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What is the difference between an EPC and a Turnkey Projects?

Last Updated on September 16, 2022 by Admin

In this article, we have explained the difference between an EPC and a Turnkey project. What is EPC? and what are the Turnkey projects? Find here all you want to know about EPC and Turnkey Projects.

An EPC is a construction project detailed according to the contract’s letter. The contractor (company) will provide all labor, materials, equipment, and other expenses for the project through one agreement in exchange for a fixed price. A turnkey project has a set scope of work, including design services and team members, that are agreed upon in advance with the customer.

What is EPC?

Engineering, Procurement, and Construction” EPC is a particular form of contracting arrangement used in some industries where the EPC Contractor is made responsible for all the activities from design, procurement, and construction to commissioning and handover of the project to the End-User or Owner.

The engineering and construction contractor will carry out the detailed engineering design of the project, procure all the equipment and materials necessary, and then construct to deliver a functioning facility or asset to their clients. Companies that offer EPC Projects are commonly referred to as EPC Contractors.

What is EPC mode in construction?

EPC stands for Engineering, Procurement, and Construction. This is used in the construction industry to ensure a project is completed on time and within budget.

It involves allocating resources wisely, coordinating efforts between different parts of the construction team, and maintaining communication between all stakeholders.

EPC can help to improve the quality of a project as well as reduce costs. EPC mode in construction includes all the steps necessary to design, build, and maintain a project.

A civil works EPC contract is a legal agreement between a client and contractor in which the contractor agrees to design, finance, build and operate an infrastructure project.

The key difference between a civil works EPC contract and other contracts is that the contractor takes on more risk under an EPC contract. This means that the contractor is responsible for any cost overruns or schedule delays that occur during the project.

What is the EPC Project Examples

Engineering Procurement & Construction projects generally include performing the engineering design, procuring the necessary materials and finally performing the actual construction. These tasks are generally done by contractors specializing in EPC and therefore referred to as EPC contractors. The client enters into a contract with EPC contractors, delivering a functioning asset to the client.

Here are some of the Prominent EPC Companies are;

  • TechnipFMC Plc, United Kingdom
  • McDermott International, Inc, USA
  • Saipem, Italy
  • Worley, Australia
  • Samsung Engineering India Pvt Ltd., India
  • Linde Engineering India Pvt. Ltd. Vadodara

What is a Turnkey Project?

One of the unique modes of carrying out international business is a turnkey project. Turnkey projects mean a contract under which a firm agrees to fully design, construct and equip a manufacturing/ business/ service facility and turn the project over to the purchaser when it is ready for remuneration.

The term turnkey project (Turn-key delivery) describes a project (or the delivery of such) in which the supplier or provider is responsible to the client for the total result of the project and presents it to the client, finished and ready to use.

The term turnkey project is a turnkey solution, turnkey delivery, or ready-to-use. The client should be able “just to turn the key.” The turnkey project supplier is the general contractor (leading supplier, direct supplier, or main contractor).

Turnkey projects in practice: In a turnkey project, the supplier takes on complete responsibility for the adherence to delivery dates, the scope, and the cost of the entire delivery subject to the customer.

Thus, the customer is not affected by any risks inside the project, and the project result is covered by one agreement.

Also, turnkey project management means having a team that can handle all aspects of a project from start to finish. This allows for a more streamlined process and eliminates the need for multiple vendors.

Turnkey Projects examples

Engineering Projects, large construction projects, i.e., Construction of Airports, Ports, skyscrapers, Bridges, In IT (turnkey implementation of information systems)

The turnkey project is usually very complex and may involve the development and design, the production, and the delivery and set-up or installation of the project.

What is a Lump Sum Turnkey Contract

A lump sum turnkey contract is a construction contract in which the contractor agrees to provide all labor, materials, and equipment necessary to complete the project.

The owner pays a lump sum price for the entire project, and the contractor is responsible for ensuring that the project is completed according to the agreed-upon specifications. This type of contract is often used for large construction projects, such as building a new factory or office complex.

What is meant by Turnkey Contract?

A turnkey contract is a contract where the contractor provides all the necessary resources and personnel to complete the project.

This means that the contractor has complete control over what is done on the project. The contractor may also provide pre-determined specifications or guidelines for how the project should be completed.

What is EPC Turnkey Contract?

EPC Turnkey Contract is a contract that is typically used by businesses to provide services such as construction, engineering, and procurement. Under this contract, the business will contract with an EPC firm to provide these services on a project-by-project basis.

This means that the EPC firm will be responsible for all aspects of the project, from beginning to end. This includes managing the project team, overseeing the work being done, and ensuring that the deadline is met.

What is the difference between an EPC and a Turnkey Project?

Here are some of the common differences between the EPC and Turnkey projects.

EPC Project

EPC = Engineering Procurement and Construction.

These engineering, procurement, and construction jobs are helpful but can involve some significant differences. It is good to see what differences between EPC and turnkey contracting.

The first thing involves the depth of the project that is being handled. An EPC project will include a contractor working with basic engineering procedures. This can help ensure that a business will be set up correctly with the right engineering plans for unique needs.

A turnkey project will involve more specific rules for technical procedures. This is often used to help make it a little easier for a person to handle more controls without an issue getting in the way of things.

The next difference involves who is responsible for getting a design for EPC and turnkey contracting ready. An EPC plan will include the contractor getting a complete system design ready to be more effective and easy to read.

Meanwhile, a turnkey process will involve a contractor dealing with special considerations for handling property and designing things based solely on the type of specifications that come with the property.

There is also the point about the contractor having to work with assigning the right people for the construction process.

An EPC process will involve that contractor working on getting another party to get the startup construction process handled. The turnkey process will include the contractor being fully responsible for every part of what is happening here.

This is often used to help make it a little easier for a property to be arranged as carefully as possible to prepare engineering plans.

The interesting point about getting EPC and turnkey contracting plans going is how they both work with different kinds of procedures to work with varying costs in mind.

However, the total cost of getting EPC and turnkey projects contracting India ready should be the same regardless of the type of control being handled in the process. This fascinating point makes it a little easier for anyone to handle contracting functions for all kinds of business purposes around India.

The differences between EPC and turnkey project contracting are great points that must be seen when trying to find ways to get different kinds of procedures handled.

This is used as a means of helping to see how it works and whether or not a person will be controlled as well as it can for the best possible needs that a business will have.

From the role & responsibility point of view

Turnkey Projects: You can turn the key and start using the facility. So it indicates the contractor scope includes all the activities and facilities required to start operation on a single-point responsible basis.

EPC: EPC indicates a contractor is responsible for the Engineering, procurement, and construction of a particular facility/work awarded to him

Example: A hotel project awarded on a turnkey basis means the contractor is responsible for completing all activities leading to the final operation level (handing over to the operation team).

You can’t divide this project into different activities like Civil, MEP, etc., and award it on a turnkey basis to various contractors. On an EPC, you can award only MEP works on EPC or a Sewage Treatment Plant (STP) work on EPC.

From the risk point of view

Turnkey Projects: An Employer can do engineering & procurement (full or partial) and appoint a contractor to execute the work on a turnkey basis. Here, the Employer can decide to take more risks in engineering, procurement, or both.

EPC: An employer doesn’t want to take any risk regarding a particular work (like the Sewage Treatment Plant example given above). So he wants to keep all three components within the scope of a single contractor.

Any engineering, procurement, or construction failure will rest with the contractor. Also, variations to the Contract will be minimum for an EPC contract.

From an execution point of view

Turnkey Projects: is preferred where several activities are involved. The single-party reduces coordination efforts with many contractors that are required otherwise.

EPC: is preferred where complex engineering or proprietary technology is involved, like in oil & gas and process plants.

An EPC project is the same as a turnkey project combinedly called an EPC turnkey project.

An EPC contract encompasses the E (Engineering/Design), P (Procurement), and C (Construction), which is the entire project from concept to commissioning (turnkey).

However, EPC is an extended and sometimes wrongly used term. Some projects may be EPCM, where only the design, procurement, and construction management ( not the actual construction part, just its management).

Sometimes, even individual portions of a project, like engineering, procurement, or construction, may be handed to a particular company. Thus if all components E, P & C are awarded to the same company, it is, in essence, an EPC turnkey project.

Conclusion

So, EPC is a contract comprising Engineering, Procurement, and Construction.

A turnkey project is a contract comprising Engineering, Procurement, and Construction.

If you look at the definition, you may find no difference between the two concepts, but there are some differences between the two concepts as follows;

1- In EPC, an employer will provide basic engineering to a contractor, and the latter shall perform detailed design based on a received basic design.

2- In Turnkey Project, the Employer will only provide certain project technical specifications. It is the contractor’s responsibility to prepare the basic and detailed design of the project.

3- In turnkey, the contractor is responsible for performing construction and commissioning, startup, and taking over the plant to an employer. Still, another third person in EPC may be responsible for commissioning and startup.

FAQs

What is an EPC contract?

An EPC contract is a construction contract in which a single entity takes on the responsibility for the design and construction of a project. This arrangement is often used for large-scale projects, such as constructing a new power plant or factory.

What is a Turnkey Contract?

A turnkey contract is an agreement between a business and a contractor in which the contractor agrees to complete a project or task according to pre-determined specifications, and the business agrees to pay for the work. The word “turnkey” comes from the fact that once the work is completed, all the business has to do is “turn the key” and start using the new product or service.

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