Developers in the private sector typically outsource major facilities construction to a contractor who assumes primary responsibility for project execution. “Engineering, procurement and construction” refers to a contract type popular with developers because it provides predictability and certainty regarding project costs and timetables. DLA Piper says once an EPC contract is completed, all the client has to do is “turn a key to start operating the facility.”
Characteristics of EPC Contracts
Under an EPC contract, also called a turnkey construction contract, the construction firm takes responsibility for producing a fully functioning facility. The client usually needs to do no more than provide specifications, funding and a project management team that monitors progress and compliance with requirements. The contractor secures the services of engineers to create a fully developed design and must obtain all necessary materials and equipment. The contracting firm then executes the actual construction and turns a completed project over to the client that is ready to begin operations. While this is beneficial to clients, operating under an EPC contract means the construction firm assumes liability for meeting project deadlines and staying within budget. Failure to do so can mean taking a serious loss on a project.