International Construction Law Review
SOME THOUGHTS ON SUCCEEDING IN EPC PROJECTS
James Pickavance1
INTRODUCTION
Notwithstanding the possibly unexpected and turbulent course of politics in the past 12 months,2 the growth of the global construction industry continues more or less unabated. In 2015, the United Nations Conference on Trade and Development (“UNCTAD”) observed that the amount of foreign investment for the construction of greenfield projects in developing economies had jumped from US$22 billion in 2013 to US$42 billion in 2014, with year-on-year increases experienced particularly in the least-developed economies (562% increase from 2013 to 2014), East and South-East Asia (116%), West Asia (136%) and developed economies (55%).3 The majority of the major investment is focused on either energy or large infrastructure projects.4
Many, if not most of these projects are undertaken pursuant to EPC procurement route,5 principally because the employer, sometimes a state entity, does not have the skills, resource or financing to be able to offer much more than the details of the output of what it wants built. Generally speaking, a project let through an EPC route involves the contractor taking most of the responsibility for the design and construction of the work. The
1 James is a partner in the litigation division at Eversheds LLP in London, specialising in construction and engineering. He leads Eversheds’ global construction international arbitration practice and is author of A Practical Guide to Construction Adjudication, a book published by Wiley Blackwell in December 2015. He wishes to thank Pam Kahlon, an associate in the London construction and engineering practice and also the contributors listed at footnote 9 for their invaluable insight. The author, the contributors and their respective organisations accept no liability howsoever or whatsoever for the content or the views expressed in this paper.
2 Referring to Brexit in the UK, Russia’s nuclear war test with 40 million citizens, the latest US elections, a well-known US political correspondent remarked that the last 12 months felt like “… the precipice of an era of regression. What concerns me is that people are polarising and that promulgates an attitude that leads nations to polarise and when that gets out of hand it’s time to crawl under a rock, because nowadays everyone’s got bigger sticks and stones to play with.”
3 UNCTAD, World Investment Report 2015: Reforming International Investment Governance, 2015, pages 14, 40, 53 and 72.
4 See e.g., UNCTAD, ASEAN Investment Report 2015 – Infrastructure Investment and Connectivity; PwC, Capital Project and Infrastructure Spending: Outlook to 2025, 2015; FDI Intelligence, The fDi Report 2014 – Global Greenfield Investment Trends, Financial Times Ltd, 2014; Turner & Townsend, International Construction Market Survey 2015 – Global Rebalancing: A Changing Landscape.
5 EPC procurement models are generally sector, finance, or capability driven. They include EPC (Engineer, Procure, Construct), EPCC (Engineer, Procure, Construct and Commission), EPCM (Engineer, Procure, Contract, Maintain), BOO (Build, Own, Operate), BOOT (Build, Own, Operate, Transfer) and DBFO (Design, Build, Finance, Operate). The choice of model essentially comes down to the control and the risk that the employer wishes to assume.
Pt 1] Some Thoughts on Succeeding in EPC Projects
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