Under this system, the client would contract a single company to supply the system design (Engineering), create detailed bills of quantities (Procurement) and manage the project execution (Construction Management) via sub-contractors who signed a contract directly with the client. The client, who is also the system owner, would remain in close contact with the design house during the construction phase, as they continued to supply management and supervisory services helping to ensure that quality requirements, budgets and time schedules were constantly being monitored and controlled. The client has a feeling of security and being in control with the design company 'by his side'.
The reality is quite different from this ideal and countless projects have shown that this model suffers from five fundamental problems. Firstly, no process guarantee is provided by the design firm. All risks involved are carried by the client, with the designer offering no guarantees for the final product. The second problem is with the cost structure being based on actual cost (often based on hours worked) plus a pre-agreed profit margin. This often results in a calculated strategy by the EPCM Company to unnecessarily complicate the project thereby requiring additional services to then be provided by them. This leads to the third problem which is an open-ended budget, with the final costs frequently exceeding initial estimates and, fourthly, a delay in completing the project. The client now faces a fifth problem in that he has been forced to assume responsibility for the project and, in effect, has become the de-facto manager of the overall project, a task for which he is ill-equipped and inexperienced. Ironically the client had contracted the management services of the design house specifically to avoid such a situation. These are cardinal problems with great financial implications, directly and indirectly, to the new system owner. The delay in erecting the new facility results in additional management fees and, more severe, is the loss of production. Working relationships deteriorate between the client, the designer and the contractors, and in most instances it's the client that pays the highest price in that he has overpaid, received a late and unguaranteed plant and will most likely have to invest additional funds for necessary improvements and repairs.
In recent years, a fundamentally new approach is increasing in popularity, that of EPC – Engineering, Procurement and Construction whereby design and engineering divisions were established as integral parts of a construction firm, in an effort to offer their clients a comprehensive solution. The EPC Company designs, purchases, and constructs the factory, finally handing over a working operation. All communication between the various sub-contractors and suppliers is handled by the EPC Company. These companies, in distinction to the previous method, have understood that in order to be able to provide a product as complicated as a new production facility it is beneficial to encourage the exchange of ideas and co-operation between the design and execution branches. This new approach believes that alongside theoretical engineering knowledge there is a place for expertise and experience gained from having been 'in the field'. Companies who were able to implement this new approach correctly, recruited professional engineering staff and purchased advanced computational and 3D simulation software to provide visual feedback to the construction teams in order to receive their input and advice, while still during the design phase. This enabled EPC's to supply their customers with a complete and functional system, with theoretical knowledge enhanced by practical site experience. The process of moving away from EPCM towards EPC is underway and is rapidly building momentum. The basis for the success of this method is the creation of confidence between the EPC and the client. This confidence can only be gained by the successful completion of more and more functionally sound projects, which are neither over budget nor late. With the EPC system the client receives his plant at a pre-determined budget and with a full process guarantee all the while keeping to the schedule. The client does not need to invest time in managing the project and actually passes on all responsibility to the EPC Company. The client has one point of contact for all issues relating to the project and is able to focus solely on ensuring that the EPC Company will deliver the correct product, on time and on budget.
The author is the general manager of systems and engineering and board member of Meptagon.