Contract engineering
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How To Become a Contract Engineer
About Us. Services Sectors. Contact Us. Carrer Pic de Peguera, 11, Girona, Spain. EPC contracting is the most widely used form of contracting in engineering , construction and large scale infrastructure works in the private sector. It is especially popular in industries such as energy, oil and gas, manufacturing, transportation and telecommunications.
For this reason, this format is called "turnkey" by some sources. Due to their exceptional flexibility, EPC contracts provide a high degree of certainty for developers and investors, especially regarding project financing. Proof of this is the positioning of the EPC as the preferred instrument for the development of the renewable energy sector. The Spanish company ESFC offers services in the field of financing, construction and modernization of industrial, infrastructure and energy facilities on the terms of an EPC contract.
Together with our European partners, we are implementing major investment projects in the EU, Asia, Africa, South America and other parts of the world. This contract includes detailed design, procurement management, construction, supervision, and commissioning.
As a rule, the EPC contractor is obliged to hand over the object to the customer at a fixed price, observing the specified deadlines and parameters of its performance. Failure to comply with these requirements leads to the application of financial sanctions.
The EPC contract compels the engineering company to complete the construction within the agreed timeframe and budget. This type of contract covers offshore activities design and engineering abroad, supplies of equipment and material from abroad and services in the customer's country construction and installation of equipment.
Working in this mode, the EPC contractor is responsible for all aspects of the project. In addition to being a contractor, an engineering firm is also involved in management and control. The most important features of EPC contracting EPC implies a relationship between a contractor and a customer based on the principles of trust, therefore the correct choice of an engineering firm is critical to the successful implementation of large-scale projects.
In any case, the customer is minimally involved in the design, procurement and construction process, transferring responsibility for this activity to the contractor. The contractor company, through the efforts of its multidisciplinary team, designs equipment and structures, holds tenders and purchases the necessary materials, delivers equipment and organizes work on the site.
One of the important features of EPC is that the work process can be carried out at the expense of the contractor's own resources or through subcontracting. Before signing, both parties agree on the construction price of an object with the specified parameters. The date of commissioning of the facility is also set from the very beginning, so the customer can plan the development of his business. This is especially important when the customer has financial obligations to credit institutions related to the project.
The turnkey contract solution guarantees compensation for any delays in the delivery of the project, and also transfers responsibility for the final cost of the work to the contractor. Some researchers believe that such contracts relate to the so-called soft law, other lawyers refer these proformas to lex constructionis. This implies a system of non-governmental regulation of international construction contracts that reflects the customs and traditional terms of international construction contracts.
Based on lex constructionis, FIDIC develops recommendations in the form of standard contracts, regulations and standards that customers and contractors use when signing contracts for the implementation of capital construction projects.
For many years FIDIC has been working on the development of standard contract forms in the civil engineering sector. As the name suggests, this first proforma was intended to settle civil engineering contracting relationships and was subsequently named " The Red Book " due to the color of its cover.
Subsequent proformas were traditionally named according to a similar principle " Silver Book ", " Yellow Book " and so on. Due to the broad support from international organizations and banks, FIDIC standard contracts are used during construction for the money of international financial institutions and organizations.
Published in , the document titled "Silver Book" was focused on the implementation of turnkey projects. This document imposes on the contractor most of the risks not only for the comprehensive construction process, but also for the implementation of engineering design and commissioning.
This gave impetus to the active use and implementation of the EPC concept. Responsibility of the parties under the EPC contract EPC contracting identifies three main aspects of cooperation - time, cost and quality of the work performed by the contractor.
The EPC contract regulates these aspects with more specificity than a regular construction contract, protecting the interests of the parties who finance the project. Next, we will discuss the aspects that are highlighted when writing an EPC contract. Distribution of responsibilities A single general contractor is entrusted with all design, procurement, construction, tendering, procurement and inspection work. This does not mean that the contractor must fulfill all his obligations himself.
He gets the opportunity to delegate tasks to his subcontractors. But, rather, it will be the same contractor who must go for repairs and compensate for damage, delays in work or defects, regardless of nature. In particular, efforts are being made to transfer to EPC contractors the risk of fines arising from delays in reaching various stages of construction and development of the project, as well as the risks associated with poor performance.
Fixed contract price Under the EPC contract, it is convenient to transfer the cost overrun risk to the contractor.
Therefore, it is the contractor who usually bears the risk of unforeseen increases in project costs in excess of the investments planned in the contract. The EPC contractor benefits from the economic efficiency of the project and therefore always strives to build the facility at a lower cost than specified in the contract. Increases in the cost of a project are permitted by the customer only in exceptional cases, such as delays or changes caused or requested by the same customer.
Specific date of putting the object into operation It can be a fixed date or a certain period from the start of work. In case of violation of the deadlines, the contractor pays a predetermined compensation delay with losses. Compensation is usually set in the form of a penalty fee for each day of delay, taking into account the additional costs for insurance, construction supervision, finance costs, and loss of profits.
Minimum performance guarantee The customer's income and repayment of loans will fully depend on the performance of the facility for example, power generation. Therefore, it is important to bring the project to the required parameters of operation, efficiency and reliability. The EPC contractor guarantees the transfer of the finished object to the customer with the minimum performance level specified in the contract.
In this sense, the amount of compensation is usually set in favor of the customer in the event that the project does not reach the specified level. However, there may be situations in which the level of performance depends on the availability of the resource. For example, the construction of wind farms and solar PV power plants.
The EPC contractor guarantees the customer a certain performance of the generators, but the engineering company cannot guarantee that the sun will shine or that the wind will blow strong enough. Limits of liability Ideally, there should be no limitation of liability. In practice, EPC contractors do not accept unlimited liability for damage to the customer. Typically, they require that the limit be set as a percentage of the contract price.
In standard contracts, the exclusion of the possibility of claiming compensation for indirect damage caused by a breach of the contract is widespread. Unsurprisingly, the parties provide for exceptions to the limitations of liability. While these exceptions are usually tailored to the specific characteristics of each project, there are others that are more common, such as cases of willful or serious misconduct by the contractor and cases where the minimum standards agreed in the contract are not met.
Guarantees of compliance with the assumed obligations Contractor requests liquid guarantees to ensure that the client's obligations are met. These usually consist of bank guarantees or withholding of funds as a percentage of the total asset value, advance payment guarantees, or guarantees provided by the contractor's controlling company.
Changes to the EPC contract A standard EPC contract allows the customer to ask the engineering company for changes for certain aspects of the project, and to approve or reject the changes requested by the contractor.
It is important that this clause of the contract contains an adequate mechanism for calculating the price change in relation to the ordered or authorized project change. Any ambiguity about this last point should be removed and ideally offered the final say to the client by establishing an adequate and agreed dispute resolution mechanism. In addition, this clause of the EPC contract may provide for an increase or decrease in both financial guarantees and the established amounts of compensation.
Liability for defects An EPC contractor will usually take responsibility for correcting defects within two years of the commercial launch of the project. During this time, he must eliminate any defect affecting the functioning of the object. In some cases, this type of liability may vary depending on serial equipment defects, while in other cases, a longer term of liability is set for critical elements of the project. Force majeure circumstances It is advisable to clearly establish which events will be considered force majeure and which will not.
It is especially recommended that the force majeure clause reflects, at a minimum, events considered to be force majeure under the main contract for the supply of products eg electricity supply.
This facilitates administration and risk assessment. Termination of the EPC contract The possibility of termination of the EPC contract is usually provided for in the event of force majeure over a certain period. The customer usually reserves the right to suspend the contract in certain cases as agreed with the contractor. Typically, termination clauses severely limit the contractor's rights to terminate the contract.
His right in this regard is usually limited to cases of repeated or prolonged non-payment or suspension of work for a certain period, either due to the inaction of the customer or due to force majeure.
Issues of termination of the EPC contract are of particular interest to credit institutions and banks that finance the project. These issues are usually resolved through a direct agreement between the investor, contractor and customer.
Performance issue Unlike traditional construction contracts, an EPC contract contains specifications for the required performance level. While the contractor retains some control over how this level of performance is achieved, this is a matter of distribution of responsibility. In this sense, the contract must be specific enough to provide the customer with a certain level of confidence in the work he is doing. Also, this paragraph should be open in order to prevent the EPC contractor from evading responsibility in case of violations.
Differences between EPCM and EPC contracts The choice of options for concluding an agreement is an integral part of any major investment project, since contracts define the rights and obligations of various working groups. Determining the correct contract form affects costs and can have a profound impact on project performance. There are two ways to implement large projects - engineering, procurement and construction EPC contracts and engineering, procurement and construction and management EPCM contracts.
Which one gives the best results and what is the difference? However, the customer needs to analyze the available mechanisms in order to determine the best option for cooperation for each specific project.
EPC contract engineering, procurement and construction In the case of EPC, the company develops a project, purchases equipment and materials, and carries out all the work on a turnkey basis.
In this case, the customer pays fixed price for the entire project. With this type of cooperation, the contractor must perform a full cycle of operations, from engineering design to transfer of the facility to the end user.
Advantages and disadvantages of EPC contracting The main advantage lies in the fixed cost, more precisely in the absence of unforeseen expenses in excess of the previously agreed amount. In other words, the customer always understands how much he should invest. All responsibility lies with the contractor. Failure to communicate properly can lead to disagreements, conflicts and serious errors. The investment amount is known from the outset, which minimizes the risk of increased costs.
How to Become an Engineering Contractor
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Engineering Contracts
Also named "Fixed Fee Contract". Often used in engineering contracts. A Fixed Fee or Lump Sum Contract is suitable if the scope and schedule of the project are sufficiently defined to allow the consulting engineer to estimate project costs. This kind of contract is based on estimated quantities of items included in the project and their unit prices. The final price of the project is dependent on the quantities needed to carry out the work. In general this contract is only suitable for construction and supplier projects where the different types of items, but not their numbers, can be accurately identified in the contract documents. It is not unusual to combine a Unit Price Contract for parts of the project with a Lump Sum Contract or other types of contracts. A contract agreement wherein the purchaser agrees to pay the cost of all labor and materials plus an amount for contractor overhead and profit usually as a percentage of the labor and material cost. The contracts may be specified as. This types of contracts are favored where the scope of the work is indeterminate or highly uncertain and the kinds of labor, material and equipment needed are also uncertain.
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The bid summary sheet will be delivered to the Selection Committee by the Engineering Contract Administrator. Engineering Contract means a written agreement between Borrower and Engineer for engineering services pertaining to the construction of the Improvements. Sample 1. Sample 2. Engineering Contract means any agreement between the Engineer and Borrower for each Qualified Project to be financed by a Loan to be made hereunder.
Engineering, procurement, and construction
At Contracts Engineering, our focus and expertise is in manufacturing our clients' products and sub assemblies for them. We empower our team to work with our clients to solve their challenges and meet their manufacturing requirements. We are an ISO accredited sheet metal work and metal fabrication manufacturer with processes and operations focused on on-time-in-full delivery and quality assurance. We take extensive steps to ensure that our clients requirements are consistently met. We operate from a 16, sq ft factory with modern, touch screen production planning software and a management team with decades of experience. We value problem solving, partnering with our clients, collaboration and working in a focused yet enjoyable atmosphere.
However, determining the contract engineering rate you deserve - that factors in your expertise, knowledge and skillset - can be tricky. For most contract engineers, each individual project they take on is unique, requiring a different set of skills, processes and operational environments; setting a blanket project price may not cut it. This has made setting and negotiating contract engineering rates with potential clients one of the more challenging parts of being a contractor.
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About Us. Services Sectors. Contact Us. Carrer Pic de Peguera, 11, Girona, Spain.
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