EPC Contracts Explained: Everything You Need to Know

EPC, short for Engineering, Procurement, and Construction, refers to the design-build construction of solar photovoltaic energy systems. SWELECT (It is combined from “SWE” and “ELLECT,” where “SWE” stands for “Solar and Wind Energy” and “ELLECT” stands for “Electricity”.) as an EPC contractor, provides comprehensive services to its customers, starting from conceptualization and design to the commissioning of the plant. We ensure that the project is completed within the specified time frame, adheres to the cost constraints, and meets the highest standards of quality.

Engineering: This is the stage of designing, researching, and developing a plan to create a product or service, determining all the necessary requirements to construct a project.

Procurement: This includes all activities related to searching for and purchasing materials, equipment, machinery, services, and other products necessary to carry out the construction work.

Construction: This is the stage of carrying out construction work and installing equipment, testing, and handing over the project to the client.

With EPC, the customer only needs to sign a contract with a single contractor to complete all stages of the construction process from design to completion. This helps customers save time, costs, and effort in project management and ensure continuity throughout the implementation process.

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.

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

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.

The PPA (Power Purchase Agreement) cooperation model will be used to develop the project, with VP Energy as the investor, Vu Phong Energy Group as the General Contractor EPC, and Quang Quan as the system user.

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.

Vu Phong Energy Group JSC

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