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What is EPC? and what is the Turnkey projects? Find here details about the EPC and turnkey projects along with the difference between an EPC and a Turnkey Projects.
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 deliver EPC Projects are commonly referred to as EPC Contractors.
What is a Turnkey Project?
One of the special modes of carrying out international business is a turnkey project. The turnkey projects meaning, 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 turn-key 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 entire result of the project and presents it to the client completely finished and ready to use.
In fact, the client should be able “just to turn the key.” The supplier of a turnkey project is called the general contractor (or main supplier, direct supplier or main contractor). Synonyms for the term turnkey project are a turn-key solution, turn-key delivery, or ready-to-use.
Turnkey projects in practice: In a turn-key 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 (turn-key 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 jobs for engineering, procurement and construction are useful but they can involve some great differences. It is good to see what differences can be found between EPC and turnkey contracting.
The first thing involves the depth of the project that is being handled. An EPC project will involve a contractor working with basic engineering procedures. This can work to help with ensuring that a business will be set up properly with the right engineering plans for great 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 types of 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 involve the contractor getting a full design of a system ready to where it will be more effective and easy to read.
Meanwhile, a turnkey process will involve a contractor dealing with special considerations for handling property and the contractor 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 to get another party to get the startup construction process handled. The turnkey process will involve the contractor being fully responsible for every single part of what is going on here.
This is often used to help make it a little easier for a property to be arranged as carefully as possible for getting engineering plans ready.
The interesting point about getting EPC and turnkey contracting plans going comes from how they are both ones that work with getting different kinds of procedures to work with different 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 that is being handled in the process. This is a very interesting point that makes it a little easier for anyone to get contracting functions handled for all kinds of business purposes around India.
The differences that come between EPC and turnkey projects contracting are great points that must be seen when trying to find ways of how 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 just 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 to complete all activities leading to the final operation level (handing over to the operation team).
You can’t divide this project into separate activities like Civil, MEP, etc. and award on a turnkey basis to different contractors. Whereas, 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 in respect of a particular work (like 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 or 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 and combinedly called an EPC turnkey project.
An EPC contract encompasses the E (Engineering/Design), P (Procurement) and the C (Construction) which is the entire project from concept to commissioning (turnkey).
However, EPC is a very broad 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 only Engineering, or only 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 two concepts, but there are some differences between 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 technical specifications of the project and it is the responsibility of the contractor to prepare the basic and detail design of the project.
3- In turnkey, the contractor is responsible to perform construction and commissioning, start-up and take over of the plant to an employer, but in EPC, it may be the responsibility of another third person to do commissioning and start-up.