Budgeting procedures for EPC projects

[Luis1947]

Sirs

I’m working as part of a team to develop new budgeting procedures for EPC projects, which should be lump sum contract. Our concern is about the bid documents, which normally includes basic engineering but many sections only have conceptual engineering. In this way, there is not enough technical data to get a competitive budget. Does anyone have some tips how we should perform to check the engineering provided by the client? I’m looking for some checklist or some criteria to evaluate it. Any comments will be appreciated.

Thanks in advance

 

[jbarba]

Contact Construction Industry Institute (CII) Austin Texas. They have several checklists and methodologies to validate client documents (mostly type) used as basis for bids. Content of documents usually has impact on bid quality. This requires expertise and experience in understanding the drawing's content.

 

[taylorg]

There are a few good consultancy's around who can help you prepare fully detailed tender documents and also help you perform a high level assesment of the resulting bids. An incorrect methodology can obviously have serious consequences.

 

[Luis1947]

Thank you for your comments. As you mentioned, although there could be a general criterion to evaluate the technical bid documents, there is no universal "cookbook" approach to substitute good engineering practices. Anyway some checklist is necessary to implement.

 

[jbarba]

Luis:

You are correct. The check list is important to make sure you have not missed something. Good engineering, long term expertise and lesson learned together with the check list are the ingredients for avoiding overruns, contract extras and delayed schedules.

Joe

 

[ColCol]

Luis,

You ask a very important question, and I'm not sure a contract consultant can help find the answer.

When a client requests proposals for EPC work, it would not be financially prudent for them to spend a lot of money on engineering to put in the RFP. The contract that they hold with their "owner's engineer" typically does not have enough funds to do much proper sizing, optimization, or even good facility siting; never mind permitting costs and scheduling.

This leaves you with the task of doing enough engineering, for free, as part of your bid preparation to back up your procurement and construction costs. As a result, competitive EPC bids are very expensive to produce. Every dollar you don’t spend during bid prep on real engineering increases your risk of missing the construction number, or forces you to add contingency dollars that eat away at your competitiveness.

The fact that you have recognized this conundrum means that you are on your way to truly understanding the EPC process. From here you can see why many large firms are beginning to back away from the EPC process, and why it is not legal for most municipalities to let EPC contracts for public works.

It was the EPC market the killed Stone & Webster, an engineering icon in the US for over 100 years. On the west coast Reiley Bechtel stated in 2002, "We have done our last EPC project."

I don't mean to be down on clients the let EPC jobs, or contractors that perform them, there are many success stories. It's just that I have observed the EPC contract as the instrument most responsible for the worst developments in the engineering industry in the last 10 years.

Good luck on your bid!