EPC stands for Engineering, Procurement and Construction, contractors that are assigned to execute a given work using the EPC approach are going to perform detailed engineering for the required facilities to be built, procure all the required equipment and do the construction of the same. Usually a basic engineering package or FEED (Front End Engineering Design) package is done by the owner or an independent engineering company in order to define the high-level requirements of the OWNER and assist owner tendering the works on the shortlisted EPC Tenderers that were pre-qualified and found eligible to perform the works.

Note: the FEED works contractor should not participate in the EPC as a tenderer as this is considered an obvious conflict of interest*.

Usually the execution of an EPC contract is done on a Lumpsum Turnkey LSTK basis (some times referred to Fixed Firm Price "FFP" Contract). This means that EPC tenderers propose technical & commercial proposals for the execution of the works in a proposed time frame (execution schedule) and they bear the full responsibility for the execution until the handover of the facilities to the owner for final acceptance. In such manner, Owner reduce the risk of any cost or schedule overruns related to the execution of the project. A well defined scope and a well prepared tender documents in this regard have to be carefully crafted in order to minimize the need for change orders during the execution phase.

If the scope is not well defined, owner can resort to Open Book Estimate "OBE" in such type of contracts, Contractor works openly with owner exposing all costs related to the execution of the project activities, procurement of equipment, subcontracting and agree with the owner on a markup fee that Contractor will receive as a compensation of the provided services. In such sense, risk has been imposed on the Owner and accordingly Owner has to have a very professional and experienced Project Management Team (PMT) who are capable of managing the Contractor and justify cost and schedule in order to execute the project successfully without any cost or schedule overruns. Additionally, the Open Book Estimate could be converted to Lumpsum Turnkey contract (Open Book Convertible), such type of contracts have the advantage of minimizing the schedule of execution and the cost of the front end works (if the PMT are managing the contractor efficiently).

Owner can also assign a Project Management and Consultancy company to assist owner with the above mentioned activities and fill any gapes in owner's knowledge related to project management.

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