EPC general contracting EPC, that is, Engineering engineering design, Procurement equipment procurement, Construction construction, is engaged in general contracting units in accordance with the contract signed with the construction unit, the project design, procurement, construction, etc. Implementation of the whole process or a number of phases of contracting, and on the quality of the project, safety, Construction organization and implementation of engineering construction is fully responsible for the quality, safety, schedule and cost.
General contracting has E+P+C mode, E+P+CM mode, procurement general contracting (E-P), design + construction general contracting (D-B), design-procurement general contracting (E-P), procurement-construction general contracting (P-C) and other modes.
Construction units can be based on the characteristics of the construction project and the actual needs, in accordance with the principle of reasonable risk-sharing and contracting work content to adopt the general contracting mode.
Overview of general engineering contracting
Since the 1980s, China has begun to implement the general engineering contracting EPC mode in the field of engineering construction (attempt). It is mainly limited to petroleum, chemical industry, processing and manufacturing, water supply, transportation, electric power and other technically complex, large investment, large amount of equipment purchases, and management difficulties in the field.
On February 13, 2003, the Ministry of Housing and Construction issued the "Guiding Opinions on Cultivating the Development of General Engineering Contracting and Engineering Project Management Enterprises" ([2003] No. 30), which explicitly promotes the EPC general contracting model as a major general contracting model to be promoted by policy.
Over the past decade, the state has issued a number of opinions on further strengthening the management of urban planning and construction, a number of opinions on further promoting the development of general contracting, the General Office of the State Council on the promotion of sustained and healthy development of the construction industry, the General Contracting Management Specification for Construction Projects, etc., which has played a very good role in solving the problems hindering the development of general contracting, prompting China's engineering contractors to develop the EPC model as a major general contracting model to be promoted. Good role in promoting, prompting China's general contracting projects gradually towards scientific and standardized.
After years of continuous development, China's general contracting industry has made rapid progress, laying the foundation for a number of high-quality enterprises to go abroad and comply with the Belt and Road policy. But overall, the development of China's general contracting industry is still in its infancy, and there are problems such as unsound regulations and policies, immature owners, strong dependence on the traditional construction model, and weak enterprise strength.
General engineering contracting EPC/turnkey projects are often suitable for BOT or similar financing projects, but also for special E & M projects (electrical, mechanical) and other engineering projects.
The EPC model is used with four main considerations in mind:
(1) At the tendering stage, bidders are given sufficient information and time to scrutinize and verify the employer's requirements, or to carry out their design, risk assessment and estimation.
(2) In the case of the works themselves, the construction included relatively little hidden underground work and the contractor was able to carry out a moderate range of work areas for investigation prior to tendering.
(3) The owner is not required to closely supervise or control the contractor's work, or to review most of the drawings. Engineering general contracting EPC mode, the owner or the owner's representative has the right to supervise the contractor's work, but can not excessively intervene in the contractor's work, or to approve most of the construction drawings. The review of the contractor's past performance should be emphasized, especially on other projects adopting the EPC mode (if any), and the review of technical documents in the contractor's bid as well as the review of the quality assurance system.
(4) The owner pays the interim payment for the project directly according to the contract. As the EPC mode of general contracting EPC mainly adopts the lump-sum contract, for the payment of the project shall be subject to the contract agreement, rather than like other engineering construction mode first by the engineer to review the amount of work and the contractor's settlement report, and then decide and issue payment certificates. In the EPC model, interim payment can be paid monthly or by stage (or image progress); in the contract can specify the specific amount of each payment, or each payment as a percentage of the contract price.
Two, engineering general contracting EPC mode compared to the traditional construction general contracting mode advantages
Traditional construction general contracting mode, design, procurement, construction is disjointed, the implementation of the project must be in accordance with the design - bidding - construction of the sequential manner successive. When using the traditional construction general contracting model, the owner and the design unit to sign a design contract, the design unit is responsible for providing the project's design and construction documents. With the assistance of the design organization, the project is competitively tendered to bidders who meet the requirements in terms of price and quality. During the construction phase, the superintendent usually assumes a supervisory role and serves as a bridge between the owner and the contractor.
In this model, the contractor can not participate in the design work, the design of the "constructability" is poor, frequent design changes, the construction cycle is long, resulting in complex coordination between the owner and the contractor, while leading to frequent claims to increase the cost of the project, making it easy to lose control of the investment costs.
The EPC mode realizes the deep integration of design, procurement and construction. The EPC mode is to make full use of the design link to perfectly integrate the advantages of procurement and construction, and to systematically complete the selection of materials, equipment and construction technology and machinery in the design stage which has the greatest influence on the cost of the project, and to integrate them into the design; at the same time, it also integrates the design into all the links in P and C, thus realizing high efficiency. Various links, so as to achieve high efficiency, low cost, green and environmentally friendly to complete the construction task, and ultimately realize the owners and contractors of the harmonious **** win. In summary, the main performance in the following aspects:
(1) for the contractor, can better control, reduce project costs, shorten the construction period, improve the quality of construction. In the EPC mode, as the contractor can give full play to the leading role in the design, is conducive to the realization of the construction of the overall arrangement, easy to control the project cost, schedule and quality, profit space is also relatively large.
(2) for the owner, EPC general contracting contractual relationship is relatively simple, the owner only provides the principle of basic functions and basic design, organization and coordination of the workload is relatively small, and the responsibility is clear, the owner to bear the risk is low.
Three, engineering general contracting EPC mode of the contractor's main risk analysis
In engineering general contracting EPC project, the contractor replaces the traditional construction general contracting contractor's part of the status, in the core position of the project engineering and construction, in addition to the conventional risks borne by the contractor under the traditional construction general contracting mode, many of the unfavorable geological conditions originally borne by the owner of the risk, Risks of rising prices of equipment, materials and labor, and risks of management and coordination of various subcontractors are also transferred to the contractor as a result. This paper mainly focuses on some prominent problems in the recent development of EPC mode, and summarizes the main risk points of contractors, which mainly include the risk of bidding price, bidding price limit risk, contract risk, management risk, owner's directive risk, change risk, audit risk.
(1) Bid offer risk. The traditional construction general contracting model is a closed boundary. The owner provides a full set of fixed contract conditions, design drawings and technical parameters, and the boundary conditions are very clear. In the EPC general contracting project, the owner's requirements do not provide a completely closed boundary conditions. The owner puts forward relatively clear conditions, functional requirements, technical standards and approximate scope, but the construction drawings and quantity parameters are not clear. Not only is the boundary fuzzy, the contractor's time is also very tight, the contractor often does not have enough time and energy to review the documents and survey the site, uncertainty about the design and construction program, labor, equipment, materials and other costs of the rise can not make a reasonable prediction, as well as by the construction process of engineering changes and the emergence of unforeseen circumstances and other uncertain factors, the contractor can not make accurate quotations for EPC projects.
(2) Risk of bidding limit price. General bidding, the bidder in order to control the project investment costs, to prevent bidders collusion and bid inflating, will set the bidding control price that is the maximum price. In the EPC general contracting project, the owner in the feasibility study, schematic design or preliminary design is completed that bidding, set the maximum price of the conditions do not have, forced to set an unreasonable maximum price, or the owner of the assessment deliberately set the maximum price lower than the total cost of implementation of the project, the contractor is bound to lose money after winning the bidding offer. In the author to participate in the handling of a state-owned provincial company consortium 515 million won a government investment projects, this is the case. After winning the bid, the state-owned provincial companies to organize the design unit to deepen the bidding program, while organizing professional staff on the cost of accounting, found that if the bidding documents in accordance with the technical standards of the project requirements and the project implementation scope of the construction of the project requires a total cost of about 750 million, far more than the winning bid price of 515 million yuan, and the bidding limit 545 million yuan of irrational settings or even malicious settings, so that the state-owned provincial companies to continue if the construction is bound to suffer huge losses, the project will be the first time. Construction is bound to suffer huge losses, the quality of engineering construction can not be guaranteed.
(3) contract risk. Contract risk mainly includes the risk of contract terms and contract management risk. Engineering general contracting EPC contracts are numerous, including general contracting contracts, subcontracts, equipment procurement contracts, etc., the contractor in the contract signing process, it is inevitable that the scope of the project content is not clear, the terms of the claim is not clear, the implementation of the contract caused by the dispute. In the process of contract implementation, the contractor's contract management system is not perfect, low level of contract management, and even part of the construction staff did not submit the engineering contact list should leave evidence of the awareness of the comprehensive knowledge is not comprehensive, etc. lead to the later contractor is difficult to claim, there are disputes can not be resolved.
(4) Management risk. Management risk is divided into cost risk management, quality risk management, schedule risk management, safety, health and environmental risk management. The EPC project has high requirements for the contractor's management level, which tests the contractor's management ability and resource integration ability. At present, there are three practices in domestic EPC: one consortium bidding; two design unit-led; three construction unit-led. Which way is better, each has its own advantages and disadvantages, it is difficult to say. Whether it is a design unit, or construction unit, are design institute thinking, construction company thinking, each in its own way, the lack of the whole process of thinking mode; project management does not integrate the three phases of the integrated management capacity, the design institute into the role of the second supervisory; the lack of completion of the project management system; between different units, between the different departments of the unit does not have a mechanism for coordinating and communicating, information * * * * enjoyment; the design and construction units do not have the establishment of interest * * * *. Construction unit did not establish a mechanism for benefit *** enjoyment. Obviously, if the contractor's management level is low, the lack of appropriate organizational structure and system, it is difficult to efficiently complete the EPC general contracting project.
(5) Owner directive risk. On the one hand, the traditional construction general contracting mode, the owner of the contractor's work to carry out close supervision or control, the contractor is subject to the owner of more factors, most of the contractors have been accustomed to the traditional contracting mode according to the diagrams and strict process control. After the owner issued instructions, regardless of the correctness or not, the contractor will basically follow the orders. As a result, the use of EPC general contracting mode, whether the employer, consultants and contractors, will be self-confessed to the traditional construction general contracting mode of thinking into the implementation of the project, such as in the employer's requirements to provide overly detailed drawings and specifications, the implementation of the project on the contractor to carry out a detailed audit of the drawings, and to hire a supervision company on the construction of the contractor to carry out close monitoring, which is the main cause of a large number of project failures and the main reason for disputes. On the other hand, the correctness or otherwise of the owner's instructions, as an experienced contractor can judge and foresee the consequences, after the owner issued the instructions, the contractor in the case of ensuring the safety of the project and the realization of the owner's functional requirements, the owner of the erroneous instructions should be rejected, to avoid the occurrence of catastrophic safety accidents and the loss of the contractor's own interests. Jiangxi 11-24 Fengcheng power plant construction platform collapse accident in the author's view is due to the owner's instruction error, requiring the construction unit to speed up the construction progress, resulting in the cooling tower cylinder wall concrete strength is insufficient, illegal dismantling of the template, resulting in the loss of the cylinder wall concrete template support, is not enough to withstand the upper load, from the bottom of the weakest point began to collapse, resulting in the above cylinder wall concrete and molding system continuous collapse Falling. In addition, in the author to participate in the handling of another arbitration case, the owner of the cost savings, requiring the construction unit to remove the underground garage wading layer of protective materials, the construction unit according to the order of the implementation, resulting in serious water seepage in the underground garage, the owner in the expiration of the warranty period forcibly withheld after the construction unit of the warranty of 8 million yuan for maintenance, so that the owners of the wrong instructions caused by the loss of the contractors transferred to the contractor.
(6) Change risk. Engineering general contracting EPC model is generally used in the form of lump-sum contract, but the lump-sum contract does not mean that the fixed price, in the case of contractual agreement can also be adjusted. The Ministry of Housing and Construction, "Construction Project Engineering General Contracting Management Specification" Article 19 (contract form) of the general contracting project is appropriate to use the lump-sum fixed lump-sum contract, the contract price should be reasonably determined on the basis of full competition, in addition to the bidding documents or the general contracting contract agreed in the principle of price adjustment, the general contracting contract price is generally not adjusted. In the EPC project, the owner only puts forward a relatively clear conditions, functional requirements, technical standards and the approximate scope of the bidding boundary is not clear, the EPC program bidding, preliminary design bidding, the project boundary is not clear, the subsequent construction of the work within the scope of the contract or outside the scope of the contract price adjustment there are disputes.
(7) audit risk. EPC contract is a lump-sum contract, regardless of how the actual volume of work changes, should be agreed to the contract volume or price as the basis for settlement, which can encourage the construction company to optimize the design and procurement, or the use of new processes, new technologies, new management methods to reduce the cost of obtaining benefits. Fixed lump-sum contract if audited will become: the actual amount of work or price higher than the contract, according to the contract; the actual amount of work or price lower than the contract, according to the actual settlement. This kind of pragmatic audit, the contractor is extremely unfavorable. Although the national people's congress legal work committee although that the local regulations directly to audit results as the basis for the completion of the settlement and should be set out in the bidding documents or in the contract agreed to audit results as the basis for the completion of the settlement of the provisions of the restriction of the civil rights, beyond the limits of the local legislative authority, should be corrected. But this does not prevent the owner in the bidding stage directly into the bidding documents, or use its advantageous position in the contract to agree. In practice, the government audit time is too long, as little as one or two years, as long as six or seven years, the audit conclusion of the error is difficult to relief and other situations, making the contractor due to the inability to obtain timely payment for the project and operational difficulties and even face the risk of bankruptcy.
Four, engineering general contracting EPC model of the contractor's risk response
1, on the tender offer risk response measures. In the EPC project, the design link is dominant, and the contractor should make use of the experienced design unit to make estimates and quotations. At the same time, the contractor must seize the time and opportunity to obtain and consider all the relevant information as far as possible, do a detailed site survey to understand the geological foundations of the project site, water temperature and climate. The contractor should also communicate with the owner as much as possible to understand and determine the owner's requirements, to maximize the reduction of the owner's design ideas, to reduce the number of program changes.
2, on the bidding limit risk response. In practice, how to set a good maximum price, so that it can achieve both to curb the malicious bidding price, maintain the economic interests of the bidder, but also to ensure the successful completion of the bidding is indeed a difficult problem. Especially in the EPC project, in the program design, preliminary design is completed after the bidding, it is difficult to accurately estimate the contract price. At this time, the bidder should strengthen communication with the bidders, a clear understanding of the owner's functional requirements, arrange for professional estimation, for the owner of the unreasonable setting of the maximum price, the contractor in the communication of no avail to avoid bidding in order to avoid losses. At the same time, the contractor through scientific management, the use of new materials, new technologies, new construction techniques to improve the level of management, reduce construction costs, in order to meet the requirements of the bidding documents under the premise of the implementation of labor, materials, machinery consumption of self-determination, the price of the cost of self-selected, scientific estimation.
3, on the contract risk response measures. Contract terms and content of the contract is crucial to the contractor, the agreement of the EPC contract will become an important basis for the later resolution of disputes between the two sides and claims. In the process of contract negotiation, signing and fulfillment, the contractor should do a good job of market research, on-site investigation, accurate interpretation of the requirements of the bidding documents, for the negotiation of the important terms of the contract, there should be professional participation, to maximize the equality and fairness of the contract. During the implementation of the project, the contractor should pay attention to the preservation of the corresponding contact sheets, visas, minutes of meetings and other factual documents or claims materials, good custody of the contract documents, the implementation of the whole process of the project's legal services, and to promote the process of resolving construction disputes.
4, on the management of risk response measures. The essence of the EPC mode of general contracting is the integration of design and construction, integration requires a mechanism. General engineering contracting EPC enterprises not only to meet the requirements of the organizational structure, more importantly, to meet the requirements of the software construction. Including: human resources to meet the requirements of EPC, strong market competitiveness, qualified design capabilities, perfect project management system, strong technical support capabilities, the ability to purchase machinery and equipment, complete sets of equipment and construction materials in the domestic and international markets, adequate coordination capacity for EPC, the ability to deal with risks, advanced corporate culture and so on. At this stage, EPC enterprises should constantly try to integrate design, procurement and construction, learn from advanced EPC management and design experience, improve organizational structure, systems and responsibilities.
5, on the owner's instructions on the risk of countermeasures. epc contract, the contractor is in the core position of the project construction, has the dominant right of project construction. For the owner's reasonable instructions, the contractor should be adopted, as ordered; for the owner's wrong instructions, the contractor can notify the refusal, mainly from the following three aspects: (1) the contractor is difficult to obtain the required goods; (2) the change will reduce the safety or suitability of the project; or (3) will be the completion of the performance warranty will have an adverse effect. Upon receipt of such notice, the Employer shall cancel, confirm, or change the original instructions.
6. Countermeasures regarding the risk of change. In the contract negotiation, signing process, the contractor needs to use its own design management, project management capabilities in the project bidding, signing to close the project opening part, to clarify the project design, the parameters of the project volume, making the project in a closed environment. The signing of the contract to determine the scope of the project, to lay the foundation for change.
7, on the audit risk response. In practice, the owners often use their advantageous position, in the contract agreed to audit results as the basis for the completion of the settlement, the corresponding laws and regulations judicial interpretations but did not carry out the necessary regulations, resulting in excessive discretionary power of the local courts, the case dragged on for a long time. Guangdong Provincial High Court Guangdong Higher Law (2017) No. 151, "Answers to Difficult Questions on the Trial of Construction Project Contract Dispute Cases", Article 11 stipulates how to deal with the parties' agreement to use the audit results as the basis for the settlement of the project payment: the parties agree to use the audit results of the financial and auditing departments as the basis for the settlement of the project payment, in accordance with the agreement. If the financial, auditing and other departments expressly indicated that the audit, audit or no valid reason for a long time not issued audit, audit conclusions, by the parties, and meet the conditions for judicial appraisal, the people's court may determine the price of the project through judicial appraisal. Jiangsu Provincial High Court Trial Committee Minutes (2018) No. 3 document "on the trial of construction project construction contract disputes answer to a number of questions" Article 10 of the parties agreed to administrative audit, financial assessment as the basis for settlement of the project price how to deal with:The parties agreed to administrative audit, financial assessment as the basis for settlement of the project price, in accordance with the agreement. However, the administrative audit, financial assessment department expressly stated that the audit can not be carried out or no valid reason for a long time without issuing audit conclusions, the parties apply for judicial appraisal, may be permitted. At present, guangdong provincial high court and jiangsu provincial high court of the answer to the parties in the contract agreed to audit the results of the completion of the settlement of the basis of the provisions of the more ambiguous, on the evaluation department without a justifiable reason for a long time without issuing audit conclusions are not clear. The author believes that in the existing laws and regulations, judicial interpretations can not be directly on the audit period to regulate the situation, the contractor can communicate with the owner of the negotiations, to strive for the audit period to the necessary restrictions, such as the contract agreed that the owner in the receipt of the contractor settlement information for more than 2 years from the conclusion can not be made, the contractor has the right to request the court or arbitration institutions for identification, identification of the results of the two sides are binding. For the government audit or financial evaluation conclusion, the contractor has evidence to prove that does not comply with the contract agreement, the contractor has the right to request the court or arbitration agency to carry out additional appraisal or re-appraisal.
Currently, the general engineering contracting EPC model is the mainstream trend of the development of China's construction industry industry, the future will also be vigorously implemented nationwide, construction companies should seize the opportunity to follow the trend of development, and cultivate a number of excellent general engineering contracting projects. At the same time, in view of the characteristics of the EPC mode of general contracting, the contractor has borne more risks, so for the contractor, before and after the contracting of the EPC project, I advocate that the contractor should pay attention to the project contract management, tax management, cost consulting management, the implementation of the whole process of tracking services by professionals, to escort the construction of the project.