In an article published September 7, Greg Seador gives an informative look at the foundational importance of the engineering, procurement and construction (EPC) contracts in construction projects.
“Power and energy projects are inherently complex and risky,” Seador says. “Therefore, management and proper allocation of risk among project participants are essential to success.” He continues, “Careful drafting of the engineering, procurement and construction contract is a critical first step in managing risk.”
Seador examines several different contract models and pricing structures and outlines their optimal usage based on project type. He covers “full wrap” and “partial wrap” contract models as well as “fixed,” “firm” and “target pricing. His article gives a full explanation of each and underlines the importance for construction executives to thoroughly evaluate the plusses and minuses of each before the EPC contract is written.
Seador underscores the technological and commercial risks of not giving proper consideration prior to contract execution, noting that “failure to do so can often result in an unsuccessful, overbudget project.”
The full article can be found on Construction Executive’s website.