EPCM contracting: clearing the minefield
Julie Whitehead A and Karen Walters AMinter Ellison Lawyers
The APPEA Journal 54(1) 321-240 https://doi.org/10.1071/AJ13023
Published: 2014
Abstract
The past year has seen a downturn in the number of new mining and infrastructure projects in Australia. Despite that, the authors are noticing a continuation of the trend towards a greater use of engineering, procurement and construction management (EPCM) style contracting.
The increased use of EPCM contracts is in part due to projects becoming larger and more complex. As these projects can only be delivered by multiple contractors who all seek to limit their liability, the EPCM contract offers a useful framework for coordinating and managing those contractors, and maximising the owner’s recourse to them.
This is particularly so in the oil and gas industry, with many projects using this form of project delivery.
As there is no standard-form EPCM contract, however, and given the complex technical nature of these types of projects, negotiating an EPCM contract can be fraught with danger, especially for owners who may not have used this style of contract before.
This paper discusses the unique characteristics of the EPCM contract (particularly in contrast to the engineering, procurement and construction style contract), the typical risk allocation, and the creative use of compensation and incentive regimes to drive optimum performance.
The EPCM model is not suited to all projects, but if it is appropriately negotiated and drafted, and is well managed by an appropriately skilled and resourced owner’s team, it can provide a platform for excellence in project delivery.
Julie Whitehead completed her Bachelor of Laws with First Class Honours from the University of Queensland in 1995 and achieved her Professional Certificate in Arbitration and Mediation in 2000. Julie’s practice focus is strategic project delivery and procurement for large infrastructure developments, particularly in the energy and resources sector. She heads Minter Ellison’s Construction, Engineering and Infrastructure team in Queensland and her client base includes international resources houses, contractors and government. Among her landmark projects are the Cobbora, Grosvenor, Dawson and Lake Lindsay mine developments, Lynas Corporation’s Advanced Materials Plant in Malaysia, the Western Corridor Recycled Water project, the Goonyella to Abbot Point Rail Expansion, the Gold Coast Desalination Plant and mining services agreements for the Meandu, Dawson and Lake Lindsay mines. Julie.Whitehead@minterellison.com |
Karen Walters completed her Bachelor of Laws with First Class Honours from Griffith University in 2006, with a Bachelor of Arts in International and Asian Studies, majoring in Mandarin and is a Senior Associate with Minter Ellison. Karen’s primary focus is developing contract documentation and advising on major infrastructure projects, including hospitals, railways and ports. Karen has a particular interest in relationship-style contracting including alliancing and early contractor involvement and has drafted and negotiated a number of EPCM contracts in the resources sector. Karen.Walters@minterellison.com |
