Project Execution in Process Industry EPCM EPC Mode

Project Execution in Process Industry EPCM / EPC Mode – An Indian Dilemma D. P. MISRA Director, Development Consultants Private Limited Past President-IICh. E

INDIAN SCENARIO Generally EPCM mode of project execution except in Fertilizer : Sulphuric Acid plants, SSP & DAP plants, in EPC besides OMIFCO Refining : Last 4 years projects in EPC Petrochemicals : MCC PTA / IOC LAB / IOC PTA projects in EPC Minerals : Recent mineral separation plants in EPC

PROJECT EXECUTION – EPCM MODE • Know how • Basic Engg • Detailed Engg • Project Management • Procurement Assistance • Construction Supervision / Management • Commissioning Assistance • Civil Works • Erection of Eqpt / Supplies

PROJECT EXECUTION – EPC / LSTK MODE • Know how • Basic Engg • Detailed Engg • Project Management • Supply of items delivered site • Civil Works • Erection of Eqpt / Supplies • Commissioning

CLIENT’S SCOPE (EPCM MODE) • Places Order – Know how / Basic Engg. Contractor - EPCM Contractor • Reviews Engineering • Places order (Based on EPCM Contractors’s Recommendation) - Eqpt / Supplies - Civil Works Contractor(s) - Erection Contractor(s) • Interfaces with EPCM Contractor • Makes Payments

CLIENT’S SCOPE (EPC MODE) • Places Order – Know how / Basic Engg. Contractor - Project Management Contractor (PMC) - EPC Contractor • Interfaces with PMC & EPC Contractor • Makes Payments

PRACTICE • EPCM Mode • EPC / LSTK Mode (Competitive) : Generally on reimbursable basis in Europe & USA : Indian Private / Public Sector : Middle East & South East Asia : Indian Public Sector. DILEMMA FOR INDIAN PUBLIC SECTOR - EPC or EPCM (? )

TIME OF COMPLETION EPCM Mode Basic Engg 4 EPCM Contractor Selection Bid 1 36 Selection 2 Execution of Project Execution 30 EPC Mode 4 Basic Engg. PMC selection Selection EPC Contractor Selection Execution of Project 3 42 ITB 3 Submission 4 Selection Execution 2 28 EPC mode takes more time but Contractor responsible for overrun.

PREPARATION & EVALUATION OF BID • EPC ITB : Involves FEED, Job Standards, Approved Vendors for supplies etc. & hence more time consuming than EPCM • Submission & Selection : EPC Bid needs evaluation of hardware and software and hence much more time consuming

FLEXIBILITY • EPCM Contractor : More flexible to accommodate client’s suggestion for improvement of plant Quality at change order to his fees • EPC Contractor : Less flexible as it will affect total contract value & time.

PLANT QUALITY • EPC mode : • EPCM mode : Normally much less inbuilt margin and plant quality focussed to contract price & schedule Quality sometimes gets compromised Client’s involvement at each step ensures proper quality and better margin for operation

CLIENTS INVOLVEMENT • EPCM mode : • EPC mode : Concerned in every Purchase Order and day to day Project Management with EPCM Contractor. Client’s Involvement larger and Only for initial order on PMC & EPC contractor. Involvement much less & the reason Indian Public Sector likes. costly

TOTAL COST OF PROJECT • EPC mode : • EPCM mode : Generally higher (10 to 30%) due to additional tax / duty burden, technical & commercial contingency. Less due to client paying exact cost of purchase to Vendors / Contractors besides less tax / duties.

FINANCIAL RISK • EPC mode : Contractor’s responsibility Lenders like it. • EPCM mode : Client’s responsibility.

TIMELY COMPLETION • EPC Mode : 15 Contractor’s Single Point responsibility More likely to happen due to high penalty • EPCM Mode : Contractor equally responsible Penalty only against fees Experience indicates on time completion and also overrun

AVAILABILITY OF INDIAN CONTRACTORS FOR HYDROCARBON SECTOR EPCM Private Sector • TCE Consulting Engineers • Jacobs H&G • Acker Solution * • Technimont ICB * • Toyo India * • Uhde India * • Chemtex • Technip India * • Lurgi India • Dalal Mott Mc. Donald • L&T Chiyoda • SNC Lavlin EPC Private Sector L&T Punj Lloyd Tata Projects Uhde India Lurgi India Technimont ICB * Overseas counterpart sometimes may bid for the project on EPC basis

AVAILABILITY OF INDIAN CONTRACTORS FOR HYDROCARBON SECTOR EPCM EPC Public Sector • Engineers India Ltd • Mecon • PDIL Engineers India Ltd

SUMMARY Elements of Comparison Project Executed on EPCM Basis EPC/LSTK Basis • Time of Completion • Preparation of bid documents Shorter Simpler Longer by 6 months Complex and time consuming • Work Scope Flexibility More Flexible Much Less Flexible • Quality & Life of Plant Better Good enough to meet contractual requirements • Client’s involvement More Less • Risk of Cost Owner Contractor • Total Cost of Project Less Costlier • Project Completion on schedule Less likely More likely • Availability of Indian Contractors Many available Limited to 2 & 3

CASE STUDIES FLOAT GLASS PLANT • Executed on EPCM basis • Completed on time in 31 months • Cost saving leading to Bonus • Safety & Quality of International Standard • Contingencies protected by negotiations

CASE STUDIES SPONGE IRON PLANT AT DOLVI, ALIBAUG • Completed in record time of 28 months • Better Free Issue Management – saving in cost and time • Saving of Rs. 40 Million only in structurals by optimized design • Integrated Team between Client and EPCM Contractor

WHAT IS GOOD FOR INDIAN PROCESS PLANTS • Project Execution in EPCM mode - Due to advantages of Total Cost, Time & Quality - Creates opportunities for Indian Engg. Contractors, Vendors & Contractors • Project Execution in EPC mode due to Lenders’ requirement and for Standard Package plants

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