Types of Construction Contracts and What They Mean

When it comes to major construction projects, there are several types of contracts to be aware of. Each of these contracts spell out the various responsibilities for certain individuals involved in the project, and they all differ in particular ways.

To help you gain a better grasp of these types of contracts and the difference between them, here’s a quick guide to construction contracts.

EPC: EPC stands for Engineering, Procurement, Construction and is a common type of construction contract. This type of contract states that the engineering contractor will carry out the design, procurement and construction of the project.

EPCM: EPCM stands for Engineering, Procurement, Construction Management. An EPCM contract is different from an EPC contract because it states that the contractor is not directly involved with the construction, rather, they are responsible for managing the project and administering the various construction contracts that are needed. EPC and EPCM contracts are typically awarded during the FEED stage of a project. FEED stands for Front End Engineering Design. This phase focuses on the technical requirements and investment coast of the overall project.

EPCI: EPCI stands for Engineering, Procurement, Construction, and Installation and EPCI contracts are commonly used in the offshore construction industry. In these types of projects, the offshore product that is designed and constructed has to be transported and installed at the proper location.

EPIC: EPIC stands for Engineering, Procurement, Installation, Commissioning and is typically a Lump Sum Turn Key contract. This means it combines the responsibilities of conception to those of the final product. This type of contract can be awarded for all or part of a field development.

PMC: PMC stands for Project Management Consultant or Project Management Contract. Under these types of contracts an engineering contractor will oversee the work of the EPC contractors to ensure that all compliance is being met.

Learn More About EPC Contracts

The term EPC stands for Engineering, Procurement, and Construction and it is a common form of contracting in the construction field. The ECP contractor will be asked in the agreement to handle any detailed engineering design for the project, procure all equipment, tools, and materials that are needed, as well as construct and deliver a fully functioning final product to the client.

When a project is in the EPC stage, this is also often referred to as the Execution phase of the task at hand. Following a FEED, or Front End Engineering Design phase, which is the basic engineering design that will be used for the project, the EPC phase will then implement the plan’s design for the client.

Typically EPC agreements specify an amount of time and a budget that the EPC contractor must adhere to. This deadline and budget is commonly known to EPC contractors as a Lump Sum Turn Key (LSTK) Contract. This type of agreement puts the risk of schedule or budget issues on the EPC contractor.

The project owner or client will usually work very closely with EPC contractors during projects. Sometimes clients will even deploy a project-management team to oversee what the EPC contractor is doing along the way. A project-management team can help ensure that the EPC contractor is completing their work correctly and doing so in a timely manner, all in accordance with the EPC contract itself.

There are such things as EPCM contracts that are similar to EPC contracts but differ in the sense that they call for the contractors themselves to do more managing on behalf of the client rather than actually implementing and constructing. An easy way to differentiate EPC and EPCM contracts is to remember that EPC contracts place more responsibility and risk on the contractors themselves.

The Decommission Aspect of Engineering

Engineering services are commonly outsourced in today’s hectic business world. Many companies cannot afford to bring an engineer onto their staff full-time, which is why they outsource these services. Other companies outsource these services simply because they are only needed occasionally. A common aspect of the engineering process is known as decommissioning, which will be discussed in this post.

All aspects of the engineering process are important. Strong focus must be given to all areas from concept development to decommissioning. Decommissioning is the process of taking something out of service. This can be a process, software, a product, a building, a vehicle, an oil rig, a ship and much more.

Evaluate Liabilities

Liability is something that should never be overlooked when performing decommissioning. You will need an engineering team that knows what liabilities to look for during the process and how they can be avoided or protected.

Permits and Consent

Almost every decommissioning project will require the use of permits and consent. An outsourced engineering team will be able to acquire the permits necessary and obtain consent to perform the job so it can be done correctly.

Shutdown of Facility

If your facility needs to be shut down for a period prior to decommissioning, the engineering team will be able to do so. The team will also make it a point to keep the facility shut down during the decommissioning process if it is necessary. Once decommissioning is complete, the team will then redeploy the facility and ensure that it is safe for all employees to return.

Project Management

If you have a team on staff to conduct decommissioning, but require a project manager, outsourcing this engineering service is also possible with EPCM. It’s a good idea to have an experienced project manager around for the duration of the decommissioning process so no wrong turns are made.

The Wide Range of Engineering Services

Engineering is an extremely diverse field. Much of the infrastructure we see and items we use every day come from complex and innovative engineering.

But there are many different types of engineering services and applications out there. Here are a few of the most common:

Natural Disaster Relief: Engineering services can be used to help restore areas that have been hit by devastating earthquakes, tornadoes, hurricanes, and other natural disasters. Engineering can help rebuild infrastructure, manage emergency relief operations, and provide risk management or hazard analysis after natural disasters.

Transportation: Whether it is railroads, automobiles, airplanes or boats, engineering goes into their design and function. Engineering services are also used when designing roads, bridges and tunnels. Basically any transportation system or technology you can think of is thanks to the innovation of engineering.

Renewable Energy: Water, solar and wind power are all forms of renewable energy that continue to evolve thanks to engineering. As engineers work to find ways to make renewable energy technologies more efficient and effective, a growing need for these types of engineering services is occurring at a rapid pace.

National Security: From the Navy to the Army to the Air Force, all forms of national security benefit from the innovations of engineering. From the gear soldiers wear to the technology they use, engineering services are integral in the defense sector.

Power Grids: Electrical systems and power grids run off of the technology developed by engineering services. Without quality engineering, these complex systems would fail much more often and become a hazard if equipment was not properly developed and managed.

Aerospace: Aerospace engineering is among the most complex and amazing. It is what allows NASA to discover new planets and send astronauts into space. The technology in this field grows at a rapid pace and it’s all thanks to engineering services.