EPC Engineering-Procurement-Construction Contracts Project Management Perspective
Speaker ▪
Mustafa Usalan
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B.Sc Civil Engineering ITU, Executive MBA METU
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Ongoing Distant Master Construction Law & Dispute Resolution
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PMP,, MRICS and AACE PMP
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15+ years experience in Construction Sector excelled in Project and Contract Management fields.
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Agenda ▪
EPC Con Contra tract ct Man Manage agemen mentt vs. vs.T Trad raditi itional onal Cont Contrac racts ts
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Case Stud udyy # 1 Doğançay HEP HEPP P Cons Constru tructi ction on Del Delay ay (DBB Con Contra tract). ct).
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Case Stud udyy # 2 Diyarbakır WWT WWTP P Cons Constru tructi ction on (EP (EPC C Con Contra tract). ct).
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Case Ca se St Study udy # 3 Kho Khoms ms Fa Fast st Tra rack ck Pow ower er Pl Plan antt Co Cons nstr truc ucti tion on (E (EPC PC Co Cont ntra ract) ct)
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Case Ca se St Stud udyy #4 Reh ehab abil ilit itat atio ion n an and d Rep epow ower erin ing g of Ambarlı Fuel – Oi Oill Pow ower er
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Plantt Un Plan Unit itss 4& 4&55 by Co Conv nver ersi sion on to Du Dual al Fu Fuel el Co Comb mbin ined ed Cyc ycle le Pow ower er Pl Plan ant. t. Conclusion Questio Ques tions ns & Cla Clarif rifica icatio tions ns
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What is EPC contract ▪
EPC stands for Engineering Procurement Construction
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Also called c alled Turnkey Turnkey Contracts
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Shall not be confused with Design & Build Contracts but practically most of the so called EPC contracts are hybrid version of Design & Build and EPC contract forms. Main feature of EPC Contracts EPC responsibility consecuently riskisto thecontracts Contracorallocates the design
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Where do we use EPC contracts?
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Power Plants Oil & Gas Refineries Water & Wastewater Treatment Plants (Enviromental Projects) Challenging Transportation Projects (Airports, Technological Bridges) PPP Projects such as Integrated Health Campuses
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What is EPC contract
Source: KPMG Global Construction Survey, 2015
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Traditional Design – Bid – Build Contract ▪
Mostly in Construction Sector Design – Bid and Build Contracts are preferred for basic construction works. Design Stage
Tender
Procurement & Construction
Compansation is mostly done via unit rates Designer
Contractor Owner 7
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What is EPC contract Owner
Specifies Requirements and Administer EPC Contract
Project Management Consultant
EPC Contractor is compensated in Lump Sum Basis !
(Owner’ss Engineer) (Owner’ EPC Contractor
Designer
Vendors
Subcontractors
Service Provider
Consultants
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Risk Distribution in Construction Contracts
Owner
Contractor Construction Management
Construction Related Risks
Traditional Design Bid Construct
Financial & Economical Risks
Design Build
Geographical & Political Risks
EPC Contracts
Project & Contract Management Risks 9
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Main differences of EPC Contract to the Traditional Contracts.
Parameter
Design – Bid – Build
EPC
Design Responsibility
Owner
Contractor
Compensation
Unit Prices
Payment Milestones
Tests During Construction
Yes
No
Test at Completion
Relatively Less and Simple
Very Detailed and Complicated
Risk Distribution
Owner carries the majority Contractor Carries the majority
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Most Common Dispute reasons in EPC Contracts
Ill-Designed Contract Specifications Specifications.. Contractors insufficient scrunization of tender documentatio documentation n
Owner’s incapacity for managing EPC Contract Processes. Agency Problem in case usage of PM Consultant. Consultant.
SET İT OFMA İS AT THE CONTRACT,M INTERSECTİONAND ENGİNEEERİNG LAANAGEMENT W AN AND D BUSİNESS ADMİNİSTRATİON MAY Y COST SOMETİMES SE SEVE VERA RAL L FO FOLD LDS S OF TH THE E CAPİTAL CO COST ST OF INVE NVESTME STMENT NT UNLE UNLESS SS İT HA HAS S BE BEEN EN TAK AKEN EN SERİOUSLY AN AND D EXE EXECU CUTED TED İN DUE DU E CA CARE RE. 11
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Case Study # 1 Construction of Doğançay HEPP Akfen Energy •
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The main design of the HEPP altered due to the economical concerns However the soil conditions has not been deeply scrutinized duri du ring ng th this is de desi sing ng ch chan ange ge.. The water impermeability for dewatering for construction stag st age e wa wass su supp ppos osed ed to ac achi hiev eved ed by je jett gr grou outt co colu lumn mns. s. However due to the high velocity aquifer and the piping effect the th e je jett gr grou outs ts pu pump mped ed in into to th the e so soil il ha hass be been en wa wash shed ed aw away ay..
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The Th e ci civi vill wo work rkss co cont ntra ract ctor or fo foll llow owed ed th the e ma main in de desi sign gn.. 12
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Case Study # 1 Construction of Doğançay HEPP Akfen Energy Main Mai n Cha Charac racter terist istics ics of the Pro Projec ject. t. Tot otal al In Inst stal alle led d Ca Capa paci city ty is 35 MW (2 Pow ower er Ho Hous uses es). ). The Th e HE HEPP PP is co cons nstr truc ucte ted d on Sa Saka kary rya a Ri Rive verr. Ther Th ere e ar are e 6 ea ea.. Ka Kapl plan anT Tur urbi bine nes. s. •
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Tota tall fa fall ll is about 11 m. Estim Es timate ated d gen genera eratio tion n ca capac pacity ity is 17 1711 GWh GWhrr an annua nually lly..
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Case Study # 1 Construction of Doğançay HEPP Akfen Energy
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Case Study # 1 Construction of HEPP Akfen Energy
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Case Study # 1 Construction of HEPP Akfen Energy
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Case Study # 1 Construction of HEPP Akfen Energy What happened? Construction methodology completely changed Diaphram wall applied instead of Jet Grout Columns. 16 thousand m3 of concrete wasted 540.000 m3 (30.000 of Trucks) of excavation has been refilled and exvated once again after completion of diaphram walls. Commercial operation date of investment is delayed 3 years. The capital cost of investment is increased by 38% •
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The revenue loss reached about € 18.6 Mio
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Case Study # 1 Construction of HEPP Akfen Energy
Jet Grouting
Diaphram Wall Construction 18
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Case Study # 1 Construction of HEPP Akfen Energy
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Case Study # 2 Diyarbakır WWTP Construction Strabag vs. EU Investments Directorate of MoEU. • • •
Main re Main reas ason on of th the e cl clai aim m is de dela laye yed d ac acce cess ss to co cons nstr truc ucti tion on si site te.. Contra Con tracto ctorr bo both th cla claime imed d Extension of f T Tim ime e (E (EO OT) an and d Co Cost st.. During Tenderin ing g Sta tag ge the area of the WWTP was given as 28 ha but after the award it is understood that it is actually 20 ha and an d di diff ffer eren entt fr from om th the e pl plac ace e de depi pict cted ed in th the e te tend nder er do docu cume ment nts. s.
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Case Study # 2 Diyarbakır WWTP Construction Strabag vs. EU Investments Directorate of MoEU. •
Project Chara Project Characteri cteristics stics Two St Stag age e De Desi sign gn fo forr 2025 an and d 204 040 0 Ave vera rage ge lo load ad is 7255 to 109 096 61 m3 pe perr ho hou ur Valu lue e of Cont ntra ract ct is 25 Mio € Duration 48 Months including DNP (Defect Notification Period) • • • •
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Case Study # 2 Diyarbakır WWTP Construction Strabag vs. EU Investments Directorate of MoEU. FIDIC Yellow Yellow Book Design and Build Contract
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Case Study # 2 Diyarbakır WWTP Construction Strabag vs. EU Investments Directorate of MoEU.
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Case Study # 2
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Case Study # 3 Fast Track Construction of Khoms SCPP
Çalık Energy vs. General Electrical Company of Libya (GECOL) •
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Çalık Energy has awarded the Contract for Construction of Khomss Pow Khom ower er Pl Plan antt in Li Liby bya a on Ja Janu nuar arry ry 201 014 4. Company has been immediatly mobilized to the site and starte sta rted d civ civilil wor works ks (S (Soil oil Re Reinf inforc orcem ement ent)) Alll of th Al the e ma main in equ quip ipm men entt are en engi gin nee eere red d and pr pro ocure red d wi with thin in the th e fi firrst 4 mo mont nths hs of th the e pr pro oje jecct. Howe Ho weve verr th the e po poli liti tica call si situ tuat atio ion n of th the e co coun untr tryy is st stre rees esed ed in Ma May y 2014 and turmoil has been started in July 2014 with a major attack att ack to Trip ripoli oli Air Airpor port. t. 25
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Case Study # 3 Fast Track Construction of Khoms SCPP
Çalık Energy vs. General Electrical Company of Libya (GECOL) •
Project Chara Project Characteri cteristics stics Capa Ca paci city ty 55 550 0 MW Tur urbi bine ness 2 x 9F 9FA A MS MS90 9001 01F FA Cons Co nstr truc ucte ted d in Kh Khom omss Li Liby bya a The Th e fi firs rstt en ener ergy gy ge gene nera ratio tion n pr proj ojec ectt af afte terr Ga Gadd ddaf afii Re Regi gime me • • • •
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Case Study # 3 Fast Track Construction of Khoms SCPP
Çalık Energy vs. General Electrical Company of Libya (GECOL)
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Case Study # 3 Fast Track Construction of Khoms SCPP
Çalık Energy vs. General Electrical Company of Libya (GECOL)
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Case Study # 3 Fast Track Construction of Khoms SCPP
Çalık Energy vs. General Electrical Company of Libya (GECOL) •
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The western countries has evacuated all of their citizens and shut sh ut do down wn th thei eirr di dipl plom omat atic ic mi miss ssio ions ns.. Also Al so Tur urk key ha hass ev evac acua uate ted d hi hiss ci citi tize zens ns an and d sh shut utss th the e em emba bass ssy y in Tri ripo poli li.. On Only ly th the e co cons nsul ulat ate e in Mi Misu sura rata ta re rema main in op open en.. Inte In tern rnat atio ion n fl flig ight htss to th the e co coun untr tryy ha hass be been en su susp spen ende ded d fo forr mo more re than th an on one e mo mont nth. h. Çalık Energy tr triied to contin inu ue its works up to the January 2015 butt fi bu fina nall lly y ev evac acua uate te th the e si site te..
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Co Comp mpa ated nydrcl etu turn rne ed to the th efo site si te y th the e be begi gin nni nin ns. g of 201 016 6 but als lso o subm su bmit itte clai aims ms due du e to forc rce eb maje ma jeur ure e re reas ason ons. 29
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Case Study # 3 Fast Track Construction of Khoms SCPP
Çalık Energy vs. General Electrical Company of Libya (GECOL) • •
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Tot otal ally ly 135 da days ys of Eo EoT T is re requ ques este ted. d. $ 42 Mio USD has been claimed due to the unforeseen condit con dition ionss of the cou countr ntryy. Clai Cl aim m ne nego gotia tiati tion onss ha have ve st stil illl no nott be been en fi fina nali lize zed. d. Butt th Bu the e pr proj ojec ectt ha hass be been en sa sati tisf sfac acto tori rily ly co comp mple lete ted. d.
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Case Study # 4 Rehabilitation and Repowering of Ambarlı Fuel – Oil Power Plant Units 4&5 by Conversion to Dual Fuel Combined Cycle Power Plant. Ekon-Prokon-Prokon (EPP JV) vs. Electricity Generation Inc. •
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The Th e Pro roje jecct was fi firs rstt of it itss ki kin nd in th the e Wor orld ld.. Complete replacement of the orig igin ina al fir ire ed boiler of a ste tea am p thg aSetsco(m b)ina tidonheoaft-orenceovoerrymsote ream GagseT Gleannet rawtiin GT an tea nu errb atinoers(HRSG). Retention & rehabilitation of existing Steam Turbine Generatin Gene rating g Sets Sets.. 31
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Case Study # 4 Rehabilitation and Repowering of Ambarlı Fuel – Oil Power Plant Units 4&5 by Conversion to Dual Fuel Combined Cycle Power Plant. Ekon-Prokon-Prokon (EPP JV) vs. Electricity Generation Inc. •
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In rare cases, re-engineering & modifi ficcati tio on of the exist stiing ste steam turbin perfor nce optimi imizat undam ertatur kebines n, es befor yonper d forma cusmance tom aryopt im plezation mion/en ent/enha atiohance n ncemen of ment repat iis r, rehabi reh abilit litat ation ion and gen genera erall lif life-e e-exte xtensi nsion on me measu asures res.. Most Mo st pr proj ojec ects ts in incl clud ude e th the e mo mode dern rniz izat atio ion n of th the e st stea eam m tu turb rbin ine e isla is land nd I& I&C C sy syst stem emss an and d in inte tegr grat atio ion n to ne new w pla plant nt-w -wid ide e DC DCS. S. 32
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Case Study # 4 Rehabilitation and Repowering of Ambarlı Fuel – Oil Power Plant Units 4&5 by Conversion to Dual Fuel Combined Cycle Power Plant. Ekon-Prokon-Prokon (EPP JV) vs. Electricity Generation Inc. The realization of the above ambitious performance objectives were entrusted to the EPP Joint Venture, back in November 2008 after a co comp itive ive inte tend proc unde turn tu fixe pric e anmpet d cetit om parain ttern ivernat lyatio viona enal ry l ete conder noerin ming icgapr llyoces pess, rics, edun Eder PCr aco nrn-k tra-key cey, t. ,Ufi nxeditsd-pr w eice re subs su bseq eque uen ntl tly y ta tak ken off th the e gr grid id at th the e end of Ma Marc rch h 200 009 9 and ha han nded ove verr to EPP for dismantl tlin ing g, thus marshalli lin ng the commencement of project activi act ivitie tiess in ear earnes nest. t. 33
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Case Study # 4 Rehabilitation and Repowering of Ambarlı Fuel – Oil Power Plant Units 4&5 by Conversion to Dual Fuel Combined Cycle Power Plant. Ekon-Prokon-Prokon (EPP JV) vs. Electricity Generation Inc. • •
Minimu Mini mum m in inst stal alle led d ca capa paci city ty of 2x 2x40 408 8 MW Mini Mi nimu mum m ne nett ex expo port rtab able le ca capa paci city ty of 2x 2x40 400 0 MW
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Mi Mini nimu mum m ne net comb co mbin ined ed cycl cy cle ther th ermo mody dyna nami c ef effi fici cien ency cy of 54 54% % Red educ ucti tion on oftSO SO2 2 emis em issi sion ons se down do wn to be belo low wmic 60 mg/N mg /Nm3 m3 Red educ ucti tion on of NO NOxx em emis issi sion onss do down wn to be belo low w 50 mg mg/N /Nm3 m3 Elim El imin inat atio ion n of PM em emis issi sion onss do down wn to ne negli gligi gibl ble e le leve vels ls
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Case Study # 4 Rehabilitation and Repowering of Ambarlı Fuel – Oil Power Plant Units 4&5 by Conversion to Dual Fuel Combined Cycle Power Plant. Ekon-Prokon-Prokon (EPP JV) vs. Electricity Generation Inc.
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Case Study # 4 Rehabilitation and Repowering of Ambarlı Fuel – Oil Power Plant Units 4&5 by Conversion to Dual Fuel Combined Cycle Power Plant. Ekon-Prokon-Prokon (EPP JV) vs. Electricity Generation Inc.
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Case Study # 4 Rehabilitation and Repowering of Ambarlı Fuel – Oil Power Plant Units 4&5 by Conversion to Dual Fuel Combined Cycle Power Plant. Ekon-Prokon-Prokon (EPP JV) vs. Electricity Generation Inc. According to the specifications the ST generator is supposed to be working properly and shall remain untouched. However during distmantling of the Steam Turbine Turbine The Client Client insist on
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distmantling and control of generator as well. During these checks it is understood that generator is in pretty bad shape. Client asked Contractor Contractor to rehabilitate the generator as well since it is the scope of EPC contract !!! Contractor first refused to conduct this modification but later had to do it since the generator could not comply with new system as it i t was. 37
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Case Study # 4
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Case Study # 4 Rehabilitation and Repowering of Ambarlı Fuel – Oil Power Plant Units 4&5 by Conversion to Dual Fuel Combined Cycle Power Plant. Ekon-Prokon-Prokon (EPP JV) vs. Electricity Generation Inc. During the performance tests the unit # 4 generator is burned burned out after rehabilitation It is understood that both generators are inreliable for operation and so it was decided to change generators with brand new ones. However the structure was not strong enough to carry new generators and had to be reinforced. Contractor has reinforced the support structure of the Steam Turbine
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Building, bought and install new generators. 39
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Case Study # 4 Rehabilitation and Repowering of Ambarlı Fuel – Oil Power Plant Units 4&5 by Conversion to Dual Fuel Combined Cycle Power Plant. Ekon-Prokon-Prokon (EPP JV) vs. Electricity Generation Inc. As a conclusion Contractor bear the rehabilitation cost of the generators in first place. Contractor bear the cost of distmantling, removing of the old generators. Contractor bear the cost of procurement of new units Contractor bear the cost for reinforcement of the existing structure. Project has been delayed for almost 1 year Contractor lost 25% of his profit.
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Conclusion White and Black do not purely exists, we live in a gray world. No matter what you know, there is always something more to learn. Plans are worthless but planning is essential. Always carefully read and understand your contract and specifications Strategical errors cannot be corrected with tactical movements As well as your hard skills (Engineering (Engineering), ), you need to improve your softskills
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Thank You Questions & Clarificati Clarifications ons 42
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