HERVE BARON

© 2013 – Hervé Baron

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 (herve.baron@gmail.com), which I will incorporate for the benefit of all.

Hervé

HERVE BARON

© 2013 – Hervé Baron

Contracting schemes EPC Contracts

Clients contracting strategy

Phase 1

HERVE BARON

© 2013 – Hervé Baron

Contracting schemes

Clients contracting strategy

Phase 1 • EPCM • Re-imbursable

HERVE BARON

© 2013 – Hervé Baron

Contracting schemes

Clients contracting strategy

Phase 1 • EPCM • Re-imbursable

Pro’s and Cont’s

HERVE BARON

© 2013 – Hervé Baron

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

© 2013 – Hervé Baron

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

© 2013 – Hervé Baron

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

© 2013 – Hervé Baron

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

© 2013 – Hervé Baron

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 on

schedule and budget • Extensive supervision staff

HERVE BARON

© 2013 – Hervé Baron

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 on

schedule and budget • Extensive supervision staff

What difference did Phase 2 bring compared to Phase 1 for Engineering development?

HERVE BARON

© 2013 – Hervé Baron

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 on

schedule and budget • Extensive supervision staff

Engineering continuum

FEED then CFT for EPC

HERVE BARON

© 2013 – Hervé Baron

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 on

schedule and budget • Extensive supervision staff

HERVE BARON

© 2013 – Hervé Baron

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 on

schedule and budget • Extensive supervision staff

HERVE BARON

© 2013 – Hervé Baron

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 on

schedule and budget • Extensive supervision staff

HERVE BARON

© 2013 – Hervé Baron

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 on

schedule and budget • Extensive supervision staff

Phase 3 • All risks with Contractor

HERVE BARON

© 2013 – Hervé Baron

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 on

schedule and budget • Extensive supervision staff

Phase 3 • All risks with Contractor

Less and less need for a PMC

HERVE BARON

© 2013 – Hervé Baron

Contracting schemes EPC Contracts

Contractor’s strategy

Phase 3 • LSTK

How does the Contractor mitigate risks?

HERVE BARON

© 2013 – Hervé Baron

Contracting schemes EPC Contracts

Contractor’s strategy

Phase 3 • LSTK • Construction sub-contract

HERVE BARON

© 2013 – Hervé Baron

Contracting schemes EPC Contracts

Contractor’s strategy

Phase 3 • LSTK • Construction sub-contract

Pro’s and Cont’s

HERVE BARON

© 2013 – Hervé Baron

Contracting schemes EPC Contracts

Contractor’s strategy

Phase 3 • LSTK • Construction sub-contract

Pro’s and Cont’s

Phase 3 • Partial risk sharing

HERVE BARON

© 2013 – Hervé Baron

Contracting schemes EPC Contracts

Contractor’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

© 2013 – Hervé Baron

Contracting schemes EPC Contracts

Contractor’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

© 2013 – Hervé Baron

Contracting schemes EPC Contracts

Contractor’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

© 2013 – Hervé Baron

Contracting schemes EPC Contracts

Contractor’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

© 2013 – Hervé Baron

Contracting schemes EPC Contracts

Contractor’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

© 2013 – Hervé Baron

Contracting schemes EPC Contracts

Contractor’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

© 2013 – Hervé Baron

Contracting schemes EPC Contracts

Contractor’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

© 2013 – Hervé Baron

Contracting schemes EPC Contracts

Contractor’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

© 2013 – Hervé Baron

Contracting schemes EPC Contracts

Contractor’s strategy

Phase 3 • LSTK • Construction sub-contract

Pro’s and Cont’s

Phase 3 • Partial risk sharing

HERVE BARON

© 2013 – Hervé Baron

Contracting schemes EPC Contracts

Contractor’s strategy

Phase 3 • LSTK • Construction sub-contract

Pro’s and Cont’s

Phase 3 • Partial risk sharing

What usually happened?

HERVE BARON

© 2013 – Hervé Baron

Contracting schemes EPC Contracts

Contractor’s strategy

Phase 3 • LSTK • Construction sub-contract

Pro’s and Cont’s

Phase 3 • Partial risk sharing • E&P delays => Sub-contractor has

to accelerate hence claims

HERVE BARON

© 2013 – Hervé Baron

Contracting schemes EPC Contracts

Contractor’s strategy

Phase 3 • LSTK • Construction sub-contract

Pro’s and Cont’s

Phase 3 • Partial risk sharing • E&P delays => Sub-contractor has

to accelerate hence claims

What new scheme was introduced to mitigate?

HERVE BARON

© 2013 – Hervé Baron

Contracting schemes EPC Contracts

Contractor’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 has

to accelerate hence claims

HERVE BARON

© 2013 – Hervé Baron

Contracting schemes EPC Contracts Contractor’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 has

to accelerate hence claims

HERVE BARON

© 2013 – Hervé Baron

Contracting schemes EPC Contracts Contractor’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 has

to accelerate hence claims

HERVE BARON

© 2013 – Hervé Baron

Contracting schemes EPC Contracts Contractor’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 has

to accelerate hence claims

Phase 4 − Improved risk sharing − No claims − Less competitive

HERVE BARON

© 2013 – Hervé Baron

Contracting schemes EPC Contracts Contractor’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 has

to accelerate hence claims

Phase 4 − Improved risk sharing − No claims − Less competitive

Which scheme is better for COMPANY: 3 or 4? Why?

HERVE BARON

© 2013 – Hervé Baron

Typical EPC associations

HERVE BARON

© 2013 – Hervé Baron

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