HERVE

BARON

The evolution of EPC contracting

Welcome to this presentation.

It shows the evolution that took place in EPC contrcting
schemes over the last 30 years.

Comments are most welcome ([email protected]),

which I will incorporate for the benefit of all.
2013 Herv Baron

Herv

HERVE
BARON

Contracting schemes
EPC Contracts

Clients contracting strategy

Phase 1

2013 Herv Baron

HERVE
BARON

Contracting schemes

Clients contracting strategy

Phase 1
EPCM
Re-imbursable

2013 Herv Baron

Contracting schemes

HERVE
BARON

Clients contracting strategy

Pros and Conts

Phase 1
EPCM
Re-imbursable

2013 Herv Baron

Contracting schemes
EPC Contracts

HERVE
BARON

Clients contracting strategy

Phase 1
EPCM
Re-imbursable

Pros and Conts

Phase 1
All risks with Client
Budget and schedule slippage
Extensive supervision staff

2013 Herv Baron

Contracting schemes

HERVE
BARON

Clients contracting strategy

Phase 1
EPCM
Re-imbursable

Pros and Conts

Phase 1
All risks with Client
Slippage budget and schedule
Extensive supervision staff

Phase 2

2013 Herv Baron

Contracting schemes

HERVE
BARON

Clients contracting strategy

Phase 1
EPCM
Re-imbursable

Pros and Conts

Phase 1
All risks with Client
Slippage budget and schedule
Extensive supervision staff

Phase 2
EPCM
LS E&P
2013 Herv Baron

Contracting schemes
EPC Contracts

HERVE
BARON

Clients contracting strategy

Phase 1
EPCM
Re-imbursable

Pros and Conts

Phase 1
All risks with Client
Slippage budget and schedule
Extensive supervision staff

Phase 2
EPCM
LS E&P
2013 Herv Baron

Contracting schemes

HERVE
BARON

Clients contracting strategy

Phase 1

Pros and Conts

All risks with Client

Slippage budget and schedule
Extensive supervision staff

EPCM
Re-imbursable

Phase 2
EPCM
LS E&P

Phase 1

Phase 2
Improvement over Phase 1 on
schedule and budget
Extensive supervision staff
2013 Herv Baron

Contracting schemes

HERVE
BARON

Clients contracting strategy

Phase 1

Pros and Conts

All risks with Client

Slippage budget and schedule
Extensive supervision staff

EPCM
Re-imbursable

Phase 2
EPCM
LS E&P

Phase 1

Phase 2
Improvement over Phase 1 on
schedule and budget
Extensive supervision staff
2013 Herv Baron

What difference did Phase 2 bring compared to Phase 1 for

Engineering development?

Contracting schemes

HERVE
BARON

Clients contracting strategy

Phase 1

Pros and Conts

All risks with Client

Slippage budget and schedule
Extensive supervision staff

EPCM
Re-imbursable
Engineering continuum

Phase 2

Phase 1

Phase 2
Improvement over Phase 1 on
schedule and budget
Extensive supervision staff

EPCM
LS E&P

2013 Herv Baron

FEED then CFT for EPC

Contracting schemes

HERVE
BARON

Clients contracting strategy

Phase 1

Pros and Conts

All risks with Client

Slippage budget and schedule
Extensive supervision staff

EPCM
Re-imbursable

Phase 2
EPCM
LS E&P

Phase 3

Phase 2
Improvement over Phase 1 on
schedule and budget
Extensive supervision staff
2013 Herv Baron

Phase 1

Contracting schemes

HERVE
BARON

Clients contracting strategy

Phase 1

Pros and Conts

All risks with Client

Slippage budget and schedule
Extensive supervision staff

EPCM
Re-imbursable

Phase 2
EPCM
LS E&P

Phase 3
LSTK

Phase 2
Improvement over Phase 1 on
schedule and budget
Extensive supervision staff
2013 Herv Baron

Phase 1

Contracting schemes

HERVE
BARON

Clients contracting strategy

Phase 1

Pros and Conts

All risks with Client

Slippage budget and schedule
Extensive supervision staff

EPCM
Re-imbursable

Phase 2
EPCM
LS E&P

Phase 3
LSTK

Phase 2
Improvement over Phase 1 on
schedule and budget
Extensive supervision staff
2013 Herv Baron

Phase 1

Contracting schemes

HERVE
BARON

Clients contracting strategy

Phase 1

Pros and Conts

All risks with Client

Slippage budget and schedule
Extensive supervision staff

EPCM
Re-imbursable

Phase 2

LS E&P

LSTK

Phase 3
All risks with Contractor

2013 Herv Baron

Phase 3

Phase 2
Improvement over Phase 1 on
schedule and budget
Extensive supervision staff

EPCM

Phase 1

Contracting schemes

HERVE
BARON

Clients contracting strategy

Phase 1

Pros and Conts

All risks with Client

Slippage budget and schedule
Extensive supervision staff

EPCM
Re-imbursable

Phase 2

Less and less

need for a PMC

LS E&P

LSTK

Phase 3
All risks with Contractor

2013 Herv Baron

Phase 3

Phase 2
Improvement over Phase 1 on
schedule and budget
Extensive supervision staff

EPCM

Phase 1

HERVE
BARON

Contractors strategy

Contracting schemes
EPC Contracts

Phase 3
LSTK

How does the Contractor mitigate risks?

2013 Herv Baron

HERVE
BARON

Contractors strategy

Contracting schemes
EPC Contracts

Phase 3
LSTK
Construction sub-contract

2013 Herv Baron

HERVE
BARON

Contractors strategy

Pros and Conts

Contracting schemes
EPC Contracts

Phase 3
LSTK
Construction sub-contract

2013 Herv Baron

HERVE
BARON

Contractors strategy

Phase 3
LSTK

Pros and Conts

Contracting schemes
EPC Contracts

Phase 3

Partial risk sharing

Construction sub-contract

2013 Herv Baron

HERVE
BARON

Contractors strategy

Phase 3
LSTK

Pros and Conts

Contracting schemes
EPC Contracts

Phase 3

Partial risk sharing

Construction sub-contract

2 different schemes: 3a and 3b

2013 Herv Baron

HERVE
BARON

Contractors strategy

Phase 3
LSTK

Pros and Conts

Contracting schemes
EPC Contracts

Phase 3

Partial risk sharing

Construction sub-contract

Phase 3a

General Construction Contractor

2013 Herv Baron

HERVE
BARON

Contractors strategy

Phase 3
LSTK

Pros and Conts

Contracting schemes
EPC Contracts

Phase 3

Partial risk sharing

Construction sub-contract

Phase 3a

General Construction Contractor

2013 Herv Baron

HERVE
BARON

Contractors strategy

Phase 3
LSTK

Pros and Conts

Contracting schemes
EPC Contracts

Phase 3

Partial risk sharing

Construction sub-contract
Phase 3a
Phase 3a

Reduced risk and supervision

General Construction Contractor

2013 Herv Baron

HERVE
BARON

Contractors strategy

Phase 3
LSTK

Pros and Conts

Contracting schemes
EPC Contracts

Phase 3
Partial risk sharing

Construction sub-contract
Phase 3a
Phase 3a

Reduced risk and supervision

General Construction Contractor

Phase 3b intense cost pressure

2013 Herv Baron

HERVE
BARON

Pros and Conts

Contractors strategy

Phase 3

Contracting schemes
EPC Contracts

Phase 3
Partial risk sharing

LSTK
Construction sub-contract

Phase 3a

Reduced risk and supervision

Phase 3a

General Construction Contractor

Phase 3b intense cost pressure

Sub 2013 Herv Baron

Multiple
Construction
Contractors

HERVE
BARON

Pros and Conts

Contractors strategy

Phase 3

Contracting schemes
EPC Contracts

Phase 3
Partial risk sharing

LSTK
Construction sub-contract

Phase 3a

Reduced risk and supervision

Phase 3a

General Construction Contractor

Phase 3b intense cost pressure

Sub 2013 Herv Baron

Multiple
Construction
Contractors

HERVE
BARON

Pros and Conts

Contractors strategy

Phase 3

Contracting schemes
EPC Contracts

Phase 3
Partial risk sharing

LSTK
Construction sub-contract

Phase 3a

Reduced risk and supervision

Phase 3a

General Construction Contractor

Phase 3b intense cost pressure

Sub-

Increased competition
Extensive coordination
2013 Herv Baron

Multiple
Construction
Contractors

Phase 3b

HERVE
BARON

Contractors strategy

Phase 3
LSTK

Pros and Conts

Contracting schemes
EPC Contracts

Phase 3
Partial risk sharing

Construction sub-contract

2013 Herv Baron

HERVE
BARON

Contractors strategy

Phase 3
LSTK
Construction sub-contract

Pros and Conts

Contracting schemes
EPC Contracts

Phase 3
Partial risk sharing

What usually happened?

2013 Herv Baron

HERVE
BARON

Contractors strategy

Phase 3
LSTK
Construction sub-contract

Pros and Conts

Contracting schemes
EPC Contracts

Phase 3
Partial risk sharing
E&P delays => Sub-contractor has
to accelerate hence claims

2013 Herv Baron

HERVE
BARON

Contractors strategy

Phase 3
LSTK
Construction sub-contract

Pros and Conts

Contracting schemes
EPC Contracts

Phase 3
Partial risk sharing
E&P delays => Sub-contractor has
to accelerate hence claims

What new scheme was introduced to mitigate?

2013 Herv Baron

HERVE
BARON

Contractors strategy

Phase 3
LSTK
Construction sub-contract

Pros and Conts

Contracting schemes
EPC Contracts

Phase 3
Partial risk sharing
E&P delays => Sub-contractor has
to accelerate hence claims

Phase 4

2013 Herv Baron

HERVE
BARON

Contractors strategy

Phase 3

LSTK
Construction sub-contract

Contracting schemes
EPC Contracts
Pros and Conts

Phase 3

Partial risk sharing

E&P delays => Sub-contractor has
to accelerate hence claims

Phase 4

EP / C in Consortium or JV

2013 Herv Baron

HERVE
BARON

Contractors strategy

Phase 3

LSTK
Construction sub-contract

Pros and Conts

Contracting schemes
EPC Contracts

Phase 3

Partial risk sharing

E&P delays => Sub-contractor has
to accelerate hence claims

Phase 4

EP / C in Consortium or JV

2013 Herv Baron

HERVE
BARON

Contractors strategy

Phase 3

Pros and Conts

LSTK
Construction sub-contract

Phase 4

EP / C in Consortium or JV

Contracting schemes
EPC Contracts

Phase 3

Partial risk sharing

E&P delays => Sub-contractor has
to accelerate hence claims

Phase 4

Improved risk sharing

No claims
Less competitive

2013 Herv Baron

HERVE
BARON

Contractors strategy

Phase 3

Pros and Conts

LSTK
Construction sub-contract

Phase 4

EP / C in Consortium or JV

Contracting schemes
EPC Contracts

Phase 3

Partial risk sharing

E&P delays => Sub-contractor has
to accelerate hence claims

Phase 4

Improved risk sharing

No claims
Less competitive

2013 Herv Baron

Which scheme is better for COMPANY: 3 or 4? Why?

HERVE
BARON

Typical EPC associations

2013 Herv Baron

HERVE
BARON

Going further

You enjoyed this presentation?

Share my experience on other topics:
Engineering
Contract Management
Project Control
Attend my classroom training
The list and schedule of coming sessions is on my blog at:
http://www.toblog.fr/en/baron.html

2013 Herv Baron