HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
The evolution of EPC contracting
Welcome to this presentation.
It shows the evolution that took place in EPC contrcting
schemes over the last 30 years.
Comments are most welcome ([email protected]),
which I will incorporate for the benefit of all.
Hervé
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
EPC Contracts
Clients contracting strategy
� Phase 1
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
Clients contracting strategy
� Phase 1
• EPCM
• Re-imbursable
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
Clients contracting strategy
� Phase 1
• EPCM
• Re-imbursable
Pro’s and Cont’s
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
EPC Contracts
Clients contracting strategy
� Phase 1
• EPCM
• Re-imbursable
Pro’s and Cont’s
� Phase 1
• All risks with Client
• Budget and schedule slippage
• Extensive supervision staff
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
Clients contracting strategy
� Phase 1
• EPCM
• Re-imbursable
� Phase 2
Pro’s and Cont’s
� Phase 1
• All risks with Client
• Slippage budget and schedule
• Extensive supervision staff
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
Clients contracting strategy
� Phase 1
• EPCM
• Re-imbursable
� Phase 2
• EPCM
• LS E&P
Pro’s and Cont’s
� Phase 1
• All risks with Client
• Slippage budget and schedule
• Extensive supervision staff
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
EPC Contracts
Clients contracting strategy
� Phase 1
• EPCM
• Re-imbursable
� Phase 2
• EPCM
• LS E&P
Pro’s and Cont’s
� Phase 1
• All risks with Client
• Slippage budget and schedule
• Extensive supervision staff
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
Clients contracting strategy
� Phase 1
• EPCM
• Re-imbursable
� Phase 2
• EPCM
• LS E&P
Pro’s and Cont’s
� Phase 1
• All risks with Client
• Slippage budget and schedule
• Extensive supervision staff
� Phase 2
• Improvement over Phase 1 onschedule and budget
• Extensive supervision staff
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
Clients contracting strategy
� Phase 1
• EPCM
• Re-imbursable
� Phase 2
• EPCM
• LS E&P
Pro’s and Cont’s
� Phase 1
• All risks with Client
• Slippage budget and schedule
• Extensive supervision staff
� Phase 2
• Improvement over Phase 1 onschedule and budget
• Extensive supervision staff
What difference did Phase 2 bring compared to Phase 1 for
Engineering development?
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
Clients contracting strategy
� Phase 1
• EPCM
• Re-imbursable
� Phase 2
• EPCM
• LS E&P
Pro’s and Cont’s
� Phase 1
• All risks with Client
• Slippage budget and schedule
• Extensive supervision staff
� Phase 2
• Improvement over Phase 1 onschedule and budget
• Extensive supervision staff
Engineering continuum
FEED then CFT for EPC
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
Clients contracting strategy
� Phase 1
• EPCM
• Re-imbursable
� Phase 2
• EPCM
• LS E&P
� Phase 3
Pro’s and Cont’s
� Phase 1
• All risks with Client
• Slippage budget and schedule
• Extensive supervision staff
� Phase 2
• Improvement over Phase 1 onschedule and budget
• Extensive supervision staff
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
Clients contracting strategy
� Phase 1
• EPCM
• Re-imbursable
� Phase 2
• EPCM
• LS E&P
� Phase 3
• LSTK
Pro’s and Cont’s
� Phase 1
• All risks with Client
• Slippage budget and schedule
• Extensive supervision staff
� Phase 2
• Improvement over Phase 1 onschedule and budget
• Extensive supervision staff
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
Clients contracting strategy
� Phase 1
• EPCM
• Re-imbursable
� Phase 2
• EPCM
• LS E&P
� Phase 3
• LSTK
Pro’s and Cont’s
� Phase 1
• All risks with Client
• Slippage budget and schedule
• Extensive supervision staff
� Phase 2
• Improvement over Phase 1 onschedule and budget
• Extensive supervision staff
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
Clients contracting strategy
� Phase 1
• EPCM
• Re-imbursable
� Phase 2
• EPCM
• LS E&P
� Phase 3
• LSTK
Pro’s and Cont’s
� Phase 1
• All risks with Client
• Slippage budget and schedule
• Extensive supervision staff
� Phase 2
• Improvement over Phase 1 onschedule and budget
• Extensive supervision staff
� Phase 3
• All risks with Contractor
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
Clients contracting strategy
� Phase 1
• EPCM
• Re-imbursable
� Phase 2
• EPCM
• LS E&P
� Phase 3
• LSTK
Pro’s and Cont’s
� Phase 1
• All risks with Client
• Slippage budget and schedule
• Extensive supervision staff
� Phase 2
• Improvement over Phase 1 onschedule and budget
• Extensive supervision staff
� Phase 3
• All risks with Contractor
Less and less
need for a PMC
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
EPC ContractsContractor’s strategy
� Phase 3
• LSTK
How does the Contractor mitigate risks?
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
EPC ContractsContractor’s strategy
� Phase 3
• LSTK
• Construction sub-contract
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
EPC ContractsContractor’s strategy
� Phase 3
• LSTK
• Construction sub-contract
Pro’s and Cont’s
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
EPC ContractsContractor’s strategy
� Phase 3
• LSTK
• Construction sub-contract
Pro’s and Cont’s
� Phase 3
• Partial risk sharing
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
EPC ContractsContractor’s strategy
� Phase 3
• LSTK
• Construction sub-contract
Pro’s and Cont’s
� Phase 3
• Partial risk sharing
2 different schemes: 3a and 3b
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
EPC ContractsContractor’s strategy
� Phase 3
• LSTK
• Construction sub-contract
• Phase 3a
− General Construction Contractor
Pro’s and Cont’s
� Phase 3
• Partial risk sharing
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
EPC ContractsContractor’s strategy
� Phase 3
• LSTK
• Construction sub-contract
• Phase 3a
− General Construction Contractor
Pro’s and Cont’s
� Phase 3
• Partial risk sharing
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
EPC ContractsContractor’s strategy
� Phase 3
• LSTK
• Construction sub-contract
• Phase 3a
− General Construction Contractor
Pro’s and Cont’s
� Phase 3
• Partial risk sharing
• Phase 3a− Reduced risk and supervision
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
EPC ContractsContractor’s strategy
� Phase 3
• LSTK
• Construction sub-contract
• Phase 3a
− General Construction Contractor
• Phase 3b – intense cost pressure
Pro’s and Cont’s
� Phase 3
• Partial risk sharing
• Phase 3a− Reduced risk and supervision
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
EPC ContractsContractor’s strategy
� Phase 3
• LSTK
• Construction sub-contract
• Phase 3a
− General Construction Contractor
• Phase 3b – intense cost pressure
− Multiple Construction Sub-Contractors
Pro’s and Cont’s
� Phase 3
• Partial risk sharing
• Phase 3a− Reduced risk and supervision
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
EPC ContractsContractor’s strategy
� Phase 3
• LSTK
• Construction sub-contract
• Phase 3a
− General Construction Contractor
• Phase 3b – intense cost pressure
− Multiple Construction Sub-Contractors
Pro’s and Cont’s
� Phase 3
• Partial risk sharing
• Phase 3a− Reduced risk and supervision
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
EPC ContractsContractor’s strategy
� Phase 3
• LSTK
• Construction sub-contract
• Phase 3a
− General Construction Contractor
• Phase 3b – intense cost pressure
− Multiple Construction Sub-Contractors
Pro’s and Cont’s
� Phase 3
• Partial risk sharing
• Phase 3a− Reduced risk and supervision
• Phase 3b− Increased competition
− Extensive coordination
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
EPC ContractsContractor’s strategy
� Phase 3
• LSTK
• Construction sub-contract
Pro’s and Cont’s
� Phase 3
• Partial risk sharing
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
EPC ContractsContractor’s strategy
� Phase 3
• LSTK
• Construction sub-contract
Pro’s and Cont’s
� Phase 3
• Partial risk sharing
What usually happened?
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
EPC ContractsContractor’s strategy
� Phase 3
• LSTK
• Construction sub-contract
Pro’s and Cont’s
� Phase 3
• Partial risk sharing
• E&P delays => Sub-contractor hasto accelerate hence claims
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
EPC ContractsContractor’s strategy
� Phase 3
• LSTK
• Construction sub-contract
Pro’s and Cont’s
� Phase 3
• Partial risk sharing
• E&P delays => Sub-contractor hasto accelerate hence claims
What new scheme was introduced to mitigate?
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
EPC ContractsContractor’s strategy
� Phase 3
• LSTK
• Construction sub-contract
� Phase 4
Pro’s and Cont’s
� Phase 3
• Partial risk sharing
• E&P delays => Sub-contractor hasto accelerate hence claims
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
EPC ContractsContractor’s strategy
� Phase 3
• LSTK
• Construction sub-contract
� Phase 4
• EP / C in Consortium or JV
Pro’s and Cont’s
� Phase 3
• Partial risk sharing
• E&P delays => Sub-contractor hasto accelerate hence claims
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
EPC ContractsContractor’s strategy
� Phase 3
• LSTK
• Construction sub-contract
� Phase 4
• EP / C in Consortium or JV
Pro’s and Cont’s
� Phase 3
• Partial risk sharing
• E&P delays => Sub-contractor hasto accelerate hence claims
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
EPC ContractsContractor’s strategy
� Phase 3
• LSTK
• Construction sub-contract
� Phase 4
• EP / C in Consortium or JV
Pro’s and Cont’s
� Phase 3
• Partial risk sharing
• E&P delays => Sub-contractor hasto accelerate hence claims
� Phase 4− Improved risk sharing
− No claims
− Less competitive
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Contracting schemes
EPC ContractsContractor’s strategy
� Phase 3
• LSTK
• Construction sub-contract
� Phase 4
• EP / C in Consortium or JV
Pro’s and Cont’s
� Phase 3
• Partial risk sharing
• E&P delays => Sub-contractor hasto accelerate hence claims
� Phase 4− Improved risk sharing
− No claims
− Less competitive
Which scheme is better for COMPANY: 3 or 4? Why?
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
Typical EPC associations
HERVE
BARON
©2
01
3 –
He
rvé
Ba
ron
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