Engineering, Procurement and Construction (EPC) Contracts
11th March 2024
As the UK moves forward towards building for the future. Many of the projects being delivered across the country featuring engineering such as solar parks/farms and other infrastructure involve contracts that have been drafted specifically for engineering and construction projects. We briefly take a look at these below and summarise some of the key features of the contracts for this work.
What is an EPC contract?
EPC contracts have been the most frequent form of contract utilised on projects that involve construction and engineering works by the private sector extensively. Complex infrastructure projects across numerous different industry sectors which includes and are not limited to power, oil and gas, transport water and waste.
EPC contract stands for ‘Engineering, procurement and construction’, this is also referred to as a ‘turnkey’ contract due to its idea being that once the project (venture) has been completed it is ready to be passed over to the owner and from there on the owner is able to start operating it. In the EPC contract it is the contractors role to hold the responsibility for the entire project, from designing and engineering to acquiring materials and equipment to constructing and installing the project. An EPC contractor is responsible for the delivery and completion of projects to the owners.
Key aspects of an EPC contract – what might it look like:
- A fixed contract price with limited liability for the contractor to claim additional costs which provides certainty for the owners regarding project costs.
- A fixed time frame for project completion with limited ability for the contractor to claim an extension of time providing assurance for the owners to complete within schedule.
- Single point responsibility whereby contractors are responsible for the whole project which streamlines communication between different parties.
- Contractors are responsible for proving their performance and reliability of the completed project.
- An aim on the long-term performance and operation of the project and its capacity to generate income.
Key parties involved in EPC contract:
- Owner
- EPC Contractor
- Subcontractors
- Suppliers
EPC contracts are an option for complex ventures by owners that demand fixed price, fixed time and a single point of contact, however, EPC contracts also carry its risks and challenges and may not provide the right option for all projects/ventures, therefore in view of EPC contracts, it is vital to weigh the advantages and disadvantages, drafting and carefully negotiating the contract is imperative in order to mitigate risks and protect your interests.
Our Corporate Commercial department at BTTJ advises businesses across all sectors, for further advice please contact us.
Article written by Paralegal Ann George and Solicitor Kyle Smith