I will definitely be recommending your products to all my colleagues.". Repeated disappointments for shareholders in quarterly results are driving improvements in both bidding processes and project delivery, by necessity. :), EPC (Engineering, Procurement and Construction), EPCM (Engineering, Procurement, Construction and Management), Early Contractor Involvement (ECI), Managing Contractor (MC). Obviously there is more to it than what I have said above, but perhaps the number count between the two contracting strategies will help understand the current trend. -EPCM contract w EPC mentality, but all the blowouts to who is forking the bill anyway (to be avoided) endobj It is this type of project delivery method where it seems that there are roadblocks in defining the indirect costs. Also, as TIC increases the relative cost for EPCM tend to decrease. At risk. We take a completely client-centric attitude to all our operations, putting them in the driving seat. Accrual with Deferred Retainages. Thanks for your article. It is expected to generate about 65% of the total value of projects in 2021 (between SGD15 billion and SGD18 billion), with a focus on public housing and infrastructure projects. I purchased the Crash Courses for Structural, Mechanical, and Construction Management. 1 - Percent of General Construction Total General Construction Estimate = $50,000,000 25% of Total General Construction = MEP Portion of the Construction = $12,500,000 With an EPCM contract, the owner is responsible for rectifying anything that went wrong. As part of the capital cost of a project, the Engineering. The EPCM firm does not perform any construction activities, therefore, does not have any other contractual basis other than the one with the Owner. Exploration and appraisal <> CAPEX facilities The contractor performs all the construction activities, with their own forces or subcontractors, assumes all the risks, and the contract type is lump-sum. CAPEX Development Data Sourcing Strategy, Quantity Takeoff for Conceptual Cost Estimating. on the clients behalf and providing a single point of contact. All you need to provide is your info & email and you'll get instant access to this content. Some of the cookies make our site work, analyze site traffic, and personalize content, and others offer you a better browsing experience. Most construction managers will charge a fee of three to five percent of the total project cost. The project delivery is the process by which all the aspects required for a complete project are put together, and the contractual relationships required. <> The technical storage or access that is used exclusively for anonymous statistical purposes. ), taxes, insurance, bonds, profit (noting that some owners prefer to include the profit within the multiplier), contingency, escalation and any external sub-consultants. Hi Can you please elaborate the difference between an EPC cost vs. NON-EPPC costs. Are these ratios and info based on experience, or there may be some international references ? In this type of project delivery method, the contractor is selected through the competitive tender process. It also provides greater budgetary controls because the final price is typically agreed upon before construction begins. It stands for Engineering, Procurement and Construction Management. The best way to explain what constitutes Owners costs is to break down the project capital costs from the top down. xMk@&_I@4Vk4lf}wgt2a0Lq1AI*%%6Fnm*( 'r+n o`0%1rL*7CWWg7` Vf47qc.FS8?&ao#PBZBqS2wF)z[fG[A?=F|q dE3K]xY Planned vs actual progress curves (called 'S' curves because they look like the letter 'S') help decipher the schedule and cost performance of the project. <>>> The Owner has contracts with Vendors and Contractors, and the EPCM firm manages such contracts on behalf of the Owner. Feasex: Feasability engineering study cost(early stage) Manifold and Dock Pump Mechanical Install. This method of project delivery tends to attract higher project costs as opposed to the EPCM (Engineering, Procurement and Construction Management) method. You have very well elaborated the heads which falls under Direct & Indirect Cost. This is a very high-level observation of what constitutes owners costs. The high volume of gas to be treated because the CO 2 is dilute (13-15 volume percent in coal-fired systems); The low pressure [15-25 pounds per square inch (psi)] of the flue gas; The large auxiliary power load to compress captured CO 2 from near atmospheric pressure to pipeline pressure (about 2,200 psi). The EPCM Contractor agrees to complete performance of the Phase I EPCM Work pursuant to this Agreement on a cost reimbursable basis with a fee based on a set percentage, determined pursuant to Schedule 3-A, to produce a Target Price and a Target Schedule based upon a mutually acceptable Open Book Estimate for Owner's review and acceptance, in a . If you assume erection and commissioning at 40% to 50% of TIC for non-union labor, you are probably close. stream In contrast, the EPC approach is often used on smaller projects, because it's done on a lump sum basis and delivers certainty on the price. For the person who is not very familiar with the various delivery methods and contract types for the construction projects, it can get confusing. Hope this helps. Private sector spending on construction in 2021 was estimated to be between SGD8 billion and SGD10 billion. ABEX abandonment, My article focuses on the CAPEX part of the cost, with emphasis on the Owners costs. Lets look at the categories of indirect costs which should be included, and where, under the EPCM contract delivery method: There can be variations of all of the above, depending on the contracting strategy and the terms of the EPCM services contract. Below is the list of project delivery methods. commissioning and operation readiness (if not included in Construction Management). Construction Cost Estimating Knowledge Share. The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network. In some other cases, the EPCM contractor can hire an outside construction contractor who they will manage on their own.. DRILLEX drilling The best way to explain what constitutes Owner's costs is to break down the project capital costs from the top down. I seen the following in the last 5 years: Regards. stream Working across this large spectrum of construction project types and various project delivery methods, I often have to define the indirect costs for each instance. fees, insurance or adminstrative expenses and also temporary works that are not related to the Project Cost. dbuzz (Structural) 4 Oct 05 21:26. These metrics are used in early estimate development to provide factors for material and labor disciplines and for bottoms-up estimate validation for more defined estimates (e.g., Class 3). There are more EPCM contractors willing to accept both negative and positive incentives on achievement of the key project targets. Shared services: e.g. 2. It is critical to the success of the KPI incentive regime that, when formulating the targets and methods of measuring performance, there is sufficient clarity of project scope and the owners requirements. The items not covered by multiplier, and thus needing to be billed as separate additional cost add-ons, include IP and technology usage fees (software, etc. In short, two main approaches are available: With all these structures and formula/benchmarking in place to calculate a reasonable multiplier the next key question is: How can the same sense of urgency and efficiency in the EPCM contractor and its personnel over a long period be achieved as compared to a fixed priced model? As I recall, a few years ago there was a desire to move AWAY from EPCM in favour of EPC. Collaborative Contract, e.g. http://www.learncostestimating.com/capital-cost-estimating-owners-costs/, Soil Types and Conditions Estimators View, Excavation Slope Protection Cost Estimators Perspective, Key Points To Consider When Developing a Cost Estimate, Underground Utilities Cost Estimating Course, Commercial Buildings Cost Estimating Course. <> Maryland results came in today. The information does not usually directly identify you, but it can give you a more personalized web experience. Even capital project owners who have already been through a myriad of DBB project deliveries can benefit from working with an EPC contractor. It will be great if information to how to workout such cost can be detailed. I have more than 2 decades of experience in cost estimating of lump-sum EPC on-shore oil and gas projects. What do you think? DBB remains popular due to the ability to get pricing at each stage. 3 0 obj 0,001 times 1 000 equals 1 dollar. Primavera P6 tool is really usefull to manage this process. Interesting to note is that some Owners might require a specific Owners costs breakdown, based on their internal code of accounts and accounting for capital expenditures requirements. Simply put, this is because EPC is not a service in the same way that EPCM is. Generally EPCM cost for major capital investment projects in the oil and chemicals industry comprise 10-20% of TIC. After going through this article I was refresh and possess more information for future Projects. It is essentially the same as what is known (especially in the U.S.) as a cost-plus contract. The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user. Conversely, utilizing the EPC delivery method in a capital project provides an integration of all project departments and a single source of accountability from engineering to construction.. I hope you do well. In this case, 10 divided by 10 000 is 0,001. My best way to explain the direct vs. indirect costs is to look at the different types of project delivery methods. The EPCM advantage above can turn into a disadvantage if done improperly. or discretion of Project Management team having a temporary works aside form the Project. Generally speaking, all the costs that can be directly attributed to construction of the facility, are Owners direct costs, or hard costs. With my extensive experience in estimating and in-depth understanding of planning, cost control, contracting, change management, risk management, project management and decision making within the oil & gas industry, I want to start sharing my knowledge. any requirements for Integrated Project Controls reports or level of DE/BIM requirements, Owners internal project delivery resources and skill set, Level of integration between the project parties respective teams. Comprehensive planning of the construction elements, costs, logistics and construction team; on-site management of contractors, individual operatives, equipment, services and office facilities (again, to name only a few of the multi-faceted elements involved in construction management) all encompassed to effectively supervise the construction of the clients project through to completion. So, I thought I would share my point of view and experience on this subject. We promise we won't spam you or sell your data. AREA EPC EPCM Cost q Final project costs are, with the exception of valid Owner scope change, included in the contractors lump sum budget. The clients engineering consultants provide full construction management for the project from beginning to end. The owner or principal of the EPC project provides the EPC contractor with a detailed design including technical and functional specifications, in order for the EPC contractor . 1. In an EPC type ofcontract, the Owner has veryminimal involvement in the design process. Notify me of follow-up comments by email. 8.9 Tracking of Cost Impact of Addenda and Change Orders. OPEX production The other 80-90% consists of purchase orders for materials/equipment and of construction contracts. This is also true even if that contractor is chosen for a construction management roleunderstanding how to manage process density helps minimize schedule overruns and outlines any potential safety risks for whichever contractor is eventually selected. In such cases, it is very common that the Owner will supply the cost consulting firm with their cost breakdown requirements and code of accounts. In my experience, the waste industry, going down the EPC(M) route as opposed to EP saves in CAPEX around 40% of costs. Operating cost: After Declaration of production and performance testing has been accepted by external authorities. Assess activity levels in the EPC/EPCM services market, monitor competitors' contracting trends, and choose between (short term) tactical and (long term . We find our clients across all markets & industries have both exacting requirements as well as a need for innovation in their respective highly-specialist fields, which is where our EPCM full-circle approach shines. Having multiple service providers adds a layer of complexity to any project and forces either the owner or contractor to work within separate contracts. The Owner costs are project indirect costs. Fill in your details below or click an icon to log in: You are commenting using your WordPress.com account. (LogOut/ These factors should be addressed while setting/agreeing KPI incentive regime. Hi Hussnain, Thank you for reading this post. Costs The EPCM contractor is usually paid on an actual costs basis at pre-agreed rates as well as a project fee (representing its profit) divided monthly across the construction phase. I am a Certified Estimating Professional as certified by AACE International since Feb-2014. The engineering consultants will find, vet and make recommendations of these third parties, and they will then manage them and may even draw up the contract between the client and the third parties, but fundamentally the contracts sit with the client, so the client has overall responsibility and control. Activities may have many resources assigned to them to develop an accurate cost estimate and include many items that would never be updated in the process of updating a schedule. In this category, we have: project financing, Owner's project management team, legal costs, permits, rights of way, land acquisition, . That are not requested by the subscriber or user estimated to be between SGD8 billion and SGD10 billion negative! Oil and gas projects works that are not requested by the subscriber user! A disadvantage if done improperly essentially the same as what is known ( especially in the design process early. 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Working with an EPC contractor: after Declaration of production and performance testing has been accepted by authorities... Orders for materials/equipment and of construction contracts thought i would share my point of view and experience on subject... Owners costs are probably epcm costs as a percentage, with emphasis on the capex part the! Epcm is study cost ( early stage ) Manifold and Dock Pump Mechanical Install multiple service adds.