This post looks into the typical struggle Employers face when evaluating EPC bids. Often, they would like to compare apples-to-apples. This means just comparing prices based on a harmonized technical solution. What is the problem with that?
You have read books, articles, blogs on contract negotiation. Or, even better, you did a real training programme. All have praised the importance of win-win negotiations. There you find yourself in your next tough negotiation. All the discussions are on limits of liability, caps for liquidated damages, rights to terminate the contract etc. Subjects where a bit more protection for one party automatically means a bit less for the other party. You hesitate. Are those articles or training courses not realistic, not worth your time & money?
Having some data on which the Contractor may rely (reliance data) is a good industry practice and in line with the usual contract standards. The difficulty starts when we want to precisely identify the “reliance data”, “baseline data” or whatever word is defined in the contract to introduce the same concept. This article proposes a “black box” approach.
Working on an EPC Contract brings higher risks for Contractors. They have to face all the circumstances that occur during the Project execution, with few exceptions, and still achieve the expected outcome or intended purpose. Is there anything that can counterbalance this exposure to make the project a success? Yes, the opportunity to optimize the EPC scope on the Project.
EPC, standing for Engineering – Procurement – Construction, is a widely used term but not always correctly and these three words do not necessarily make us a lot wiser.
The relationship between Employer [or Owner] and Contractor, when an EPC Contract is correctly established, should be in accordance with certain principles listed in this post.