9/13/23, 8:37 AM What Does an EPC Contractor Do?

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OUR EPC APPROACH WHAT DOES AN EPC CONTRACTOR DO?

WHAT DOES AN EPC

CONTRACTOR DO?
An EPC contractor plans and executes all engineering,
procurement, and construction activities needed to
complete a capital project.

One of the earliest and most crucial decisions project owners must make for any capital project
is determining which project delivery system (PDS) to utilize to execute their project. The design-
build, or EPC (engineering, procurement, construction), PDS is a method in which a single EPC
contractor works under a single contract with a project owner, executing all project phases from
start to finish. The EPC contractor is held accountable for capital project schedules, costs, and
overall results, moving the risk from the project owner to the contractor.
Below, we discuss what an EPC contractor does, including what to look for in the selection
process and when it’s appropriate to work with an EPC contractor.

What an EPC Contractor Does

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The EPC method often allows for faster project delivery, as all project phases
are completed by a single EPC company under a single contract. Because of
this, many project owners choose to hire EPC contractors when working to
execute highly schedule-driven projects. Work can often be completed more
quickly due to the elimination of the transactional nature of traditional methods,
such as design-bid-build. The cohesive flow of work completed by a single team
from front-end planning through construction allows EPC contractors to overlap
project stages and optimize the sequencing of the project as a whole.

Front-End Planning

While some project owners choose to perform front-end planning before

selecting an EPC contractor, integrating front-end planning after contractor
selection can provide continuity through design and construction planning.
Depending on the initial level of scope definition, project complexity, and other
driving factors, project owners may choose to complete a formal stage-gate
process.
During this phase, the EPC contractor and their team assess and evaluate the
overall constructability of the project. The contractor should develop a robust
definition of scope, assess the site and any existing structures, and establish all
tasks that need to be performed before construction can begin. The early
development of a strong scope definition is crucial for the success of any
capital project. A well-defined scope reduces the likelihood of significant
changes to the scope and the need for change orders during project execution.
If a formal stage-gate process is desired, there will likely be three stages, or
gates: FEP 1, FEP 2, and FEP 3. Not only will this process help scope
development, but it should also result in a highly accurate cost estimate that
spans the full scope of work required for project completion. Each of the three
gates must be passed before contractors may proceed to detail engineering and
design.
Following scope development, work packaging can be defined, and the Work
Breakdown Structure (WBS) and the Project Execution Plan (PEP) can be
developed. The WBS is the central organizational hierarchy that syncs a project
schedule, cost, and performance against a budget for all levels of a WBS. Within
the WBS, contractors should include deliverable-oriented groupings of project
elements and cover all project components. It also should contain the entirety

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of work dictated by the scope to cover all deliverables that must be completed
during project execution.

Detail Engineering and Design

After all of the scope parameters, including equipment selection, timeline, site,
and budget, have been established and agreed upon by all involved parties, the
EPC contractor can begin the detail engineering and design phase. All
departments and disciplines work together to determine and produce the
optimal design for project success. They should work to develop a design that
strikes a balance between budget and efficiency. After the design has been
developed, the contractor’s engineering team provides a set of highly
disciplined drawings that will be used for construction.

Procurement
Procurement is a highly detailed and complicated process that involves all
sourcing, purchasing, and inspecting of products, materials, services, and
equipment required for construction. The EPC contractor’s procurement team
should be involved from the beginning of the project to develop a detailed and
strategic procurement management plan.

This plan creates the framework for a strategic procurement schedule that
ensures on-time deliveries to help maintain construction timelines. This plan
determines the timeline for purchasing each item and identifies critical
procurement milestones that should be updated as the plan progresses to
assess any impacts on the project. Procurement management plans help the
procurement team organize and prioritize all procurement activities at a
commodity level while determining the optimal sequencing of activities. This
plan should be shared with all involved parties to provide full transparency
regarding critical procurement-related activities.
Key elements to an effective procurement management plan include the
following:

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Key Elements of
Significance to
Procurement
Procurement Success
Management Plans

Identifies all project requirements as well

Project Scope as who will provide materials, whether
this will be the client or contractor

Determines where the materials are

Suppliers and Sourcing coming from, identifying any obstacles
and risks for their procurement

Identifies manufacturing capabilities and

Lead Times lead times, shop loading and backlog,
labor shortages, and global market impact

Provides a clear understanding as to what

engineering can deliver regarding the
Engineering Deliverables
project schedule and procurement
management plan

Identifies Required On-Site (ROS) dates in

Project Schedule
accordance with the project schedule

Ensures the procurement management

plan is aligned with engineering
AWP
deliverables to support the project
schedule

Identifies sources for all materials, the

Logistics Planning method for site delivery, and import duties
and taxes

Fabrication and Construction

Not all EPC contractors have in-house fabrication capabilities—however,
working with an EPC contractor who can perform fabrication in-house helps
maintain the cohesive workflow and communication stream as well as provides
greater schedule certainty.
With strategic planning and cross-department communication, the construction
team may complete the construction of various project components while work
packages are still in the engineering and design or fabrication phase of the
project. The remaining construction activities required to meet predetermined
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deadlines and goals per the scope of the project, including all civil, structural,
piping, equipment, electrical, and instrumentation activities, take place during
the construction phase.

If the EPC contractor has in-house fabrication capabilities, some project

components may be prefabricated or preassembled off-site in the fabrication
shop, while others may benefit from on-site construction. Regardless of
whether off-site or on-site construction is utilized, contractors work to ensure
all construction activities are performed safely and accurately.

Other Key Responsibilities

In addition to key project phase-related responsibilities, EPC contractors are
also responsible for several crucial aspects of managing the project, such as risk
management, project controls and reporting, and change management.

Risk Management
EPC contractors are in charge of identifying, evaluating, mitigating, and
monitoring project risks, such as schedule, cost, quality, safety, and
environmental concerns, throughout a project’s life cycle.

From the beginning of the project, EPC contractors work to mitigate risk through
best practices and strategies, such as those detailed below.

Best Practices and Strategies for

Risk Element
Risk Mitigation

Strong and early scope definition

Early execution strategy
Good project controls
Schedule and Cost “Float” in the timeline
Isolation of risks
Efficient change management procedures

Full in-house capabilities

Multi-disciplined quality inspectors
Quality Collaboration and communication
Analysis of individual work processes

Safety and Behavior-Based Safety (BBS) programs

Environmental Extra Hazardous Work programs and work
processes
Strong safety culture and focus on continuous
improvement
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Early identification of critical and high-risk

activities

Project Controls and Reporting

Capital project controls are an important element of capital project
management. Project controls are the processes that include all resources,
procedures, and tools required to plan, monitor, and control each phase of
capital project life cycles. Project controls should be integrated throughout the
entire project, including during the pre-contract and bid phase as well as the
execution phase. They are critical for capital project reporting and risk
management.

Throughout all project phases, the ability to see all aspects of a capital project’s
progress in real-time is critical for making informed decisions. Utilizing an
integrated location, such as a dashboard, to view all data in one place provides
all parties with full transparency.
During the pre-contract and bid phase, key elements of project controls should
include the following:

WBS
Schedule of Values (SOV)
Contractor rate sheets
PEP
Project reporting schedules

During the execution phase, key elements of project controls should include the
following:

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Earned value management

Contractor project reports
Change management procedures

Change Management
While the EPC method often reduces some of the challenges surrounding
change management, there is always a possibility of change. Change
management is the process of integrating a balanced procedure for recognizing,
planning, and evaluating capital project changes effectively.

Project changes can introduce risk, cause delays, and increase costs. EPC
contractors must identify and communicate changes as early as possible so a
plan can be created and implemented to mitigate risks. Proper change
management should include the following elements:

Use of an established change management work process

Consistent communication and alignment
Prompt notification of identified changes to the project owner
Complete documentation of change
Dedicated change management resources
Definition and use of appropriate change criteria

What to Look for in an EPC Contractor

In this industry, safety is not negotiable and should be a top consideration when
choosing between EPC contractors. Look for contractors with strong safety
standards and a robust safety culture with a focus on continuous improvement.
Other important aspects to look for in an EPC contractor include the following:

Familiarity with the area and type of work being performed

Expertise in the industry and strong, proven work processes
Transparency throughout the project lifecycle and consistent and strong
reporting, ideally weekly
Strong, integrated project management and project controls capabilities
In-house capabilities for all project phases
Commitment to quality

When to Work with an EPC Contractor

Working with an EPC contractor provides projects with complete oversight from
concept to start-up and offers project owners many benefits—however, there is
a time and place for every PDS. Here are some key indicators that working with
an EPC contractor may be the optimal route for project success:

The project owner is capable of clearly defining the scope up front.

The project owner wants to transfer the risk of both detail engineering and
design and construction to a single entity.

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The project owner would like to reduce administrative needs and points of
contact.
The type of construction work being done may align with a specialized EPC
contractor’s abilities.

H+M Industrial EPC: Delivering Capital

Project Success Since 1988
For more than 30 years, we have provided leading capital project management
services to the energy, chemicals, and terminal and logistics industries using
our proven EPC approach, highly established work processes, and highly
experienced team.

To find out more about working with an industry-leading EPC contractor,

H+M Industrial EPC, contact us through our website today.

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