What is an EPC contract? 

EPC What does it mean

The article will explain what an EPC contract is, the responsibilities of an EPC general contractor, and the numerous benefits of an EPC contract for investors. 

What is EPC? 

EPC stands for Engineering – Procurement – Construction, include: 

Engineering means design 

Procurement means the technological equipment supply.

Construction means construction work. 

What is an EPC contract? 

The Decree No. 37/2015/ND-CP published on April 22, 2015, defined it as: “A contract to perform jobs ranging from designing and supplying technological equipment to the construction of works and work items; an general contractor contract is a contract for designing – providing technological equipment – and constructing all works of a construction investment project.” 

While typical agreements separate each stage of design, procurement of materials, construction, and installation, all of this included in the EPC contract. As a result, many domestic and foreign investors in Vietnam currently employ this kind of contract for industrial projects. 

The principal contractor in the form of a solar power EPC contract is the investor, and the contractor is the contractor general or main contractor. 

What is EPC mean?

Vu Phong Energy Group – A professional company specialized in providing EPC services 

What does EPC General Contractor mean? 

The investor may enter into an agreement with one or more principal contractors in a project. However, for the whole project execution, before an investor, from the design stage, materials procurement, construction, and testing up to the handover, must be accountable for the operational activity of the contractor who wins the EPC package (EPC general contractor). 

The general contractor of the EPC may do all its work or use subcontractors themselves to implement specific project components. The contracts with one/several sub-contractors are signed by the general contractor, the central entrepreneur of the EPC(s), the investor shall approve those sub-contractors. The unit is to be liable to the investor as the general contractor, the main contractor, and the tasks of sub-contributors for the progress and quality of the works signed. 

What are the advantages? 

The investor is subject to reduced administrative pressures because it needs to work with the general contractor or the principal contractor. Although the project can involve multiple sub-contractors (design/consultant, supplier, manufacturer, and installer), investors do not need to be concerned about the likelihood of disagreements between the participants. Because the general contractor managed it, they should be accountable for the operation of the subcontracting packages. Therefore, the investor shall not carry the risk of coordinating the activities of such bidding packages. 

Furthermore, the investor can determine the cost, implementation time, completion time, and quality of the work reasonably precisely based on the scope of the contract with the general contractor, the principal contractor. The price of a contract is usually predetermined. During the project implementation period, the investor has no cause for concern about price variations in materials or labor on the market. Investors will also be guaranteed because the operating efficiency, efficient guarantee for the operation of the plant, enough security for contract performance, and reimbursement for any damages in the EPC contract are frequently specified and obvious.  

Naturally, the investor must choose an experienced and renowned EPC contractor to deliver the package to obtain the above benefits. For further information about EPC General contractor’s capacity assessment criteria, in particular in the field of solar power, please click here

Source: Vu Phong Energy Group JSC

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