Transcription
Hello everyone. In this video, we are going to discuss the difference between EPC and EPCM, and what is the working of EPC and EPCM.
Okay, so what is the meaning of EPC? So, EPC or EPC company means Engineering Procurement and Construction companies, right? And EPCM means Engineering Procurement and Construction Management. Okay. So, see, if I talk about the companies, so what they do is EPCM, that is Engineering Procurement Construction Management, and PCM, that is Project and Construction Management. I hope you are getting my point.
Now let's talk about what is the working of EPC and EPCM. Okay. In an EPC project, the engineering contractor handles the full project. Full project means from conceptual study, from conceptual study or you can say the basic design engineering package to detailed engineering, to procurement activities, to commissioning, to handover to the client. Because here, you provide the guarantee to the client that your, if there is any plant, for example, a sulfuric acid plant, so that will be your efficiency, right? So, in EPC, you handle everything, you could say like that.
But in an EPCM project, the engineering contractor only manages the project while the client arranges the resources. See, what is the meaning of client here? So, client can be anyone who is going to build one project. For example, IOCL. Okay. IOCL, let's suppose IOCL wants one refinery project. Okay. And they select any particular engineering contractor, for example, Technip. So, just assume that IOCL is a client. So, they will arrange the resources. What is the meaning of resources? For example, they will, like, they will buy the pump, they will buy the equipment, they will buy the piping and all. But in all the process, the engineering contractor will manage and will assist them. I hope you are getting my point, what I want to say.
Now, in EPC, the engineering contractor is responsible for the project delivery and tries to complete within the time and go ahead for another one. But in an EPCM, the engineering contractor advises the client, takes the decision, and responsibility. What is the meaning of this? So, simply see, in EPC, you have to do everything that is required for the project. The client will just give you the requirement. They decide that when the, when what will happen. They prepare one, let's suppose the schedule, you can say, and all engineering disciplines will go with that schedule. And they take, they also, like, for example, they also assume there is some margin of delay as well. And they try to complete their project within the time, and after that, they go into the next project. Because if they will consume more time in any particular project, so obviously, what will happen? The main manpower will be consumed. If more manpower will be consumed, so obviously the cost will increase of the project, right?
In EPCM, the engineering contractors only advise. So, the client takes the decision and responsibility. What we have to do, what will be the schedule and all, right? And they also, they also share that schedule to the engineering contractors because engineering contractors also give them the deliverables. For example, they are basic design engineering package documents, or they have to also help in detailed engineering documents. So, they also share their schedule. But the main decision responsibility, the client has in the EPCM projects.
In EPC projects, engineering contractors take higher risk. If there is high risk, so obviously there will be high profit because every responsibility you have to take, that's why. So, in EPC, you have to take the responsibility of the project delivery, and you have to take the risk of the project. So, there is a high risk as well as the high profit. Same in EPCM, the client takes more risk, but the client has control over the decision. Okay. So, in that case, in EPCM, engineering contractors do not take any risk. But in that case, the client takes more risk. But at the same time, the client has the control over decision. So, the chance of the risk is less. I hope you are getting my point.
But in the case of the EPC project, for example, if your project goes delayed. If some deliverables are not reached at the site at a proper time, so what will happen? Simply your manpower will be consumed, or your project will lead to a delay. So, in that case, sometimes the client takes more risk. And sometimes they bear the loss, sometimes they make good money. I hope you are getting my point, what I want to say.
In EPC projects, the engineering contractor has more control over the project. But in an EPCM project, the client has more control over the projects. What is the meaning of this? Simply see, in EPC projects, the engineering contractor has to do everything. They have to do basic design engineering package, they have to do detailed engineering, they have to do commissioning, they have to do the, they have to, in the last, they have to hand over the plant to the client. So, that's why the engineering contractor has more control. But in EPCM, the engineering contractor has to do only advice as well as the basic design engineering package. So, that's why the client has more control.
In EPC project, there is a fixed cost, so changes may lead to escalation. But in the case of the EPCM projects, more cost control, potential for client savings. See, in an EPC project, as I told you earlier as well, for example, if any of your deliverables goes delayed due to any reason from your side, so what will happen? That your manpower will be consumed. So, what will happen? Simply cost will increase of the project, right? And for example, let's assume that in a contract, there is some point or some condition is mentioned, and if you do not meet that condition and you just ignore that condition, but in the last, the client says that this condition should be fulfilled. And earlier you have to consider that requirement, and now you are considering that requirement, so obviously the cost should be escalated. There could be many other reasons as well. So, mainly what I want to say, there is a fixed cost, so that's why if there is any change, so it may lead to the cost escalation if the client gives more and more comments. So, you will do more and more revisions. That's why.
In EPCM, that could be same like client could send you more and more comments, but in this case, the client has more responsibility and control. So, it is more cost control and potential for client savings, right?
Next, in EPC projects, engineering contractors handle the procurement activity and material handling. That I have already shared with you earlier. In EPCM projects, client manages procurement and takes engineering contractors' guidelines. Means, in EPCM, what will happen? That let's assume that the engineering contractors prepare the MR (Material Requisite), they prepare the TBE (Technical Bid Evaluation), TBA (Technical Bid Analysis), they prepare the technical order. And the client reviews it, and after that, the client will manage the procurement activities. Right? But in the case of the EPC, you have to do everything. You have to prepare the PDS, you have to prepare the TBA, TTO, AR, and then you have to also manage the procurement activities and the material handling.
Next, in EPC projects, less flexible in accommodating client changes. But in EPCM, more flexible to adapt to client changes' needs. What is the meaning of this? In EPC projects, there is less flexibility in accommodating client changes because if the client will change the contract again and again, or if the client does the changes again and again, and that is not in the contract, so what will happen? That it will definitely reschedule your project, and that is less flexible in EPC. But in an EPCM, there is more flexibility to adapt the client's changing needs. Why it is? Could you let me know in the comments box why in an EPCM project there is more flexibility to adapt the client's changing needs? Because in this case, obviously, you are only advising to the client. But also, but in this case also, you have one, you have the contract. If they go beyond the contract, so obviously you could ask for more money with respect to your manpower. But why this is more flexible as compared to the EPC project? Could you let me know in the comments box? If yes, then please let me know in the comments box.
So, that was the some main difference between the EPC projects and EPCM projects. I hope you enjoyed this video. I hope you learned something new from this video. So, that's it. If you learned something new from this video, please like this video, share this video with your friends. Also, please subscribe to the Core Engineering YouTube channel. See you in the next video. Thanks for watching. Till then, keep learning. Thank you.