How to Select an EPC Contractor

Capital projects require several moving parts to guarantee success. A great way to ensure your project stays on track is hiring an engineering, procurement, and construction (EPC) contractor for execution. However, many project owners are unsure of what to look for when choosing an EPC contractor for their capital projects. 

There are many factors to consider, from quality control and scope definition to safety management and project stage reviews. While it is impossible to account for every issue that can arise during a project, the best contractor for engineering, procurement, and construction services for your capital project will be able to limit cost overruns and deliver complex projects on schedule.

Below we describe some of the most important characteristics and capabilities a project owner should look for when researching how to select an EPC contractor to complete a capital project. 

1. Make sure you have a clear project scope and a well-defined scope of supply for the contractor (who does what).
2. Ensure the contractor has integrated project management and project controls capabilities.
3. Determine whether or not the contractor has in-house capabilities for engineering, procurement, and construction.

Accurate Project Bids and Contract Estimates

A project’s success can be determined very early in the work process. Successful scope definition and front-end engineering provide the baseline for what can be accomplished, what supplies are necessary, and who will be handling fabrication and installation at the build site.

Even when operating on a time and materials contract, capital project owners who focus solely on the bottom line at the development stage of the project may be doing themselves and stakeholders a disservice. Potential cost overruns are the bane of every contract, but these most often come from poor or delayed scope definition. It’s essential to place importance on defining the scope definition as accurately as possible in the early stages of the project to ensure the project is planned and executed within budget.

Hiring contractors who do not have in-house construction or procurement staff can also affect the logistics of a project. For example, if a section of your project requires specialized equipment that is on backorder, the whole project can be delayed with no way to make up the time elsewhere.

Hiring a contractor that has to rely on other parties to complete the project increases financial risk potential. Having to rely on outside parties who may or may not have the full qualifications to execute each project phase can result in change orders and cost overruns. Issues surrounding quality and consistency throughout each stage of the project can also arise. 

Consistent Project Management and Project Stage Overlap

Capital projects are frequently broken into engineering, procurement, and construction phases that seem separated by firewalls. The front-end engineering design (FEED) team may produce specifications with an appealing time-to-completion, only to find out that a key feature requires significant safety steps, such as using cranes over water. Confidence and certainty at the beginning of the project can be quickly undone without frequent communication among the professionals operating at each project stage.

On the other hand, an EPC contractor with integrated fabrication and construction teams can work on a more agile basis. The FEED team is already aware of what processes will require significant safety adjustments or difficult-to-acquire components. Leveraging that experience, they can communicate with the construction team to ensure proper precautions are taken during preparation.

In addition, an EPC contractor must approach capital project management in a way that supports continuous improvement and consistent communication as well as a shared responsibility between departments. For example, an integrated EPC contractor uses previously completed projects to identify how to improve processes and activities at every stage of a capital project. This includes not just practices that make procurement run more smoothly but also speed up construction without sacrificing worker safety.

Capital Project Controls and Vertical Integration

Knowing how to select an EPC contractor is important, but it’s also essential to know if the contractor has the capabilities to properly execute your project. Many EPC contractors have limited procurement staff and in-house fabrication capabilities, and a large portion doesn’t have in-house construction teams. This creates a lengthy list of potential delays or oversights from the very start. 

Many EPC contractors advertise the ability to fabricate critical pieces for capital projects, but it’s important to verify whether or not there is an in-house fabrication team handling the components. Otherwise, everyone is banking on another party’s ability to meet advertised lead times, material availability, and quality standards. This dovetails quite quickly into the procurement stage—when an EPC contractor is creating material lists, are they able to create them with the understanding of construction capabilities and safety concerns?

Whether or not you select a vertically integrated EPC contractor, you will want to be sure that everything is staying on track as the project moves forward. Consider the frequency of reporting on project issues and progress. When you receive updates regularly, it limits the potential of issues becoming long-term disasters and also provides significant peace of mind.

Integration Matters When Learning How to Select an EPC Contractor

At H+M Industrial EPC, our in-house procurement, fabrication, and construction teams set us apart. With everything under one roof, we can overlap project stages and incorporate concerns from the construction team at the engineering stage. Our work can be seen in successful capital projects in the energy, terminal and logistics, and chemical industries throughout the Gulf Coast. No matter what stage your project is at, we’re able to provide strategic EPC services to ensure your project meets your vision and your budget.