HERVE
The evolution of EPC contracting
BARON
Welcome to Welcome to this presentation. It shows the evolution that took place in EPC contrcting schemes over the last 30 years.
Comments are most welcome (
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HERVE BARON
Contracting schemes EPC Contracts
Clients contracting strategy
Phase 1
© 2 0 1 3 – H e r v é B a r o n
HERVE
Contracting schemes
BARON
Clients contracting strategy
Phase 1 • EPCM • Re-imbursable
© 2 0 1 3 – H e r v é B a r o n
Contracting schemes
HERVE BARON
Clients contracting strategy
Pro’s and Cont’ Cont ’s
Phase 1 • EPCM • Re-imbursable
© 2 0 1 3 – H e r v é B a r o n
Contracting schemes EPC Contracts
HERVE BARON
Clients contracting strategy
Phase 1 • EPCM • Re-imbursable
Pro’s and Cont’ Cont ’s
Phase 1 • All risks with Client • Budget and schedule slippage • Extensive supervision staff
© 2 0 1 3 – H e r v é B a r o n
Contracting schemes
HERVE BARON
Clients contracting strategy
Phase 1 • EPCM • Re-imbursable
Pro’s and Cont’ Cont ’s
Phase 1 • All risks with Client • Slippage budget and schedule • Extensive supervision staff
Phase 2
© 2 0 1 3 – H e r v é B a r o n
Contracting schemes
HERVE BARON
Clients contracting strategy
Phase 1 • EPCM • Re-imbursable
Pro’s and Cont’ Cont ’s
Phase 1 • All risks with Client • Slippage budget and schedule • Extensive supervision staff
Phase 2 • EPCM • LS E&P
© 2 0 1 3 – H e r v é B a r o n
Contracting schemes EPC Contracts
HERVE BARON
Clients contracting strategy
Phase 1 • EPCM • Re-imbursable
Pro’s and Cont’ Cont ’s
Phase 1 • All risks with Client • Slippage budget and schedule • Extensive supervision staff
Phase 2 • EPCM • LS E&P
© 2 0 1 3 – H e r v é B a r o n
Contracting schemes
HERVE BARON
Clients contracting strategy
Phase 1
Pro’s and Cont’ Cont ’s
Phase 1 • All risks with Client
• EPCM
• Slippage budget and schedule
• Re-imbursable
• Extensive supervision staff
Phase 2
Phase 2
• EPCM
• Improvement over Phase 1 on schedule and budget
• LS E&P
• Extensive supervision staff
© 2 0 1 3 – H e r v é B a r o n
Contracting schemes
HERVE BARON
Clients contracting strategy
Phase 1
Pro’s and Cont’ Cont ’s
Phase 1 • All risks with Client
• EPCM
• Slippage budget and schedule
• Re-imbursable
• Extensive supervision staff
Phase 2
Phase 2
• EPCM
• Improvement over Phase 1 on schedule and budget
• LS E&P
• Extensive supervision staff
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What difference did Phase 2 bring compared to Phase 1 for
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Engineering development?
é B a r o n
Contracting schemes
HERVE BARON
Clients contracting strategy
Pro’s and Cont’ Cont ’s
Phase 1
• All risks with Client
• EPCM
• Slippage budget and schedule
• Re-imbursable
• Extensive supervision staff
Engineering continuum
Phase 1
Phase 2
Phase 2
• EPCM
• Improvement over Phase 1 on schedule and budget
• LS E&P
• Extensive supervision staff FEED then CFT for EPC
© 2 0 1 3 – H e r v é B a r o n
Contracting schemes
HERVE BARON
Clients contracting strategy
Phase 1
Pro’s and Cont’ Cont ’s
Phase 1 • All risks with Client
• EPCM
• Slippage budget and schedule
• Re-imbursable
• Extensive supervision staff
Phase 2
Phase 2
• EPCM
• Improvement over Phase 1 on schedule and budget
• LS E&P
• Extensive supervision staff
©
Phase 3
2 0 1 3 – H e r v é B a r o n
Contracting schemes
HERVE BARON
Clients contracting strategy
Phase 1
Pro’s and Cont’ Cont ’s
Phase 1 • All risks with Client
• EPCM
• Slippage budget and schedule
• Re-imbursable
• Extensive supervision staff
Phase 2
Phase 2
• EPCM
• Improvement over Phase 1 on schedule and budget
• LS E&P
• Extensive supervision staff
©
Phase 3 • LSTK
2 0 1 3 – H e r v é B a r o n
Contracting schemes
HERVE BARON
Clients contracting strategy
Phase 1
Pro’s and Cont’ Cont ’s
Phase 1 • All risks with Client
• EPCM
• Slippage budget and schedule
• Re-imbursable
• Extensive supervision staff
Phase 2
Phase 2
• EPCM
• Improvement over Phase 1 on schedule and budget
• LS E&P
• Extensive supervision staff
©
Phase 3 • LSTK
2 0 1 3 – H e r v é B a r o n
Contracting schemes
HERVE BARON
Clients contracting strategy
Phase 1
Pro’s and Cont’ Cont ’s
Phase 1 • All risks with Client
• EPCM
• Slippage budget and schedule
• Re-imbursable
• Extensive supervision staff
Phase 2 • EPCM
• Improvement over Phase 1 on schedule and budget
• LS E&P
• Extensive supervision staff
Phase 2
Phase 3 • LSTK
Phase 3 • All risks with Contract Contractor or
© 2 0 1 3 – H e r v é B a r o n
Contracting schemes
HERVE BARON
Clients contracting strategy
Pro’s and Cont’ Cont ’s
Phase 1
• All risks with Client
• EPCM
• Slippage budget and schedule
• Re-imbursable Less and less need for a PMC
• Extensive supervision staff
Phase 2
Phase 2
• EPCM
• Improvement over Phase 1 on schedule and budget
• LS E&P
• Extensive supervision staff
Phase 1
Phase 3 • LSTK
Phase 3 • All risks with Contract Contractor or
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HERVE BARON
Contractor’s strategy
Contracting schemes EPC Contracts
Phase 3 • LSTK
How does the Contr Contractor actor mitigate risks?
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HERVE BARON
Contractor’s strategy
Contracting schemes EPC Contracts
Phase 3 • LSTK • Construction sub-contract
© 2 0 1 3 – H e r v é B a r o n
HERVE BARON
Contractor’s strategy
Pro’s and Cont’ Cont ’s
Contracting schemes EPC Contracts
Phase 3 • LSTK • Construction sub-contract
© 2 0 1 3 – H e r v é B a r o n
HERVE BARON
Contractor’s strategy
Phase 3 • LSTK
Pro’s and Cont’ Cont ’s
Contracting schemes EPC Contracts
Phase 3
• Partial risk sharing
• Construction sub-contract
© 2 0 1 3 – H e r v é B a r o n
HERVE BARON
Contractor’s strategy
Phase 3 • LSTK
Pro’s and Cont’ Cont ’s
Contracting schemes EPC Contracts
Phase 3
• Partial risk sharing
• Construction sub-contract
2 different schemes: 3a and 3b
© 2 0 1 3 – H e r v é B a r o n
HERVE BARON
Contractor’s strategy
Phase 3 • LSTK
Pro’s and Cont’ Cont ’s
Contracting schemes EPC Contracts
Phase 3
• Partial risk sharing
• Construction sub-contract
• Phase 3a − General Construction Contractor
© 2 0 1 3 – H e r v é B a r o n
HERVE BARON
Contractor’s strategy
Phase 3 • LSTK
Pro’s and Cont’ Cont ’s
Contracting schemes EPC Contracts
Phase 3
• Partial risk sharing
• Construction sub-contract
• Phase 3a − General Construction Contractor
© 2 0 1 3 – H e r v é B a r o n
HERVE BARON
Contractor’s strategy
Phase 3 • LSTK
Pro’s and Cont’ Cont ’s
Contracting schemes EPC Contracts
Phase 3
• Partial risk sharing
• Construction sub-contract
• Phase 3a − General Construction Contractor
• Phase 3a − Reduced risk and supervision
© 2 0 1 3 – H e r v é B a r o n
HERVE BARON
Contractor’s strategy
Phase 3 • LSTK
Pro’s and Cont’ Cont ’s
Contracting schemes EPC Contracts
Phase 3
• Partial risk sharing
• Construction sub-contract
• Phase 3a − General Construction Contractor
• Phase 3a − Reduced risk and supervision
• Phase 3b – intense cost pressure
© 2 0 1 3 – H e r v é B a r o n
HERVE BARON
Contractor’s strategy
Phase 3
Pro’s and Cont’ Cont ’s
• LSTK
Contracting schemes EPC Contracts
Phase 3
• Partial risk sharing
• Construction sub-contract
• Phase 3a − General Construction Contractor • Phase 3b – intense cost pressure Construction Sub− Multiple Contractors
• Phase 3a − Reduced risk and supervision
© 2 0 1 3 – H e r v é B a r o n
HERVE BARON
Contractor’s strategy
Phase 3
Pro’s and Cont’ Cont ’s
• LSTK
Contracting schemes EPC Contracts
Phase 3
• Partial risk sharing
• Construction sub-contract
• Phase 3a − General Construction Contractor • Phase 3b – intense cost pressure Construction Sub− Multiple Contractors
• Phase 3a − Reduced risk and supervision
© 2 0 1 3 – H e r v é B a r o n
HERVE BARON
Contractor’s strategy
Phase 3
Pro’s and Cont’ Cont ’s
• LSTK
Contracting schemes EPC Contracts
Phase 3
• Partial risk sharing
• Construction sub-contract
• Phase 3a − General Construction Contractor • Phase 3b – intense cost pressure Construction Sub− Multiple Contractors
• Phase 3a − Reduced risk and supervision
• Phase 3b competition − Increased − Extensive coordination
© 2 0 1 3 – H e r v é B a r o n
HERVE BARON
Contractor’s strategy
Phase 3 • LSTK
Pro’s and Cont’ Cont ’s
Contracting schemes EPC Contracts
Phase 3
• Partial Partial risk risk sharing
• Construction sub-contract
© 2 0 1 3 – H e r v é B a r o n
HERVE BARON
Contractor’s strategy
Phase 3 • LSTK • Construction sub-contract
Pro’s and Cont’ Cont ’s
Contracting schemes EPC Contracts
Phase 3
• Partial Partial risk risk sharing
What usually happened?
© 2 0 1 3 – H e r v é B a r o n
HERVE BARON
Contractor’s strategy
Phase 3 • LSTK • Construction sub-contract
Pro’s and Cont’ Cont ’s
Contracting schemes EPC Contracts
Phase 3
• Partial risk sharing • E&P delays => Sub-contractor has to accelerate accelerate hence claims
© 2 0 1 3 – H e r v é B a r o n
HERVE BARON
Contractor’s strategy
Phase 3 • LSTK • Construction sub-contract
Pro’s and Cont’ Cont ’s
Contracting schemes EPC Contracts
Phase 3
• Partial risk sharing • E&P delays => Sub-contractor has to accelerate accelerate hence claims
What new scheme was introduced to mitigate?
© 2 0 1 3 – H e r v é B a r o n
HERVE BARON
Contractor’s strategy
Phase 3 • LSTK • Construction sub-contract
Pro’s and Cont’ Cont ’s
Contracting schemes EPC Contracts
Phase 3
• Partial risk sharing • E&P delays => Sub-contractor has to accelerate accelerate hence claims
Phase 4
© 2 0 1 3 – H e r v é B a r o n
HERVE BARON
Contractor’s strategy
Phase 3
Phase 4
• LSTK • Construction sub-contract
Pro’s and Cont’ Cont ’s
Contracting schemes EPC Contracts
Phase 3
• Partial risk sharing • E&P delays => Sub-contractor has to accelerate accelerate hence claims
• EP / C in Consortium or JV
© 2 0 1 3 – H e r v é B a r o n
HERVE BARON
Contractor’s strategy
Phase 3
• LSTK • Construction sub-contract
Pro’s and Cont’ Cont ’s
Contracting schemes EPC Contracts
Phase 3
• Partial risk sharing • E&P delays => Sub-contractor has to accelerate accelerate hence claims
Phase 4 • EP / C in Consortium or JV
© 2 0 1 3 – H e r v é B a r o n
HERVE BARON
Contractor’s strategy
Pro’s and Cont’ Cont ’s
Phase 3
Phase 4
• LSTK • Construction sub-contract
• EP / C in Consortium or JV
Contracting schemes EPC Contracts
Phase 3
• Partial risk sharing • E&P delays => Sub-contractor has to accelerate accelerate hence claims
Phase 4 − Improved risk sharing − No claims − Less competitive
© 2 0 1 3 – H e r v é B a r o n
HERVE BARON
Contractor’s strategy
Pro’s and Cont’ Cont ’s
Phase 3
Phase 4
• LSTK • Construction sub-contract
• EP / C in Consortium or JV
Contracting schemes EPC Contracts
Phase 3
• Partial risk sharing • E&P delays => Sub-contractor has to accelerate accelerate hence claims
Phase 4 − Improved risk sharing − No claims − Less competitive
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Which scheme is better for COMPANY: 3 or 4? Why?
é B a r o n
HERVE
Typical EPC associations
BARON
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Going further
HERVE BARON
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