The EPC general contracting mode usually adopts the total price mode.
2、 The contract mode and contract liability are different.
To sum up, in the whole process of EPC mode, although the work and content undertaken by the EPC contractor are very heavy, if the management is in place, the return may be improved compared with the traditional mode.
It can be seen from the released policies that the competent government departments are gradually deepening their understanding of the value of the EPC model, and the promotion measures are becoming more and more specific.
Article 20 of the opinions clearly pointed out that we should vigorously promote general contracting.
As the EPC mode realizes the integration of design, procurement, construction and commissioning, as long as the management is in place, compared with the traditional owner independent construction mode, it can speed up the project progress and reduce the construction cost on the premise of ensuring safety and quality, so as to achieve comprehensive benefits.
After adopting the EPC Construction mode, the main body of the project construction should be the general contractor, the owner is the supervision unit, and the supervisor is the construction management supervision unit hired by the owner.
In particular, the concentration trend of the housing development market is very obvious.
Guide key enterprises to improve their project management, technological innovation and resource allocation capabilities, cultivate EPC enterprises with comprehensive management capabilities, and protect the legitimate rights and interests of EPC units.
After the government implemented PPP mode, enterprises with capital and capital integration capacity have won preliminary victory, while enterprises without capital capacity struggle in the Red Sea market, especially the implementation of PPP + EPC mode, which gives the strong a greater living space.
Let’s go into the world of EPC engineering general contracting and feel its differences from simple engineering survey and design projects or general construction contracting projects in many aspects.
First look: the necessity of general contracting.
The design, procurement and construction mode with split value chain has been difficult to meet their needs.
At present, most projects in the world are constructed by EPC general contracting, and our government is also vigorously promoting the development of EPC general contracting.
The increasing concentration of the market, monopoly of large enterprises, new changes in the market, new policy ideas and other phenomena constantly promote the change of the construction mode.
The formation of monopoly of these large enterprise groups not only promotes the further concentration of the construction market, but also the construction market in each subdivided field is gradually occupied by construction enterprises with strong comprehensive ability.
Like the previous extensive technology application, it can no longer meet the needs of these large industrial enterprises.
Under the fixed total price mode, the less standard labor hours consumed to complete the design means the lower the cost and the higher the benefit profit; The benefit profit point of the construction contract to the construction enterprise mainly lies in the reduction of professional subcontracting cost, material procurement cost and the efficiency brought by the reduction of comprehensive cost and the improvement of overall efficiency caused by the scientific and reasonable construction organization design.
Look again: the unique charm of EPC general contracting makes the application of EPC general contracting mode more and more widely.
Most design contracts are total price contracts, which bear limited liability (unless it is a malicious act), and its maximum liability shall not be higher than the total price of the design contract.
The Department of housing and urban rural development of Jiangsu Province and the provincial development and Reform Commission issued the implementation opinions on promoting the general contracting development of housing construction and municipal infrastructure projects, which made it clear that under the premise of clear construction contents and mature technical schemes, government investment projects and projects controlled or dominated by state-owned funds should take the lead in implementing the general contracting mode..
In the discrete market, any predator has equal opportunities, but the market development is gradually concentrated.
In the actual construction market, the government has adopted more and more EPC projects, which is becoming the main force to promote the development of the EPC market.
In addition, in recent years, with the popularization and application of prefabricated buildings and the rapid development of information technology such as BIM, it will also promote the reform of this organization and implementation mode.
These differences are mainly reflected in: first, the scope of project management is different, and the design project is only responsible for the engineering design of construction projects, plus preparing bidding documents for relevant equipment and assisting the owner in equipment bidding; The construction project is only responsible for the engineering construction of the construction project, while the EPC project is responsible for the design, procurement, construction, commissioning and start-up of the whole project (or the main project), even including some matters usually responsible by the owner (such as the preparation of operation and maintenance manual, the operation identification of the whole plant, etc.).
The objectives of the design unit and the construction unit are very simple.
As a fast track mode, this mode can reduce the construction period, and the compression of the construction period can bring the actual benefits of early production to the owner (or investor); Through the early fine planning and overall planning of professionals, it is conducive to more smoothly achieve the project objectives.
The penalty amount for failing to meet the objectives or assessment indicators is very large.
Housing development has become a competition among large developers, the market concentration is increasing, large enterprises are vigorous, and it is more and more difficult for small and medium-sized enterprises.
The EPC mode may become a high-end market for construction enterprises in the future.
In the initial stage, it is in a state of high dispersion and free competition.
The market dominated by the government includes infrastructure and some public buildings.
At this time, the EPC mode integrating design, procurement and construction gradually shows its vitality, adding power to boost the development of the construction industry.
It is very difficult for small developers to obtain land.
Looking back on the past 20 years of the construction industry, its development is synchronized with the state of reform and opening up and economic development.
The contract has clear contract objectives (such as quality objectives and progress objectives) and strict assessment conditions (such as unit performance assessment indicators and minimum acceptable performance indicators) for the general contractor.
Since the EPC was incorporated into the Interim Provisions on Several Issues concerning the reform of the construction industry and capital construction management system issued by the State Council in 1984, the state has successively issued some policies to promote the development of the EPC model.
In 2019, relevant ministries and commissions jointly issued the measures for the administration of general contracting of housing construction and municipal infrastructure projects, which requires to promote the development of general contracting of housing construction and municipal infrastructure projects, standardize general contracting activities and improve the level of project construction, Promote investment and high-quality development.
The benefit profit point of the design contract to the design enterprise comes from the work efficiency and management level of the designers.
4、 The project objectives and project conflict management ideas are different.
National policies help the EPC project general contracting mode to drive onto the “expressway”.
3、 The benefit and profit source points are different.
The construction party no longer only considers the cost of the construction stage, but will more consider the total cost of the whole life cycle of the project.
The risks faced by the EPC contractor are mentioned earlier, but often “risks and opportunities coexist”.
The construction contract is usually in the mode of bill of quantities / provisional total price / fixed unit price.
They are only responsible for the contract objectives in the relevant design contract and construction contract, and their objectives cannot be completely unified with the construction objectives of the construction unit for the project; The EPC Contractor’s project objectives and the construction unit are basically highly unified, such as project safety objectives, quality objectives, progress objectives and cost objectives, and the construction unit (employer) has put great pressure on the EPC Contractor through the contract terms.
This innovation in the field of construction is not only a recognition of emerging technologies, but also the inevitable result of the development of the times.
In August 2020, the Ministry of housing and urban rural development and other departments issued several opinions on accelerating the industrialization of new buildings.
For upstream enterprises, they believe in high and new technology.
The contractor is only responsible for the construction work within the scope of the contract and is not responsible for the project progress and performance indicators of the whole project.
Some construction units with high level of contract management will take claims as the main means of profit.