Project Execution in Process Industry EPCM / EPC Mode – An Indian Dilemma D. P. MISRA Director, Development Consultants Private Limited Past President-IIChE

INDIAN SCENARIO Generally EPCM mode of project execution except in Fertilizer : Sulphuric Acid plants, SSP & DAP plants, in EPC besides OMIFCO Refining : Last 4 years projects in EPC Petrochemicals : MCC PTA / IOC LAB / IOC PTA projects in EPC Minerals : Recent mineral separation plants in EPC

PROJECT EXECUTION – EPCM MODE Know how Basic Engg Detailed Engg Project Management Procurement Assistance Construction Supervision / Management Commissioning Assistance Civil Works Erection of Eqpt / Supplies

PROJECT EXECUTION – EPC / LSTK MODE Know how Basic Engg Detailed Engg Project Management Supply of items delivered site Civil Works Erection of Eqpt / Supplies Commissioning

CLIENT’S SCOPE (EPCM MODE) Places Order – Know how / Basic Engg. Contractor - EPCM Contractor Reviews Engineering Places order (Based on EPCM Contractors’s Recommendation) - Eqpt / Supplies Civil Works Contractor(s) - Erection Contractor(s) Interfaces with EPCM Contractor Makes Payments

CLIENT’S SCOPE (EPC MODE) Places Order – Know how / Basic Engg. Contractor - Project Management Contractor (PMC) - EPC Contractor Interfaces with PMC & EPC Contractor Makes Payments

DILEMMA FOR INDIAN PUBLIC SECTOR PRACTICE EPCM Mode : Generally on reimbursable basis in Europe & USA : Indian Private / Public Sector EPC / LSTK Mode : Middle East & South East Asia (Competitive) : Indian Public Sector. DILEMMA FOR INDIAN PUBLIC SECTOR - EPC or EPCM (?)

EPC mode takes more time but Contractor responsible for overrun. TIME OF COMPLETION EPCM Mode Basic Engg 4 36 EPCM Contractor Selection Execution of Project Bid 1 Selection 2 Execution 30 EPC Mode Basic Engg. 4 Selection 3 42 PMC selection EPC Contractor Selection Execution of Project ITB 3 Submission 4 Selection 2 Execution 28 EPC mode takes more time but Contractor responsible for overrun.

PREPARATION & EVALUATION OF BID EPC ITB : Involves FEED, Job Standards, Approved Vendors for supplies etc. & hence more time consuming than EPCM Submission & Selection : EPC Bid needs evaluation of hardware and software and hence much more time consuming

FLEXIBILITY EPCM Contractor : More flexible to accommodate client’s suggestion for improvement of plant Quality at change order to his fees EPC Contractor : Less flexible as it will affect total contract value & time.

PLANT QUALITY EPC mode : Normally much less inbuilt margin and plant quality focussed to contract price & schedule Quality some sometimes gets compromised EPCM mode : Client’s involvement at each step ensures proper quality and better margin for operation

CLIENTS INVOLVEMENT EPCM mode : Concerned in every Purchase Order and day to day Project Management with EPCM Contractor. Client’s Involvement larger and costly EPC mode : Only for initial order on PMC & EPC contractor. Involvement much less & the reason Indian Public Sector likes.

TOTAL COST OF PROJECT EPC mode : Generally higher (10 to 30%) due to additional tax / duty burden, technical & commercial contingency. EPCM mode : Less due to client paying exact cost of purchase to Vendors / Contractors besides less tax / duties.

FINANCIAL RISK EPC mode : Contractor’s responsibility Lenders like it. EPCM mode : Client’s responsibility.

TIMELY COMPLETION EPC Mode :15 Contractor’s Single Point responsibility More likely to happen due to high penalty EPCM Mode : Contractor equally responsible Penalty only against fees Experience indicates on time completion and also overrun

AVAILABILITY OF INDIAN CONTRACTORS FOR HYDROCARBON SECTOR EPCM EPC Private Sector Private Sector TCE Consulting Engineers L&T Jacobs H&G Punj Lloyd Acker Solution * Tata Projects Technimont ICB * Uhde India Toyo India * Lurgi India Uhde India * Technimont ICB Chemtex Technip India * Lurgi India Dalal Mott McDonald L&T Chiyoda SNC Lavlin * Overseas counterpart sometimes may bid for the project on EPC basis

AVAILABILITY OF INDIAN CONTRACTORS FOR HYDROCARBON SECTOR EPCM EPC Public Sector Public Sector Engineers India Ltd Engineers India Ltd Mecon PDIL

SUMMARY Elements of Comparison Project Executed on EPCM Basis EPC/LSTK Basis Time of Completion Shorter Longer by 6 months Preparation of bid documents Simpler Complex and time consuming Work Scope Flexibility More Flexible Much Less Flexible Quality & Life of Plant Better Good enough to meet contractual requirements Client’s involvement More Less Risk of Cost Owner Contractor Total Cost of Project Less Costlier Costlier Project Completion on schedule Less likely More likely Availability of Indian Contractors Many available Limited to 2 & 3

CASE STUDIES FLOAT GLASS PLANT Executed on EPCM basis Completed on time in 31 months Cost saving leading to Bonus Safety & Quality of International Standard Contingencies protected by negotiations

SPONGE IRON PLANT AT DOLVI, ALIBAUG CASE STUDIES SPONGE IRON PLANT AT DOLVI, ALIBAUG Completed in record time of 28 months Better Free Issue Management – saving in cost and time Saving of Rs. 40 Million only in structurals by optimized design Integrated Team between Client and EPCM Contractor

WHAT IS GOOD FOR INDIAN PROCESS PLANTS Project Execution in EPCM mode - Due to advantages of Total Cost, Time & Quality - Creates opportunities for Indian Engg. Contractors, Vendors & Contractors Project Execution in EPC mode due to Lenders’ requirement and for Standard Package plants

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