Can we consider NON- EPC costs as Owner Cost. On the other side, really small contractors need to consider higher average multipliers, probably 3.0 to 4.0, to achieve their objectives. Define EPCM Liability Limit for Defective Work. The percentage will be at the lower end for a larger project (higher . (LogOut/ All costs in addition to the EPC costs and project contingency can be labeled as Owners costs. 1 - Percent of General Construction Total General Construction Estimate = $50,000,000 25% of Total General Construction = MEP Portion of the Construction = $12,500,000 The last but not the least, since the EPCM Contractor will typically drive/set the key project targets (e.g., project budget and the schedule including completion dates), appropriate independent due diligence and assurance program is definitely recommended by the Owner, or its independent adviser, to establish that the project targets are sensible in the context of the project proposed. The values input into the TASKS and SHEETS spreadsheets are automatically transferred into the Project Fee Calculation Worksheet and compiled into an overall Project Fee. %PDF-1.5 From there on the cost can be split up into the following segments (be aware this isnt cast and stone as this might be depending on interpretations of the company accountants and governmental bodies). Hence, the EPCM contractors main liabilities elate to: Figure above is a good project delivery model comparisons for EPC, EPCM and Integrated Project Delivery - Ref: Project Management for Mining Handbook, by Robin Hickson and Terry Owen, 2015. The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes. Manifold and Dock Pump Mechanical Install. 3 0 obj % :) This review course was a huge help and was my main [source for] study materials. Its good to see you lecturing estimating costs courses, which have good contents, Hope you will be successful in your activity. Most important is the philosophy for developing/ arriving such direct and indirect cost for different type of project. The table above can be utilised to calculate the indicative high level cost for the engineering effort required for a scope (for example, only FEED engineering, or only detailed engineering etc.). Using an EPC(M) does however require a strong team (including your own team) to manage the components, especially around battery limits. Most construction managers will charge a fee of three to five percent of the total project cost. In this instance, the CM is performing some construction activities, usually, the ones associated with the most risk, so some of the risks are transferred from Owner to the CM. I hope you do well. (LogOut/ Assess activity levels in the EPC/EPCM services market, monitor competitors' contracting trends, and choose between (short term) tactical and (long term . Such costs are private costs because they reflect the private choices and decisions of the owners and operators of the facilities. Thanks for sharing your views on this topic, Julio. Maryland results came in today. The EPC contractor also selects its own vendors and subcontractors for different project stages. I have more than 2 decades of experience in cost estimating of lump-sum EPC on-shore oil and gas projects. You have very well elaborated the heads which falls under Direct & Indirect Cost. This is where the EPCM approach really shines. The project owner has the ability to hire another contractor to perform construction and task their EPCM contractor to manage them. My best way to explain the direct vs. indirect costs is to look at the different types of project delivery methods. Costs are estimated for the first time at the beginning of a project or even before a project has started. Are these ratios and info based on experience, or there may be some international references ? 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. Negligence in managing the procurement and construction work. Operating cost: After Declaration of production and performance testing has been accepted by external authorities. Could you elaborate on the following sentence? If you need help with understanding construction management contracts and fees percentage, you can post your . EPCM stands for Engineering, Procurement and Construction Management and is a professional engineering services contract growing in popularity for the construction of manufacturing plants or heavy engineering facilities across many industries. Why is project financing or taxes or bonds & insurance an indirect cost. Hi Felipe, thank you for reading my article. EPC contracts. Dispute resolution Both delivery methods are not without risk, however. Planned vs actual progress curves (called 'S' curves because they look like the letter 'S') help decipher the schedule and cost performance of the project. Collaborative Contract, e.g. I know its not that simple as it is a complex working but still if things can be shared for learning and developing the cost for such projects. We take a completely client-centric attitude to all our operations, putting them in the driving seat. Ideally, of course, deliverables and activity based resource requirement would be established and costed by Individual estimators / project engineers to arrive at the overall engineering cost for the required scope. means EPCM Contractor's obligation to reperform Defective EPCM Work in accordance with the terms of this Agreement in an amount not to exceed * percent (*%) of the total consideration paid to the EPCM Contractor under this Agreement pursuant to Schedule 3 that is attributable to (a) labor (including employees, contract employees of the EPCM . xWmOH)a>z}:\EF1!87NB@utB6zvgBo >G}8g9s plN'(OnN +~e4 \$L/nMVUgYM.:nk ! HqY/)n{T%X.0DFt\^ks2|r\$3mfD,4Kt3t7Wm0)bD.l1iW0pne`+.+.~DpAnPt;;Nz;VjQZLh0Hu38TPI0-nU HPUo Y9S Even capital project owners who have already been through a myriad of DBB project deliveries can benefit from working with an EPC contractor. Hi Hussnain, Thank you for reading this post. Comprehensive planning of the construction elements, costs, logistics and construction team; on-site management of contractors, individual operatives, equipment, services and office facilities (again, to name only a few of the multi-faceted elements involved in construction management) all encompassed to effectively supervise the construction of the clients project through to completion. So, I thought I would share my point of view and experience on this subject. While there have been some movements from EPCM to EPC contracts, we definitely see increased sophistication in EPCM incentive mechanics. To provide the best experiences, we use technologies like cookies to store and/or access device information. EPCM for instance has numerous percentages associated with different projects . endobj Estimating cost is an important process in project management as it is the basis for determining and controlling the project budget. I have read this article in the line of my business experience and therefor some items I would provide some feedback on which have encountered during my experience as a cost estimator. All you need to provide is your info & email and you'll get instant access to this content. Hard being the actual cost of building with soft being everything else. -Classic EPC done before schedule and cost (w rewards shared) This is a question that comes up quite often in capital cost estimating. Your email address will not be published. 4 0 obj 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 clients engineering consultants provide full construction management for the project from beginning to end. Engineering Design Cost Estimate | Calculate Man Hours, Tank Farm Benchmarking (Open SourceExample), Print Macro Automate Generation of MultipleEstimates, A Call for Transparency: Sharing Working EstimateFiles, Design Optimisation for a Successful BusinessCase, Weight Tables for Quick Piping MaterialEstimate, Piling Costs: Rough Estimate Model forBenchmarking, Labour Productivity Factor CalculationTool, Power Plant Benchmarking (Open SourceExample). DRILLEX drilling ",#(7),01444'9=82. Scenario : Non-allocable amount of a cost needs to be calculated. What are the indirect costs for a capital cost estimate? Crucially the difference is in how the project is organised with EPCM all the contracts and purchase orders with third parties such as construction contractors, suppliers and vendors remain with the client. In this category, we have: project financing, Owner's project management team, legal costs, permits, rights of way, land acquisition, . We provide research, benchmarking, and consulting services to improve the performance of our clients capital projects and project systems. When you visit our website, it may store or retrieve information on your browser, mostly in the form of cookies. On a lump sum contract, it is harder to get credit back for work . 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. Lets look at the categories of indirect costs which should be included, and where, under the EPCM contract delivery method: There can be variations of all of the above, depending on the contracting strategy and the terms of the EPCM services contract. Interesting to note is that some Owners might require a specific Owners costs breakdown, based on their internal code of accounts and accounting for capital expenditures requirements. the shortage of experienced labour and quality materials and resultant fluctuations in associated costs. So, this approach tends to be used by larger or more established mining companies on larger-scale projects. The EPC contractor is responsible for the design, procurement, construction, and commissioning & start-up. Exploration and appraisal I purchased the Crash Courses for Structural, Mechanical, and Construction Management. So, we have the following cost estimates: What does EPCM mean? In an EPCM arrangement, the client selects a contractor who provides management services for the . as Percentage of the MEP Construction (4%): as Percentage of General Construction (25% x 4% = 1%): 10% of Total General Construction Architects Fee = $5,000,000. Great suggestion for further assessment on the number count between the two contracting strategies and their performance, both time and cost. 8.8 Markup on Addenda and Change Orders. Choosing the best contractual strategy for developing and delivering of major infrastructure projects has never been an easy task and wont be! In addition, the employer has the benefit of negotiating each construction and supply contract . With an EPCM contract, the owner is responsible for rectifying anything that went wrong. This gated system still often places the engineering and procurement responsibility on one party, similar to that of either EPC or EPCM. owners costs =EPC contract + management costs)? As with cost overruns, any liability for delay will generally be capped as a percentage of the contractor's fee. For pure EPC or design-build (DB) projects, this is the key . Look forward to receiving your reply. 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