EPC Contract

EPC stands for ‘Engineering, Procurement and Construction’.

Engineering, Procurement and Construction Contract or EPC contract is a type of construction contract between parties where the contractor is responsible for all the engineering, procurement, and construction activities to deliver the completed project to the employer or owner within a predefined time and cost.

Role of an EPC contractor

The EPC contractor is responsible for:

  • Detail engineering or design involved with the project
  • Procurement of all the necessary equipment and materials required to build the project
  • Construction of the facility
  • Making it ‘ready to use’ and handover to the owner.

In addition to the delivery of the complete facility, the EPC contractor must deliver it within a guaranteed time and guaranteed price.

The facility must perform at an specified efficiency level mentioned as ‘performance specification’ section in the contract.

EPC contract and Turnkey contract are very much similar in nature. Sometimes, these two contract types are used interchangeably, though have little difference.

Basic features of an EPC contract:

The key features of an EPC contract are:

  • Single point responsibility
  • Fixed contract price
  • Fixed completion date
  • Performance guarantee
  • Caps on liability
  • Security
  • Liquidated damage
  • Defect liability period
  • Force majeure etc.