In this blog, we will learn about the EPC and turnkey projects or the difference between the two. This blog will also provide you with information about why clients are much more inclined towards the adoption of turnkey contractors and EPC projects. The most basic thing which each one of you is aware of is the clients release tenders and attach the necessary documents along with the tender. They are only solely responsible for the designing and drawing also. But there is one more case in which the clients release all the tension and all the work is done by the contractor. The contractor will do his work like project execution, checking things, planning but he does all the work on the client’s end also such as drawing and designing.
EPC and Turnkey Projects/Contractors
EPC stands for Engineering Procurement Construction Contract. In EPC the client only tells the contractor what project he wants to execute, EPC contractors then create their proposal and present it to the clients. The client goes through the proposals and only selects the best for him. All the responsibility is then shifted to the shoulders of the final contractor and he carries out the things ranging from designing and drawing to creating BOQ and project execution efficiently. The contractor looks into every little thing such as selection of material, availability of resources, manpower deployment, vendors, different types of machinery for completing the project, and so on. EPC contractors follow the schedule provided by the client and complete the project on a fixed time. Talking about the payment part, the complete payment is decided beforehand at the time of finalizing the project only.
The BOQ amount is checked and considered as the fixed benchmark amount throughout the whole project execution period. If sometimes natural disasters hit the land, so to compensate for the loss cost increases and the client pays for that too. This type is suitable for large-scale complex projects. Under the EPC contract, commissioning is added to the end which means the contractor is responsible for the satisfactory commission of the facility and after-sale service. The client does not go personally and check the execution and quality of the work or if the project is being carried out in the proper period.
The client does not visit the project location for checking audits or anything, unlike other projects. It is all done and managed by the EPC contractor, with execution he is solely responsible to be reassured about the quality of the project that is being carried out. This is all about the EPC projects and EPC contractors. Turnkey contractors are the constructor contractors that take up the projects and are solely responsible for project planning, designing, procurement. It includes everything ranging from machinery deployment to manpower deployment.
How do the EPC and Turnkey contracts vary?
There are key differences between EPC and Turnkey, let us understand now how do they differ-
- Cost and Time
The cost is decided by the final contractor in EPC. The BOQ amount of the final contractor is fixed at that very time and the client only has to accept it as per his requirement whereas in Turnkey contracts the client releases the notice in which he beforehand fixes his cost limitation and whichever contract finds it appropriate accepts it.
In EPC the time given by L&T is locked and that particular period is fixed by the client for the final call whereas, in turnkey just like the cost, the time is also fixed and stated in the final notice by the client. The contractors create their quotations as per the given terms and conditions and finally out of all the quotations the client finalises the one which he finds suitable.
In other words, Cost and time are pre-decided and fixed by clients in turnkey contracts whereas in an EPC contract cost and time of the project will be fixed by the client on the schedule of cost and time provided by the final contractor.
- Sequence of work
In EPC contracts the sequence of activities and work is carried out in the pre-stated agreement signed between the client and final contractor whereas in turnkey no agreement is signed between the client and the contractor regarding the sequence of activities of the project.
- Project Execution
EPC contractors can hire subcontractors to execute the project and the client has nothing to do with the other party contractors as he is only concerned about the project and within the time limit they decided with proper finishing with the L&T. It is all responsibility of the final contractor for the project execution whereas in the turnkey contract the final contractor has to single-handedly manage and execute the whole process, the client does not allow them to hire the subcontractor for finishing up the project.
Pros of EPC contracts and Turnkey Projects
- There is no chance that any problem can occur because everything is decided beforehand only after analyzing each aspect before handing a project to any contractor.
- There would not be any problem in the project execution process as these contractors are skilled and laden with manpower and machinery in abundance. Also, EPC and turnkey contractors are allowed to process sub-hiring which means the execution of work will be done fast.
- The client is not at all concerned about preparing the drawing, design, and BOQ for the project they want to execute because when they hire the EPC and Turnkey contractors all the work is carried out by them only ranging from managing and planning to designing and finishing of the whole project.
- The client fixes the time and the cost of the project which is appropriate according them, the only goal for them is to finalize the suitable contractor that understands the needs of the client and execute the project with stated terms and conditions without compromising on the quality.
Conclusion
EPC and Turnkey contractors are best for carrying out the project because these contractors understand the needs of the client and deliver good quality work within the fixed duration of time without any disputes and issues.