In an EPC project delivery format, the risk is transferredfrom the owner to the EPC contractor. - Anything can work w the right team of individuals like any model can fail w the wrong team and attitude. On average, a project's cost 10% - 20% more using EPC style of contracting than a project using the EPCM style of contracting. In my experience, without a risk-based KPI incentive mechanisms, it is very difficult, if not impossible, to achieve effectiveness and value for money from EPCM contracts. As a thumb rule, for most Oil & Gas projects, typically, the engineering costs generally ranges between 5 and 15% of the overall CAPEX (Capital Expenditure), depending on the scope of engineering required, project size, complexity, brownfield / greenfield development etc. By not using EPC, you have a much bigger pool of contractors to choose from and you buy the pieces of equipment from the supplier rather than through a middle company. In other words, the multiplier will act like a Base while EPCM Contractor will also be entitled to bonuses or subject to a reduction in payment under agreed KPIs (i.e. However, the gated nature of the stages means that there is the possibility of a weaker integration between the goals of the engineering and procurement contractor and the construction team, leading to a higher possibility of change orders and schedule inflation.. We note that these cost estimation procedures are meant to support the calculation of the costs of purchasing and installing pollution control equipment, and then operating and maintaining this equipment, at a facility. Site management and services including planning and procurement of site services, construction management services, erection management services, commissioning management services. Of the top three cost . Read about how we use cookies and how you can control them by clicking "Privacy Preferences". Alliance, Competitive Alliance, Incentivised Collaborative Contract, Delivery Partner, etc. For the natural resources industry, the project lifecycle can be broken down into the following stages: Exploration, Appraisal, Development, Production, and Abandonment. EPC stands for Engineering, Procurement and Construction so the crucially missing element is the M for Management. 1. 3. 3 0 obj I am interested to know about your experience with Owners costs in capital cost estimating. Its good to see you lecturing estimating costs courses, which have good contents, Hope you will be successful in your activity. #financialmodeling #mining #projectfinanceThis is a lesson from Financial Modeling for Mining course where we review the differences between the EPC and EPC. The contractor is fully responsible for the quality of the construction job. The best way to explain what constitutes Owner's costs is to break down the project capital costs from the top down. Operating cost: After Declaration of production and performance testing has been accepted by external authorities. The project is then invoiced to the customer based on the actual costs incurred plus the agreed margin. 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. Any shortfall of costs is a risk that rests with the EPC contractor, making cost control their number one priority. <>/ExtGState<>/Font<>/ProcSet[/PDF/Text/ImageB/ImageC/ImageI] >>/MediaBox[ 0 0 720 540] /Contents 4 0 R/Group<>/Tabs/S/StructParents 0>> . Epcm Service Costs - posted in Industrial Professionals: Kindly advise what percentage should I consider for Engineering, Procurement and Construction Management (EPCM) Services Cost of the Total Project Cost. The contractual framework in an EPC contract enables the owner to transfer the complete risk of design, procurement, and construction to the contractor. the shortage of experienced labour and quality materials and resultant fluctuations in associated costs. If we agree on this breakdown, the key question is: How the risks and uncertainties should be assessed when setting/agreeing the EPCM multiplier - what's the relationship with 'contingency' then!? . Cost control is The information does not usually directly identify you, but it can give you a more personalized web experience. However it would be interesting to also understand the current quantum of EPC vs EPCM contracts (in Western Australia). 5. It stands for Engineering, Procurement and Construction Management. Not consenting or withdrawing consent, may adversely affect certain features and functions. Your email address will not be published. The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user. The percentage will be at the lower end for a larger project (higher CAPEX) and will tend to be at the higher end for smaller CAPEX projects. The most common way to break down the capital cost of a project, with the EPC element in it, is: The direct costs are all the costs included in the EPC contract: All costs shown above are in base-year currency. In an EPCM arrangement, the client selects a contractor who provides management services for the . Oops! One thing to consider to include in the estimate is the owners cost from completion of FEL3 to EPC Phase. Private sector spending on construction in 2021 was estimated to be between SGD8 billion and SGD10 billion. The following is a brief description of the sets of metrics in this report: This field is for validation purposes and should be left unchanged. When considering this, note that EPC contractors that have in-house construction teams will be able to quickly create a realistic forecast of schedule and costs based on previous experience. The owner is able to choose which contractors and subcontractors will work on different areas of the project. I typically consider a 50/50 split between hard and soft costs. Owners costs include EPC contract costs (i.e. This also forces the responsible party, whether that be the owner or the overall contractor, to ensure they act as a clearinghouse for information among everyone involved, including stakeholders, which can limit some of the benefits of the EPCM project delivery system in terms of integration and responsibilities. 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. It will be great if information to how to workout such cost can be detailed. The important difference between the EPCM and EPC forms of contract is that under EPCM contract, the contractor is NOT a principal in relation to the procurement of plant and materials, or construction. (I can't write an article without referring to risk and contingency!! Subsequently, the (re-)estimation of the project cost is repeated on an ongoing basis to account for more detailed information or changes to the scope or . Below is the list of project delivery methods. 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In EPCM cost reimbursables, its quite common to apply a model with a single multiplier on the bare (actual) labor rates. As you would expect, where EPCM contracts are employed there is a significant amount of specialist engineering processes which need to be scoped, strategized, organised, planned, coordinated and executed. In the following paragraphs, we will break down the costs in more detail. CSU: Commissioning and Start up cost 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. Log in, " thanks so much again for your guidance and great resources. In addition, at IntES we have a distinct advantage over other firms in that we have several experienced senior consultants who have spent most of their highly successful careers on the client-side of EPCM, and so our process becomes more seamless than most. Hi Can you please elaborate the difference between an EPC cost vs. NON-EPPC costs. So this means with an EPC contract, yes your engineers will completely handle the clients project from start to finish, however, the client effectively relinquishes control of the project from the moment the contract is signed. -EPCM contract w EPC mentality, but all the blowouts to who is forking the bill anyway (to be avoided) In best practice for EPCM ENR projects, it is recommended that multiplier should only include: For large EPCM contractors, this generally comes out between 2.1 and 2.7, although in tough times large contractors may decide to go below 2.0 range just to keep their staff. EPCM Solutions personnel have experience in bankable feasibility work for projects in Australia, Asia . stream the project delivery methods such as engineering, procurement, and construction management (EPCM) contracts give them greater flexibility and that they have the expertise and experience required to control costs in an EPCM Contract. <> Click Actions, then select Inbox/Outbox Explorer . Please share if you liked it! What would be % cost considered for Design as compared to overall cost estomate of the project. The contractual relationship is Owner-CM, Owner-Vendors, and Owner-Subcontractors. EPCM contracting offers potential savings on project cost. If you have questions, please write it below and I will try to give you my best answer. This involves everything from technical quotation requests, organisation of the tender process, pre-qualification of vendors, technical evaluation and recommendation of contractors, negotiations and much, much more. Different types of contract allow the risks and uncertainties associated with the project to be transferred from the owner of the project to various counter-parties for a PRICE! Why is project financing or taxes or bonds & insurance an indirect cost. Few years ago I was in contract section of EPC Contract 3rd LNG Project at Das Island, UAE. However, these metrics provide many more levels of detail in the metrics, from discipline-level cost ratios (e.g., Piping Engineering Cost / Piping Construction Cost) to labor rates to unit hours (e.g., Piping Labor Hours / Piping Feet). You should start receiving our newsletter in your inbox now. When you visit our website, it may store or retrieve information on your browser, mostly in the form of cookies. The contractual relationship is Owner-CM, Owner-Vendors, and Owner-Subcontractors. EPCM Solutions provide a low-cost value-add construction estimating service using the knowledgebase and systems that have been built up from decades of experience and continual tendering activities in the industrial construction sector. the EPCM contractor may charge a fixed fee for his role, rather than a percentage of the total construction price, so costs can be contained and built-in cost contingencies prevalent in EPC . CNXLpC#CS0( JcqH(RAUlmAf!s"7&*`ker:~G`:JAq\nlTXI#iu IpD. Drillex: Cost of drilling appraisal/ production wells I am writing this post to shed some light on the topic. Shop inspections & expediting. In the simplest form of a Cost-reimbursable contract the Employer reimburses the Contractor's costs of work on a project, plus usually a fixed sum or percentage for financing, overheads and profit. The cost estimating methodology for all of the above is detailed cost estimating. All you need to provide is your info & email and you'll get instant access to this content. %PDF-1.5 (LogOut/ 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. EPCM Project Academy is the online academy for Engineering, Procurement, Construction, and Project Management professionals. Most recently our team helped a client in market data benchmarking for assessing a suitable EPCM multiplier and potential influencing risk factors for an EPCM cost reimbursable model on a major brownfield project. Most construction managers will charge a fee of three to five percent of the total project cost. Many organizations undervalue the soft costs believing that most of the costs should be in actually buying and laying bricks and such. OPEX production In this case, bonding will become direct cost. The contractual relationship is Owner-A/E, Owner- Contractor and Contractor-Subcontractors/Vendors. Note: The actual percentage for all the above scope of work could sometimes be much more than 15% of the overall CAPEX for small projects. 2 0 obj Contractors performing the construction activities will have their indirect costs to support their scope of work. The cost estimate types are usually conceptual to a detailed cost estimate, and all variations in-between. Here is the link: http://www.learncostestimating.com/capital-cost-estimating-owners-costs/. Like the summary cost metrics, the objective of the Detailed and Unit Cost Metrics is to support estimate development and review. To reduce capital expenditure in any project, you must know where the capital is being spent. Why is that the case? I am in upstream oil and gas EPCM in Alberta, Canada, so what has worked for me is: I usuually go in with EPCM at 7% to 10% of TIC for green-field, and EPCM at 15% of TIC for brown-field projects. in Oil & Gas industry, it started out with E, and about 30% or so the P will pick-up and then at about mid way the C begins. dbuzz (Structural) 4 Oct 05 21:26. Total General Construction Estimate = $50,000,000; 25% of Total General Construction = MEP Portion of the Construction = $12,500,000; MEP Design Fee: as Percentage of the MEP Construction (4%): Design Fee = $12,500,000 x 4% = $500,000; as Percentage of General Construction (25% x 4% = 1%): The other 80-90% consists of purchase orders for materials/equipment and of construction contracts. To reduce capital expenditure in any project, you must know where the capital is being spent such cost be! Vs. NON-EPPC costs capital expenditure in any project, you must know where the capital being... ) labor rates * ` ker: ~G `: JAq\nlTXI # IpD! 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