oil and Gas EPC Projects

Engineering, Procurement, and Construction (EPC) contractors with lump-sum turnkey contracts have recently been suffering massive profit losses due to re-works and schedule delays in offshore oil and gas EPC megaprojects. The main objective of this research is to develop and implement a detail engineering completion rating index system (DECRIS) to assist EPC contractors to optimize fabrication and construction works schedules while minimizing potential re-work/re-order. This is achieved through adequate detail design development and results in minimizing schedule delays and potential liquidated damages (i.e., delay penalties). The developed DECRIS was based on findings from an extensive review of existing literature, industry-led studies, expert surveys, and expert workshops. The DECRIS model is an evolution, and improvement of existing tools such as the project definition raking index (PDRI) and front-end loading (FEL) developed specifically for the early stage of engineering maturity assessment (i.e., planning, basic design, and front-end engineering design (FEED)), prior to EPC projects. The DECRIS was evaluated and validated with thirteen sample as-built offshore megaprojects completed recently. When the DECRIS was applied to the completed projects post-hoc, a correlation (R-squared 0.71) was found between DECRIS scores and schedule/cost performances. This is much superior to the PDRI-Industrial model’s correlation (R-squared 0.04), which was primarily devised for owners’ basic engineering or FEED completion assessment. Finally, as a means of further validation, project schedule and cost performance of an ongoing project was predicted based on the correlations found on the thirteen completed projects. The resultant predicted schedule and cost performance was well matched with the current project performance status. Based on the accuracy of the DECRIS model found in the validation, said model is an effective prospective tool for EPC contractors to manage their engineering and procurement/construction risks during the initial detail design stages.

An approach of one-item-multiple-code for logistics management in power generation EPC projects

Engineering-procurement-construction project type is widely used in the industry of power generation development, and logistics management has been playing an important role. Logistics, in the area of power generation industry, can be a very complicated system as it typically involves many participants who undertake a number of operational activities and subsequently includes a number of interfaces which need to be properly dealt with. To enhance the management and control from an EPC contractor's point of view, a 'one-item-multiple-code' approach is proposed so as to realise the traceability of items and related operations along the logistics phase. The presented approach imitates the relationship of ID no. and other certificate numbers by the use of KKS being unique and fundamental code. Its merits and demerits are analysed in detail. The implementation and developed IT system based on the approach are subsequently discussed. Finally, the paper goes on to point out two directions which need to be further exploited by future research.