VALVE MAGAZINE Spring 2024

EPC EFFICIENCIES

CONSTRUCTION Maximizing Efficiency in EPC Projects

The crucial role of procurement in industrial construction.

Many EPCs use staging warehouses to manage project deliveries.

BY: DAVID DORMAN, MBA, PMP, CEP COMPANY: IAC International Source (all photos): IAC International.

For large construction projects owner companies often employ an Engineering, Procurement and Construction company (EPC) to manage the project from ideation to commissioning. It is critical to engage with an EPC at the earliest stages to ensure projects have the best chance at being on time and on budget. There are a number of EPCs in the U.S. and internationally to choose from, but finding one with expertise in the client’s industry is worthwhile so the EPC can engage with vendors they have established relationships with for better negotiations and terms, where possible. Some clients choose to do their own procurement, which can be advantageous, but there is also risk. This article explores both sides of this proposition. We will discuss several factors in this article: • How much will the EPC project’s cost risk be reduced? • How do equipment lead times impact the EPC process? • How much effort is required to procure large, specialized industrial equipment and ensure timely delivery? • Does the EPC project client have the staff to handle the procurement or all the items required for the project?

What are the costs associated with delayed deliveries on an EPC construction project? These costs can include contractor delays and extended direct and indirect costs, as well as lost revenue if the owner company misses contractual obligations from missed deadlines There may also be challenges to procure certain items if the owner company or client doesn’t have relationships with suppliers. This can be an opportunity for an EPC to source already fabricated, undelivered equipment or systems, and determine the actual cost of the purchases. How much will the EPC procurement cost risk be reduced if the client does purchasing? We will use the term equipment, interchangeably, to cover material as well. Material is any permanent plant struc ture, such as a structural steel package. For the most part, the client and EPC contractor should have the information required to order equipment at the same time. In general, costs are locked in at the time of the purchase, and purchase orders include terms and conditions that protect both the

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VALVE MAGAZINE

SPRING 2024