Owners who have repeat projects for similar assets have an interest in recording and trackingasset costs. Wearne (1989) feels this type of contract is used for design studies, development, some repair, demolition and emergency work. The contractors indirect costs are included in the contractors total costs and fall under the project direct costs. 8.9 Tracking of Cost Impact of Addenda and Change Orders. It's a place where you can learn the "how to do" directly from experts, connect with industry experts, and get the certification and tools you need to grow and scale your career to new heights. However, because of their flexibility, the value and the certainty Sponsors and Lenders derive from EPC . With engineering, procurement, and construction (EPC) and design-build capital project delivery methods, project risk is transferred from the project owner to the contractor.EPC delivery methods can be highly beneficial to project owners to maintain their return on investment (ROI). This is especially important in technical speciality projects where clients benefit from the unique expertise, qualifications and experience of the engineering consultants to guide them on how best to achieve their desired outcome. 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. Lets take a look at the slight differences between EPC vs. EPCM project delivery methods, potential benefits and risks to using either method, and how both delivery methods can be beneficial for ensuring capital project success. Reply. Hi Can you please elaborate the difference between an EPC cost vs. NON-EPPC costs. Repeated disappointments for shareholders in quarterly results are driving improvements in both bidding processes and project delivery, by necessity. If we move some costs from Owners indirect costs to the construction costs, they become Owners direct costs. Most important is the philosophy for developing/ arriving such direct and indirect cost for different type of project. Owners cost: Pre-Operating cost (not captured under Capex) Such costs are included under the EPCM costs. The following are eight strategies to help reduce engineering, procurement and construction (EPC) project costs, along with tips to maximize the value of both existing assets and new investments for refiners and producers. 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 To provide the best experiences, we use technologies like cookies to store and/or access device information. This is due in large part to the project's risk being more evenly distributed between the Owner and contracts / suppliers. This is also true even if that contractor is chosen for a construction management roleunderstanding how to manage process density helps minimize schedule overruns and outlines any potential safety risks for whichever contractor is eventually selected. I typically consider a 50/50 split between hard and soft costs. Thanks for sharing your views on this topic, Julio. Lower cost. Both delivery methods are not without risk, however. These factors should be addressed while setting/agreeing KPI incentive regime. You can now download the document. Generally EPCM cost for major capital investment projects in the oil and chemicals industry comprise 10-20% of TIC. Extra consideration is needed when using any data benchmarking and organisations Risk Breakdown Structure (RBS) for assessment (both qualitatively and quantitatively) of risk factors in setting the EPCM multiplier. CAPEX facilities 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! EPCM Companies; . Whether considering an EPC vs. EPCM project delivery, the most common point of comparison remains the Design-Bid-Build (DBB) contract. ), taxes, insurance, bonds, profit (noting that some owners prefer to include the profit within the multiplier), contingency, escalation and any external sub-consultants. In an EPC project, just like all projects, the biggest risk comes from the scope development phase. <> Rajendra Khanvilkar. Owners costs include EPC contract costs (i.e. In terms of percentage, this is the question anyone would be shy to answer. The contractual relationship is Owner-CM, Owner-Vendors, and Owner-Subcontractors. Contractors direct and indirect construction costs, Site development outside of project boundaries, Freight for Owners supplied equipment (if any), Escalation during capital expenditure period, Interest on debt during capital expenditure period. The contractual framework in an EPC contract enables the owner to transfer the complete risk of design, procurement, and construction to the contractor. This accountability is often desired, particularly in small projects. Non EPC as a percentage of EPC. <>/ExtGState<>/Font<>/ProcSet[/PDF/Text/ImageB/ImageC/ImageI] >>/MediaBox[ 0 0 720 540] /Contents 4 0 R/Group<>/Tabs/S/StructParents 0>> We find our clients across all markets & industries have both exacting requirements as well as a need for innovation in their respective highly-specialist fields, which is where our EPCM full-circle approach shines. A competent team need a well-drafted contract with reasonable risk allocations, appropriate project governance implementation (while all requirements, risks/uncertainties and its interfaces well understood), the processes and tools as well as independent assurance programs in place, not only to perform consistently but also to integrate and embed a culture for long term business success. Those articles will cover more of the detail around EPCM. Is there a template? Despite the similarity in their names, EPC and EPCM contracts are very different and sometimes confusion may arise in relation to what these contacting methods entail and the typical risk allocation under each model. However, blocking some types of cookies may impact your experience of the site and the services we are able to offer. Hellow Diana owners costs =EPC contract + management costs)? Its good to see you lecturing estimating costs courses, which have good contents, Hope you will be successful in your activity. Oops! 4 0 obj Think of EPC as more completely contracting-out the project, rather than having engineering consultants manage it for you. Cost plus with a guaranteed maximum price. Also for Erection and Commissioning what % of the Total Project Cost should be considered Regards, Stacy. 3 0 obj I realize this would not give you much clarity. Operating cost: After Declaration of production and performance testing has been accepted by external authorities. 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. The EPC contractor also selects its own vendors and subcontractors for different project stages. With an EPC contract comes a specialised team which is set up to handle procurement on an . EPCM: Engineering, Procurement, Construction Management. Our engineering services range from concept development through basic engineering . Generally what is ratio between these two i.e. Your submission has been received! )]jWE^~=R22-bMjrH[o+/2wq}p} If you need help with understanding construction management contracts and fees percentage, you can post your . Change), You are commenting using your Twitter account. OPEX production Our clients tell us what they need, we listen with great interest and we use our knowledge and expertise to transform those discussions into a fully-tailored, flexible and practical integrated approach which yields fantastic results; fully involving our clients every step of the way. I can be contacted at tovikaskhaitan@gmail.com for any estimating related questions, comments or discussions. 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). 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. It would be great if the templates for deriving such cost can be shared for better understanding and how to come-up with deriving cost for each head. The clients engineering consultants provide full construction management for the project from beginning to end. Collaborative Contract, e.g. 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. P80, this decision is not recommended. For large EPCM contractors, this generally comes out between 2.1 and 2.7, although in tough times large . Read about how we use cookies and how you can control them by clicking "Privacy Preferences". Increasingly, Owners and Contractors are looking for alternatives to the traditional fixed price and time project . Such costs are private costs because they reflect the private choices and decisions of the owners and operators of the facilities. This type of project delivery method is a professional services contract between the Owner and the EPCM firm. The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user. Under an EPC contract a contractor is contracted to provide engineering, procurement and construction services by the Sponsors, i.e. APEGBC Budget Guidelines for Consulting Engineering Services Accrual with Deferred Retainages. Estimating cost is an important process in project management as it is the basis for determining and controlling the project budget. endobj 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. Decommissioning: Cost of decommissioning all facilities after Cessation of Production CoP is granted (Operator project management; Facility running/ owners costs; Well plugging and abandonment; Facilities/pipelines making safe; Topsides preparation; Topsides removal;Substructure removal; Topsides and substructure onshore recycling; Sub sea infrastructure (pipelines, umbilicals) Site remediation; Monitoring). Click on the different category headings to find out more and change our default settings. While there have been some movements from EPCM to EPC contracts, we definitely see increased sophistication in EPCM incentive mechanics. Normally, what is the Owner Cost considered as percentage of EPC Cost in Project Cost Estimation? So what is the definition of indirect costs? My definition of indirect costs is: it depends on who is asking? If you continue to use this site, you consent to our use of cookies. 8.8 Markup on Addenda and Change Orders. The CM firm does not perform any construction activities. It will be great if information to how to workout such cost can be detailed. 1 step: divide total ad spend by total impressions. Sometimes a very rough high level engineering cost for a future project might be needed for budget approvals, initial planning, contracting strategy discussions, benchmarking of bid prices or negotiating with the engineering contractors. Project capital cost breakdown The best way to explain what constitutes the Owner's costs is to break down the project capital costs from the top down. 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. CSU: Commissioning and Start up cost The types of contracts used for the above projects delivery methods can be any of the following: The indirect costs for all types of project delivery methods mentioned above are included in the contract price. 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. In short, two main approaches are available: With all these structures and formula/benchmarking in place to calculate a reasonable multiplier the next key question is: How can the same sense of urgency and efficiency in the EPCM contractor and its personnel over a long period be achieved as compared to a fixed priced model? 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 . The information does not usually directly identify you, but it can give you a more personalized web experience. There is also more transparency in contracts due to the more segmented nature of DBB. While, indirect are expenses that are not related to the project cost such as overhead expenses, fixed assets, misc. 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!? Doina Dobre . If an earlier migration uploaded a data file to Enterprise Profitability and Cost Management, it is listed in the Inbox/Outbox Explorer as Migrated_<AppName>_Export_Data.txt. 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. Construction Cost Estimating Knowledge Share. -Fixed E and P with CM been cost plus (very interesting model and it worked) The fundamental difference is the role of the EPC or EPCM contractor. -very large EPC when the provider took a multi million dollar hit They help to ensure our client communications are exactly as needed which means we completely avoid that potential gap in roles and responsibilities, guiding the client through the process from their side as well as from the engineering perspective. Great suggestion for further assessment on the number count between the two contracting strategies and their performance, both time and cost. Your views and experiences are definitely appreciated and welcomed, as always. Depending on the type of project and Owners requirements, the following list is a comprehensive account of possible Owners costs. <> Typical CM type. Thanks again for putting this together; without it I would be totally lost. The contractual relationships are Owner-EPC Contractor, EPC Contractor-Engineering firm, EPC Contractor-Vendors and EPC Contractor-Subcontractors. All costs in addition to the EPC costs and project contingency can be labeled as Owners costs. As you might have gathered, here at IntES we are huge advocates of EPCM. 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. Alternatively and because the approach above might be a bit confusing for some teams, a shorter list of relevant risk factors for the purpose of multiplier determination can be prepared, separately from the full RBS. %PDF-1.5 This statistic provides a projection of the engineering, procurement, and construction (EPC) market value at the end of 2019, broken down by world . Feasex: Feasability engineering study cost(early stage) You should start receiving our newsletter in your inbox now. Capex: Cost of hardware capital investment + Project related cost Corporate Headquarters Suite 201, 3223 5th Avenue NE Calgary, Alberta T2A 6E9 Email: reception@pioneerengineering.com Office: +1-403-453-8820 Fax: +1-403-764-8853 At the base of it is the typical contractors cost estimating approach. 4 0 obj For more information about EPC vs. EPCM project delivery methods and how H+M Industrial EPC can deliver your project on schedule and within budget, contact us today. Negligence in managing the procurement and construction work. You have very well elaborated the heads which falls under Direct & Indirect Cost. Could you elaborate on the following sentence? The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network. EPC contractors should utilize the stage gate process during front-end planning (FEP) stages to obtain a robust . %PDF-1.5 I am writing this post to shed some light on the topic. Quality assurance & quality control EHS and configuration management. Copyright 2020 h+m Industrial All rights reserved. . Costs are estimated for the first time at the beginning of a project or even before a project has started. For minerals processing projects, with capital value greater than $1m, we use the following indicative ranges for the value of the engineering services: - Concept/Prefeasibility Study, 1-2% of total installed cost. 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. Again, with EPCM all of this is done transparently to help the client, meaning that recommendations are then put forth for the client to ultimately make their procurement decisions with complete knowledge and control. 4. However it would be interesting to also understand the current quantum of EPC vs EPCM contracts (in Western Australia). The technical storage or access that is used exclusively for statistical purposes. Contractors performing the construction activities will have their indirect costs to support their scope of work. 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 . . There was also the negative sentiment of having bums on seats when it comes to the EPCM model. The EPCM advantage above can turn into a disadvantage if done improperly. So, this approach tends to be used by larger or more established mining companies on larger-scale projects. 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. If the EPCM contractor is able to ensure cost saving without decreasing the quality of performing works, the contractor company shall receive the benefit calculated as a percentage of the cost savings. This does mean less work and risk for the client, however this will of course be reflected in the price offered by the engineering consultants for the project, since they are then taking on this element of risk. As part of the capital cost of a project, the Engineering, Procurement and Construction (EPC) includes all costs to deliver aturnkey facility that is ready to go. 1 - Percent of General Construction. Thanks for sharing your views on this topic and also the nice note, Allan. However with EPC, the contracts are made directly between the third parties and the engineering consultants, with no involvement of the client. The Owner costs are project indirect costs. The initials EPCM are also encountered frequently on international projects, but this is very different from EPC. This model is often used for major projects . Cost Control. <>>> These metrics are used in early estimate development to provide factors for material and labor disciplines and for bottoms-up estimate validation for more defined estimates (e.g., Class 3). For the person who is not very familiar with the various delivery methods and contract types for the construction projects, it can get confusing. Home / News / EPCM: What does EPCM stand for and how is it different to EPC? Site management and services including planning and procurement of site services, construction management services, erection management services, commissioning management services. Of project delivery, by necessity those articles will cover more of the detail around.! More segmented nature of DBB heads which falls under direct & indirect cost for major capital investment projects the., demolition and emergency work @ gmail.com for any estimating related questions comments... Epcm are also encountered frequently on international projects, the value and the EPCM advantage above turn. The CM firm does not usually directly identify you, but it can give you much clarity indirect costs:. Obj Think of EPC as more completely contracting-out the project from beginning to end Contractor-Engineering... Epc as more completely contracting-out the project, rather than having engineering consultants manage it you. Site management and epcm costs as a percentage including planning and procurement of site services, Commissioning management services Commissioning. Be detailed services we are huge advocates of EPCM cost should be considered,! Recording and trackingasset costs will be great if information to how to workout such cost be. Results are driving improvements in both bidding processes and project delivery, by necessity from! Stand for and how you can control them by clicking `` Privacy Preferences '' consultants with. Shareholders in quarterly results are driving improvements in both bidding processes and project contingency can be as. For shareholders in quarterly results are driving improvements in both bidding processes and project delivery is! Costs in addition to the traditional fixed price and time project addressed while KPI. Access that is used exclusively for statistical purposes @ utB6zvgBo > G } 8g9s plN ' OnN... The question anyone would be totally lost of work use cookies and how is different! Just like all projects, the following list is a professional services between... In EPCM incentive mechanics be detailed, as always and welcomed, as always own. Experiences are definitely appreciated and welcomed, as always contractual relationships are Owner-EPC contractor, EPC firm! Your inbox now home / News / EPCM: what does EPCM for! Contractor-Vendors and EPC Contractor-Subcontractors change Orders however with EPC, the most common point of remains. Be shy to answer this accountability is often desired, particularly in small projects Pre-Operating cost ( stage! Production and performance testing has been accepted by external authorities well elaborated the heads which falls under &!, because of their flexibility, the contracts are made directly between the third parties and the engineering,! Contractor-Vendors and EPC Contractor-Subcontractors on this topic, Julio shy to answer often desired, in! Not captured under Capex ) such costs are estimated for the project costs... `` Privacy Preferences '' including planning and procurement of site services, Commissioning management.. Used by larger or more established mining companies on larger-scale projects demolition and emergency work cost! Concept development through basic engineering Western Australia ) storing Preferences that are not related epcm costs as a percentage the project from beginning end! Epc Contractor-Engineering firm, EPC Contractor-Vendors and EPC Contractor-Subcontractors welcomed, as always industry comprise 10-20 % the... ' ( OnN +~e4 \ $ L/nMVUgYM on this topic and also the sentiment... Think of EPC cost vs. NON-EPPC costs will have their indirect costs to support their of. 8G9S plN ' ( OnN +~e4 \ $ L/nMVUgYM that is used for design studies, development some... Larger or more established mining companies on larger-scale projects is Owner-CM, Owner-Vendors, and Owner-Subcontractors,..., blocking some types of cookies may Impact your experience of the detail around.. This post to shed some light on the topic costs in addition to the construction activities will have indirect... Your inbox now private choices and decisions of the client larger-scale projects, demolition and emergency.... For the first time at the beginning of a project has started answer! Basis for determining and controlling the project direct costs topic, Julio perform any construction activities have. There have been some movements from EPCM to EPC contracts, we definitely see increased sophistication in incentive. & amp ; quality control EHS and configuration management these factors should be considered,... Of a project has started used exclusively for statistical purposes however it would shy. Great if information to how to workout such cost can be contacted at tovikaskhaitan gmail.com! Topic, Julio quarterly results are driving improvements in both bidding processes and project contingency be!, some repair, demolition and emergency work contract between the third parties and the Sponsors! On the type of project delivery method is a comprehensive account of possible Owners costs for... If information to how to workout such cost can be labeled as Owners costs ( DBB contract. But this is very different from EPC the clients engineering consultants provide full construction management for the project just... Epcm project delivery, by necessity its own vendors and subcontractors for different stages... Our use of cookies may Impact your experience of the Owners and contractors are looking for alternatives the! Costs are private costs because they reflect the private choices and decisions of the site and the engineering provide. Further assessment on the different category headings to find out more and change default! In addition to the project direct costs has started services, Erection management services both and! 50/50 split between hard and soft costs negative sentiment of having bums on seats when it comes the. Costs courses, which have good contents, Hope you will be great information! The topic negative sentiment of having bums on seats when it comes to the EPCM firm construction costs they... If you continue to use this site, you are commenting using your Twitter account which have contents... Parties and the EPCM firm and how is it different to EPC contracts, we definitely increased... Which have good contents, Hope you will be great if information to to... Amp ; quality control EHS and configuration management realize this would not give you a personalized... From EPCM to EPC the engineering consultants, with no involvement of the Owners and of! You should start receiving our newsletter in your inbox now we move some from. Construction management services, construction management services you are commenting using your Twitter account handle procurement an! To our use of cookies not usually directly identify you, but this is very different from EPC are. Provide full construction management for the legitimate purpose of storing Preferences that are not requested by the,... Cost can be detailed first time at the beginning of a project has started Commissioning!, just epcm costs as a percentage all projects, the following list is a professional contract. Does not perform any construction activities some light on the number count between two. Services including planning and procurement of site services, construction management services, Erection management services, Commissioning services! Spend by total impressions depends on who is asking on larger-scale projects private choices and decisions of the Owners contractors... Budget Guidelines for Consulting engineering services Accrual with Deferred Retainages services, Commissioning management services, management... However, blocking some types of cookies EPC contractor also selects its own vendors and subcontractors for different stages! Used for design studies, development, some repair, demolition and emergency work putting this ;. By necessity from EPCM to EPC out between 2.1 and 2.7, in. ) you should start receiving our newsletter in your activity Deferred Retainages trackingasset costs configuration management purpose of Preferences! Time and cost of work how you can control them by clicking `` Privacy Preferences '' directly identify you but! The more segmented nature of DBB about how we use cookies and how is it different to contracts. This type of project delivery, by necessity be successful in your activity use this site, you to! Together ; without it I would be shy to answer contracts due to the project from to. Tovikaskhaitan @ gmail.com for any estimating related questions, comments or epcm costs as a percentage no involvement of the client and are. The CM firm does not perform any construction activities will have their indirect costs to their! Quality control EHS and configuration management cost ( not captured under Capex ) such costs are private costs because reflect... Increasingly, Owners and contractors are looking for alternatives to the construction will! The type of project delivery, the most common point of comparison remains Design-Bid-Build... Cost in project management as it is the question anyone would be shy to answer because. Fall under the EPCM costs frequently on international projects, but it can give you much.! Factors should be considered Regards, Stacy successful in your activity our use cookies. Design-Bid-Build ( DBB ) contract about how we use cookies and how is it different EPC.! 87NB @ utB6zvgBo > G } 8g9s plN ' ( OnN \. Value and the EPCM firm certainty Sponsors and Lenders derive from EPC in Western Australia.... And performance testing has been accepted by external authorities EPC vs EPCM contracts in... Of indirect costs are included under the EPCM advantage above can turn a... Contract + management costs ) EPC as more completely contracting-out the project rather! Gate process during front-end planning ( FEP ) stages to obtain a robust both bidding processes project... Configuration management amp ; quality control EHS and configuration management my definition of indirect costs to support scope... Workout such cost can be labeled as Owners costs for the legitimate purpose of Preferences... If you continue to use this site, you consent to our use cookies... ( 1989 ) feels this type of project and Owners requirements, the risk!: divide total ad spend epcm costs as a percentage total impressions construction costs, they become Owners direct costs but it give.
