United Arab Emirates: Differences Between EPC And Design-Build Delivery- English Law Compared With GCC

Last Updated: 5 April 2019
Article by STA Law Firm
Most Read Contributor in United Arab Emirates, April 2019

Any manufacturing company primarily delves on the basics of production efficiency, innovation, cost management and time to market which are the critical factors for achieving a competitive advantage. The company needs to achieve its business strategy, and thus a brief mode of delivery is required for delivering capital projects. When a strategically best method of delivery is chosen for capital construction projects, the companies can guarantee successful business goals anticipated for the project.

The economy sustains on various project delivery methods that are available on hand for them, but the problematic part arises about choosing the appropriate and strategized method for the same. It must be dependent on various factors ranging from budgets, schedule, cash flows, complexity in the projects, risk mitigation and hedging, the team composition and the goals designated for the project.

The generational and traditional way of doing it is by retaining the already available engineering and project management resources. Nevertheless, owing to the specific market-based issues related to monetary and competition, several units tend to decrease their in-house capacities and in turn, go for a selection of specific project delivery method.

Primarily, a project delivery method is a configuration of roles, relationships, responsibilities, and sequences on a project. It is a strategy utilized by an agent or the proprietor which helps in the corporation and financing design, construction, activities and support administrations for a structure or office by entering into agreements with at least one substances or gatherings. It is essential to choose a delivery method that best meets the unique needs of each owner and their project.

The fundamental decisions that an owner must take into account are that what kind sort of task conveyance strategy to utilize, what will be the obtainment technique and what will the contract be like. The Project delivery process generally involves an owner, designer and a builder.

The conveyance strategy might be a combination or hybrid of numerous conveyance techniques. Each delivery techniques builds up various connections among the parties included and, in this way, extraordinary dimensions of hazard.

Project Delivery Methods:

The Engineer-Procure-Construct (EPC)

It is a project delivery method that has risen as a favored choice for some industrial entities and is beginning to pick up support in the manufacturing business. With an EPC contract, the proprietor has a solitary purpose of contact for the venture. Under the model, the EPC firm handles the design plan, obtains all hardware and development materials, and construction services for turnkey conveyance of the office, for the most part at a single amount cost.

The EPC procedure begins with a reconstruction effort that includes some first-hand planning and designing to characterize the scope, timeline, and expenses of the venture. Approval is regularly overseen specifically by the customer or through a different validation firm to guarantee this basic action is conveyed effectively.

The EPC firm develops project scope and estimates. The timeline for the project and the budgeting are known before the task enters detail structure or development stages. All plan and development degree and spending dangers are passed to the contractual worker.

The EPC model adjusts colleagues for ideal venture execution. The EPC display decreases venture dangers for the proprietor, conveys unsurprising outcomes, and augments the adequacy of capital arranging.

Design-Build

As of years, design-build has been gaining momentum as a favored method. As an increasingly clear conveyance strategy for proprietors, it additionally limits risks. A conceptual plan for a project is developed by an owner who then solicits bids from a joint venture of architects and engineers and builders for the design and construction of the project.

The DB project delivery model is appropriate for assembling customers that require quick tract venture conveyance and need a single point of contact. The temporary worker and originators are enlisted by the proprietor to convey a total task.

The owner selects a design-build firm from pre-qualified companies that have submitted designs and prices based on the project requirements. The DB firms retain their architects, engineers, and other consultants. The owner provides the user requirement specifications, materials of construction, and the specifications for the manufacturing equipment. The Design-build contracts are typically lump sum and based on the design that accurately meets the owner's specifications.

It is employed to decrease the project delivery schedule. DB is typically practiced for architecturally-driven designs. This concept typically occurs in improved communication among the design team and a larger degree of responsibility. While this is a complicated delivery method, the compressed schedule and value engineering approach often result in cost savings for the owner.

Design-Bid-Build

Design-bid-build relates to the subsequent phases of this project delivery method, which sometimes is called "traditional." The contract documents are developed by the owner with an architect or an engineer which comprises of a various set of blueprints and a detailed specification.

Construction Management at Risk

At the point when proprietors need a characterized culmination date and value, the development the executives in danger may be the favored task conveyance technique. Amid the venture plan, a development administrator goes about as an expert to the proprietor.

Multi-Prime

In multi-prime, the undertaking is separated into three phases– design, engineering, and construction. While actualizing MP, the proprietor frames separate contracts with the experts heading the different phases of the undertaking. Every one of these classes of contractual workers may direct crafted by subcontractors, for example, a general contractor who manages carpenters and framers.

Integrated Project Delivery

Coordinated venture conveyance is the best in class conveyance strategy in development with an accentuation on cooperation and joint effort. While actualizing IPD, the essential objective of the incorporated strategy is to spread obligation, duty, and hazard (and rewards) among the partners in a construction job.

Comparing English Law with GCC

The International Federation for Consulting Engineers (Fédération Internationale des Ingénieurs-Conseils) (FIDIC) is commonly employed in the UK as well as in the GCC. FIDIC is commonly used on UK projects, particularly the EPC/Turnkey Contract (The Silver Book) and is often used in process plant/complex engineering projects in the United Kingdom.

The International Federation of Consulting Engineers (FIDIC), Joint Contracts Tribunal (JCT) and New Engineering Contract (NEC) contract suites have specific design and build options that can be modified to support the type of procurement entirely or by way of partial design liability being passed to contractors. The construction industry in the GCC adopts and follows international best practices for construction contracts governed by GCC law or implemented in the GCC. These contracts are heavily modeled after FIDIC forms of contracts.

Also, the lump-sum turnkey contract is the dominant procurement model in the GCC market. Whether upstream or downstream, the vast majority of the GCC's oil and gas sector projects are delivered through engineering, procurement, and construction (EPC) contracts.

Petrofac was recently awarded the $580m EPC contract for a GCC project. Petrofac's Middle East portfolio includes the Upper Zakum oil field project in the UAE, the Sohar refinery improvement project in Oman, and the Petro Rabigh Phase II project in Saudi Arabia.

Design-and-build is touted as the contracting technique for the future, killing debate and hurrying the plan and development process. It is relatively new in the Middle East, but as we see more of this method, the roles and responsibility of the contractor will become more evident. The client needs to ensure the right contractor is used, with enough experience and resources to enable them to complete the project to the quality required. The building criteria must be very clearly laid out ahead of appointing the contractor, as the client may lose design control once a fee has been agreed upon.

Design and build contracts have been utilized effectively for quite a few years outside of the Middle East yet were not ordinarily drilled in the Middle East until 2012.  whereas, 2013 and 2014 have seen employers from different projects adopting this procurement route. Realizing the advantages of this procurement route, more and more employers are adopting Design and Build for their projects.

Already predominant in Europe and many parts of Asia, it eliminates the separate responsibilities for the designer and the contractor, since the designer is a partner, a subcontractor or an employee of the contractor.

With the designer getting imposed with the risk, more complex projects soon became attractive in the UK, and the companies were looking for a one-stop shop approach. The Company may have avoided the design development risk, but still retains the risk of delay for the other reasons, so the potential disputes remain.

In the case of Midland Expressway vs. Carillion Construction, the M6 toll road construction was based on a design-build contract, where the entire responsibility for the design was given to the contractor. Disputes regarding claims for payments and share of the discounts to be received were ascended followed by adjudication and then litigations.

This judgment started with an intrigued tone, and the courts held that there was no doubt at considerable expense to the parties involved, thereby design and build does not prevent claims arising. It does not prevent contractors from making claims for extra time and money where there is a lag.

The company may think that he is setting all the design jeopardy on the contractor but, if significant modifications are notified during construction (which is the case for many projects), this risk stays with the organization.

Differences between EPC and Design-Build Delivery

EPC and Design-Build Delivery have both existed as mainstream delivery methods for decades. In both cases, the partner has a point of contact. In both cases, the company is responsible for the design, and the contractor takes on more risk than a traditional design-bid-build delivery. However, several essential differences differentiate the two:

Active Participant:

An EPC project results in a turnkey facility. The EPC contractor heads the working of the project facility.

A design-build contract finishes off comparatively to configuration offer form contracts, with the proprietor and its development director or fashioner playing a functioning job in punching out the office.

The design-builder is held by the proprietor from the get-go in the life of the undertaking and, now and again, before the structure has been created by any means.

Design-build is used to limit dangers for the venture proprietor and to decrease the conveyance plan by covering the structure stage and development period of an undertaking."DB with its single point duty conveys the clearest legally binding solutions for the customers in light of the fact that the DB contractual worker will be in charge of the majority of the work on the undertaking, paying little heed to the idea of the blame."

It answers the client's wishes for a single point of responsibility in an attempt to reduce risks and overall costs.

These contractors are usually handed little more than performance requirements varying, whereas most design-build configuration assemble contracts give probably some plan detail in the connecting reports.

EPC equivalent of the "structure help" or "quick track" plan construct forms is not available.By and by, this mirrors the proprietor's increasingly negligible contribution in the EPC configuration process.

There is no EPC likeness the "structure help" or "quick track" plan construct forms. By and by, this mirrors the proprietor's progressively negligible association in the EPC configuration process.

Risk-taking:

Most contracts transfer far more risk to the contractor in EPC. The risk is not shared between the owner and the design-builder, but just the contractor has to face the responsibilities and the liabilities.

Design-build contracts will, in general, take either a customary plan offer form way to deal with questions like obscure site conditions or to share that chance between the proprietor and the structure manufacturer. In contrast, it is not uncommon for EPC contracts to shift these risks entirely to the EPC contractor.

Project Delivery Processes:

The delivery of the project via Design-build is in two phases with:

  1. Phase I including budgeting and development and pre-construction services and the negotiation of the contract price for Phase II; and
  2. Phase II including final design, construction, and commissioning.

The EPC project process involves

  1. Initiating the Project
  2. Preparations like setting up of the project organization and Procurement procedure
  3. Phase I Project Development
  4. Phase II Project Implementation
  5. Phase III Project Follow up and (f) Decision Making.

Understanding the differences between these two seem quite similar design processes is a crucial step when assessing which delivery system is right for the project.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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