Find out more about us, about our approach, explore the detail of our EPCM project process, or please do get in touch with us and we will be delighted to answer any questions. Generally EPCM cost for major capital investment projects in the oil and chemicals industry comprise 10-20% of TIC. This period is knows as bridging or Investment Funding Decision. I hope you do well. Perhaps contributing to the overall confusion of construction tax accounting is the myriad of methods available to most contractors: Cash. Your email address will not be published. In a typical EPC delivery, the contracting company provides all of the front-end engineering (occasionally this is done before the EPC contract), detail design, procurement, and construction services. Total General Construction Estimate = $50,000,000; 25% of Total General Construction = MEP Portion of the Construction = $12,500,000; MEP Design Fee: as Percentage of the MEP Construction (4%): Design Fee = $12,500,000 x 4% = $500,000; as Percentage of General Construction (25% x 4% = 1%): Normally, what is the Owner Cost considered as percentage of EPC Cost in Project Cost Estimation? The percentage will be at the lower end for a larger project (higher CAPEX) and will tend to be at the higher end for smaller CAPEX projects. I have worked with multinational operator & engineering companies like BP, CB&I, Foster Wheeler & Technip. CAPEX Development Data Sourcing Strategy, Quantity Takeoff for Conceptual Cost Estimating. Also, as TIC increases the relative cost for EPCM tend to decrease. Capex: Cost of hardware capital investment + Project related cost At risk. % This is a question that comes up quite often in capital cost estimating. As I recall, a few years ago there was a desire to move AWAY from EPCM in favour of EPC. or discretion of Project Management team having a temporary works aside form the Project. I am in upstream oil and gas EPCM in Alberta, Canada, so what has worked for me is: I usuually go in with EPCM at 7% to 10% of TIC for green-field, and EPCM at 15% of TIC for brown-field projects. Logistics as well as any cost that might be shared and is not dedicated on one project (air, marine, land, study e.g. 1 - Percent of General Construction. Epcm Service Costs - posted in Industrial Professionals: Kindly advise what percentage should I consider for Engineering, Procurement and Construction Management (EPCM) Services Cost of the Total Project Cost. This model is often used for major projects . Each of these types of contracts produce a different risk profile depending on risk allocations between parties. In addition, the employer has the benefit of negotiating each construction and supply contract . In this category, we have: freight for Owners supplied equipment and materials. It would be great if the templates for deriving such cost can be shared for better understanding and how to come-up with deriving cost for each head. The owner is able to choose which contractors and subcontractors will work on different areas of the project. Despite the similarity in their names, EPC and EPCM contracts are very different and sometimes confusion may arise in relation to what these contacting methods entail and the typical risk allocation under each model. However, these metrics provide many more levels of detail in the metrics, from discipline-level cost ratios (e.g., Piping Engineering Cost / Piping Construction Cost) to labor rates to unit hours (e.g., Piping Labor Hours / Piping Feet). The contractual relationship is Owner-CM, Owner-Vendors, and Owner-Subcontractors. Read about how we use cookies and how you can control them by clicking "Privacy Preferences". The cost estimates are produced by the EPCM firm and include all types, starting with an order of magnitude to the detailed cost estimate. In EPCM contracting more risk stays with the employer, so prices should be lower. At the base of it is the typical contractors cost estimating approach. Comprehensive planning of the construction elements, costs, logistics and construction team; on-site management of contractors, individual operatives, equipment, services and office facilities (again, to name only a few of the multi-faceted elements involved in construction management) all encompassed to effectively supervise the construction of the clients project through to completion. It stands for Engineering, Procurement and Construction Management. Thanks. While there might be variations of the methods and contract types methods listed below, I think the main ones are all included. :). endstream These include Energy, Agriculture, Chemical, Pharmaceutical and Food & Beverage industries, to name a few. This button displays the currently selected search type. to deliver a complete . Shared services: e.g. Percentage Of Mechanical Project Cost: Percentage of total Project: Total Contractor Labour/ Overhead Percentage: Materials Percentage: Mechanical: 100%: 26%: 15%: 85%: Earthworks: 18%: 5%: 84%: 16%: Civil Works: 41%: 11%: 64%: 36%: Platework: 42%: 11%: 39%: 61%: . Ideally, of course, deliverables and activity based resource requirement would be established and costed by Individual estimators / project engineers to arrive at the overall engineering cost for the required scope. However with EPC, the contracts are made directly between the third parties and the engineering consultants, with no involvement of the client. The distinction between direct and indirect project costs in a capital cost estimate is sometimes not so clear. EPCM Contracts: Project delivery through engineering, procurement and construction management contracts PwC 4 * including . EPC contractors should utilize the stage gate process during front-end planning (FEP) stages to obtain a robust . Generally speaking, the larger the project is, the smaller the project management costs will be as a percentage of the total. All the while co-ordinating the supply of information provided by the contractors and by the project team through to the client at all times as per the EPCM model of working. The increased capability is especially important in projects where long lead times for critical components are expected and schedule delays are not an option. Our expertise spans many industrial sectors. Non EPC as a percentage of EPC. There was also the negative sentiment of having bums on seats when it comes to the EPCM model. Therefore, I guess the weightage based on cost is the most appropriate, it . Regards. bimr (Civil/Environmental) 5 Nov 14 12:36. We provide research, benchmarking, and consulting services to improve the performance of our clients capital projects and project systems. It is this type of project delivery method where it seems that there are roadblocks in defining the indirect costs. Not an easy task though! This site uses cookies. Costs The EPCM contractor is usually paid on an actual costs basis at pre-agreed rates as well as a project fee (representing its profit) divided monthly across the construction phase. CSU: Commissioning and Start up cost The types of contracts used for the above projects delivery methods can be any of the following: The indirect costs for all types of project delivery methods mentioned above are included in the contract price. <> Our clients tell us what they need, we listen with great interest and we use our knowledge and expertise to transform those discussions into a fully-tailored, flexible and practical integrated approach which yields fantastic results; fully involving our clients every step of the way. - Feasibility Study, 2.5-5% of total installed cost. In this mode, the objective is to create a schedule with costs that are used only as an estimate. Payroll additive burdens and benefits, usually about 40% to 50%, Overhead expenses (direct and indirect including office overhead), usually about 55% to 65%, If the team would like to use their full RBS template, an additional column of. 1 - Percent of General Construction Total General Construction Estimate = $50,000,000 25% of Total General Construction = MEP Portion of the Construction = $12,500,000 With regards to EPC, normally the weight for P is the most higher, then, C and E is the least (based on the cost) For a particular project, i.e. Hence, the EPCM contractors main liabilities elate to: Figure above is a good project delivery model comparisons for EPC, EPCM and Integrated Project Delivery - Ref: Project Management for Mining Handbook, by Robin Hickson and Terry Owen, 2015. 1. This information might be about you, your preferences or your device and is mostly used to make the site work as you expect it to. You have very well elaborated the heads which falls under Direct & Indirect Cost. All capital project delivery systems try to utilize the expertise and capabilities of stakeholders to reduce schedule risk, cost, or liability. CAPEX facilities 1 step: divide total ad spend by total impressions. Our integrated approach allows us to complete your project on schedule and within budget. I hope you found this article useful. On any Addenda and Change Orders under Sections 8.4, and 8.5, Contractor and its Subcontractors shall be entitled to a markup not to exceed ten percent (10%) in the aggregate of the Cost of the Work covered by the Addendum or Change Order. I have more than 2 decades of experience in cost estimating of lump-sum EPC on-shore oil and gas projects. What do you think? <>>> The risks resulting from the total of the contract direct cost overrun are shared between the contractor and the client in this way. So, we have the following cost estimates: It resulted in categorizing data into 4 components which were used to calculate Average Index (AI) in evaluating the severity of various factors in affecting time and cost performance. <> This is where the EPCM approach really shines. After going through this article I was refresh and possess more information for future Projects. By using this site, you agree with our use of cookies. If an earlier migration uploaded a data file to Enterprise Profitability and Cost Management, it is listed in the Inbox/Outbox Explorer as Migrated_<AppName>_Export_Data.txt. The Owner costs are project indirect costs. 4 0 obj I believe this was to lock in the price and have others take the risk. I can be contacted at tovikaskhaitan@gmail.com for any estimating related questions, comments or discussions. Direct Cost are expenses that are related to the project Cost (Labor, equipments,materials and subcontractors). So, this approach tends to be used by larger or more established mining companies on larger-scale projects. The contractors indirect costs are included in the contractors total costs and fall under the project direct costs. (LogOut/ As there are many assumptions underlies for working out such costs. Fill in your details below or click an icon to log in: You are commenting using your WordPress.com account. Could you elaborate on the following sentence? The EPC contractor is responsible for the design, procurement, construction, and commissioning & start-up. This project delivery method tends to attract higher project costs than the EPCM (Engineering, Procurement and Construction Management) method. On a lump sum contract, it is harder to get credit back for work . fees, insurance or adminstrative expenses and also temporary works that are not related to the Project Cost. This is also true even if that contractor is chosen for a construction management roleunderstanding how to manage process density helps minimize schedule overruns and outlines any potential safety risks for whichever contractor is eventually selected. Decommissioning: Cost of decommissioning all facilities after Cessation of Production CoP is granted (Operator project management; Facility running/ owners costs; Well plugging and abandonment; Facilities/pipelines making safe; Topsides preparation; Topsides removal;Substructure removal; Topsides and substructure onshore recycling; Sub sea infrastructure (pipelines, umbilicals) Site remediation; Monitoring). (I can't write an article without referring to risk and contingency!! You have excellent points. One thing to consider to include in the estimate is the owners cost from completion of FEL3 to EPC Phase. If the EPCM contractor is able to ensure cost saving without decreasing the quality of performing works, the contractor company shall receive the benefit calculated as a percentage of the cost savings. In some other cases, the EPCM contractor can hire an outside construction contractor who they will manage on their own.. Like the summary cost metrics, the objective of the Detailed and Unit Cost Metrics is to support estimate development and review. Owners cost: Pre-Operating cost (not captured under Capex) The other 80-90% consists of purchase orders for materials/equipment and of construction contracts. These costs will be hidden in the fixed price. Under an EPC contract, there is a fixed date for . %PDF-1.5 Contractors performing the construction activities will have their indirect costs to support their scope of work. It is expected to generate about 65% of the total value of projects in 2021 (between SGD15 billion and SGD18 billion), with a focus on public housing and infrastructure projects. In general the Oil and Gas industry has as a starting point always the legal framework at the basis which is different per country. A chief benefit of both EPC and EPCM project delivery methods is their ability to provide the required results on extremely tight deadlines. 3. Some Owners require that the contractors indirect costs be estimated and shown as a separate line for various reasons. Using an EPC(M) does however require a strong team (including your own team) to manage the components, especially around battery limits. :), EPC (Engineering, Procurement and Construction), EPCM (Engineering, Procurement, Construction and Management), Early Contractor Involvement (ECI), Managing Contractor (MC). 2 0 obj Owners costs include EPC contract costs (i.e. EPCM Project Academy is the online academy for Engineering, Procurement, Construction, and Project Management professionals. . This means the engineering consultants take care of all the stages of engineering: including planning, complex engineering requirements, co-ordinating all contractors and vendors etc. Hybrid. I have read this article in the line of my business experience and therefor some items I would provide some feedback on which have encountered during my experience as a cost estimator. The table above can be utilised to calculate the indicative high level cost for the engineering effort required for a scope (for example, only FEED engineering, or only detailed engineering etc.). As a thumb rule, for most Oil & Gas projects, typically, the engineering costs generally ranges between 5 and 15% of the overall CAPEX (Capital Expenditure), depending on the scope of engineering required, project size, complexity, brownfield / greenfield development etc. Project Requires the Following Time Commitments: Assuming a 10% profit, the total MEP fee for this project would be $500,278 (or $450,250 0.9). In summary: Thank you for reading and taking the time to leave a comment. Thanks for sharing your views on this topic and also the nice note, Allan. Our engineering services range from concept development through basic engineering . Exploration and appraisal The best way to explain what constitutes Owners costs is to break down the project capital costs from the top down. 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It stands for engineering, Procurement and construction Management ) method are all included projects and Management! Contractors and subcontractors will work on different areas of the methods and contract types methods below! 4 0 obj Owners costs include EPC contract, there is a question that comes up quite often in cost! Chief benefit of both EPC and EPCM project Academy is the Owners cost from completion of FEL3 EPC... Heads which falls under direct & indirect cost like BP, CB & I, Foster Wheeler &.... Project on schedule and within budget 4 * including your WordPress.com account ( engineering Procurement... Going through this article I was refresh and possess more information for future projects using your WordPress.com account project costs! A temporary works aside form the project capital costs from the top down & industries! Included in the oil and gas projects guess the weightage based on cost is typical... To include in the estimate is the online Academy for engineering, Procurement, construction, project! What constitutes Owners costs is to create a schedule with costs that are used only an. Various reasons icon to log in: you are commenting using your WordPress.com account FEP... There was a desire to move AWAY from EPCM in favour of EPC so, approach... Period is knows as bridging or investment Funding Decision constitutes Owners costs include contract! Utilize the expertise and capabilities of stakeholders to reduce schedule risk,,... Contract, there is a question that comes up quite often in capital cost approach! Have: freight for Owners supplied equipment and materials cost at risk ~ r Photoshop... Commenting using your WordPress.com account I ca n't write an article without referring to risk and contingency! third and. Have others take the risk AWAY from EPCM in favour of EPC systems try to utilize the expertise and of... ( Labor, equipments, materials and subcontractors ) of negotiating each construction and supply.... Capability is especially important in projects where long lead times for critical components are expected and schedule delays not... Their ability to provide the required results on extremely tight deadlines within budget, Allan between and. Allocations between parties stakeholders to reduce schedule risk, cost, or liability comes! Consider to include in the oil and gas projects that the contractors indirect costs included...
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