EPC Contract Negotiating Tips
If you missed the EUCI continuing education course “EPC Contracts for Power and Energy Projects,” taught by Judah Lifschitz, then you missed out on a comprehensive presentation on EPC contracts. EPC contracts are agreements for the engineering, procurement, and construction of a project. They are the industry standard for power, energy, and industrial projects such as power plants.
We recently published an article entitled Three Things Power and Energy Companies Should Know about EPC Contracts, which provides a general overview of EPC contract basics.
Negotiating with EPC Contractors
The following are tips for negotiating EPC contracts:
- Do your homework before you get started: identify the contract provisions you need and develop a strategy for negotiating to get them.
- Control the document: prepare the first draft and make revisions during the negotiation process.
- Establish a realistic budget: developing a realistic budget is critical to a successful and dispute-free project.
- Achievable schedule: develop an achievable project schedule.
- Identify technology risks / mitigation: identify technology risks and develop mitigation strategies for them.
- Know the regulatory requirements and restrictions: study all applicable regulations and restrictions affecting the project and develop a compliance program.
- Define the scope and division of responsibilities: define the scope of work and develop a clear matrix of the division of responsibilities.
- Select preferred EPC contracting model: select the most appropriate contracting method, i.e. wrap or no wrap, and pricing model for the project.
- Vet your project teams: identify and select the best project team members.
- Obtain appropriate financial, performance, and security guarantees: determine what security guarantees, bonds, and/or letters of credit you need and negotiate to obtain them.
- Anticipated the unexpected.