Advantages and Disadvantages of an EPC Contractor in an SPC Green energy project (minority investor)
Updated: Mar 30, 2022
What is an EPC Contractor?
EPC stands for Engineering, Procurement, and Construction. The EPC contractor coordinates all design, procurement, and construction work and ensures that the whole project is completed as required and in time, budget and quality.
EPC basic function on a construction project could be:
Logistics and transport
Advantages of EPC Contractor
Single point of responsibility: the SPC has a single point of contact regards of any construction problems occurring (DLA PIPER, 2011) (Langhe & Minde, 2018).
A fixed contract price (turnkey contract) with costs overruns being contractors’ responsibility (DLA PIPER, 2011) (Blaiklock, 2014).
A fixed contract and completion date: the contractor is liable for delays in project completion
Performance guarantee: the contractor is liable for any performance issues of the operations of the project, such as the deterioration of WTGs (DLA PIPER, 2011).
Project performance security: security could come in as a bank guaranty of 5-15% of the total contract cost or a parent company guarantee of the EPC contractor (DLA PIPER, 2011).
Defects liability: 12-24 months after project completion the EPC contract is liable for any defects caused due to poor construction of infrastructure (DLA PIPER, 2011).
Minimization of SPC risks (Langhe & Minde, 2018).