Last Updated on May 2, 2022 by Admin
We have also 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 that is detailed out to the letter of the contract. 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, 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 a Turnkey Project?
One of the unique modes of carrying out international business is a turnkey project. The 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 operation 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.
Synonyms for the term turnkey project are 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 (or 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 subject of delivery to the customer.
The customer thus is not affected by any risks inside the project, and the result of the project is covered by one agreement.
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 the difference between an EPC and a Turnkey Project?
EPC = Engineering procurement & construction.
These engineering, procurement, and construction jobs are helpful, but they 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 is going to 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 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 risk by doing engineering or 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 in the scope of a single contractor.
Any failure due to engineering, procurement, or construction 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 oil & gas and process plants.
Essentially 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 just 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.
So, in short, 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, in EPC, it may be the responsibility of another third person to do commissioning and startup.