8/13/2019 Risf pro

1/2

PC vs. Traditional ApproachEPC has emerged as the deliverymethod of choice for executingsystem projects in all market

sectors. The acronym EPC is shortfor Engineer-Procure-Construct,which implies that a single entity hascomplete responsibility for a project

from start to finish. Oddly, the keyfunction that assumes this overallresponsibility, namely project

management, is not in the name.

Traditional Project ApproachHistorically, utility, industrial

and large commercial entities, includ-ing governmental and institutionalfacilities, employed sufficientresources to perform projectmanagement, engineering designand procurement, and in some cases,construction. However, right sizingto meet competitive and economicconstraints has greatly trimmed thein-house capabilities of many

firms, sometimes down to asingle individual.

To compensate, project work wasprimarily outsourced to consultantsand contractors. Consultants devel-oped the design and bid packages,while the successful contractor was

responsible for equipment andmaterial procurement, installationand start-up. The figure below depictsthe relationships in this traditional

project approach.

The customer has at least twomajor contracts to administer andmultiple lines of communication tooversee. Generally, the customer isassuming the business risk associatedwith the project and when problemsarise, they often result from mis-communications between the majorparties. Consequently, fingerpointing ensues.

When viewed from a time-lineperspective, the traditional projectapproach has two distinct drawbacks.First, the two major functions,engineering and construction, areperformed at different times. Second,the total project schedule is longerbecause of multiple bidding phases.

Consider the following observations:

Not all major parties are known at

the beginning of the project.The total cost is not always known

at the start of a project. Manywork from a best estimate.

The overall schedule has not been

defined at the start of the project.The two major third parties, the

consultant and the contractor,are not in sync, i.e. by the timethe contractor is on board, theconsultant has already completed

as much as 95% of the engineeringdesign. This means most of theconsultants resources have beenredeployed with few left to satisfythe remainder of the contract,particularly when it comes toresolving problems encounteredby the contractor, unless a seriesof change orders are issuedalong with a correspondingschedule commitment.

The return on investment

is delayed due to the prolongedproject schedule.

Fast-tracking is sometimes used

to accelerate the project schedule, butthis usually increases the overall costand risk.

Engineer-Procure-Construct(EPC) Approach

In the EPC approach, the EPCfirm assumes overall responsibilityfor the project, thereby relieving the

EPC-Lower Risk, Shorten

Construction Cycle and

Reduce Costs

Risk Management

by Rich Marking-Camuto, Systems Integration and Packaging

ustomer

Consultant Contractor

EquipmentSupplier Subcontractor(s)

8/13/2019 Risf pro

2/2

Bu l l e t in N u mb e r 03031 2003 Co o p e r I n d u s t r i e s , I n c . M I 7 /03

customer of this burden and risk.The customer deals with a single-pointcontact the EPC project manager thus simplifying the lines of

communication as illustrated inthe diagram below.

With an EPC approach, the partiesinvolved, the project budget and theproject schedule are known BEFOREthe project begins. Communication

between engineering design,procurement, and construction beginsimmediately, which makes accelerat-ing the project schedule possiblewithout imposing greater risk.Customers skeptical of using an EPCapproach for projects are generallyconcerned with the perception thatEPC projects

command a premium price. This is nottrue. EPC can be more cost-effectivewhen the value of the risk assumed bythe EPC firm is considered, along withthe early revenue generating benefit ofthe accelerated project schedule.

The following diagram comparesthe project schedule of a traditionalproject versus an EPC project. Notethe durations of each major task are

the same, yet the project can bedelivered more efficiently. This clearlyshows the projects expected returnon investment (ROI) will be realizedsooner, which may make thedifference between doing theproject or not.

No Risk EPCGuarantee

Cooper Power Systems offersan exclusive guarantee that if

we perform an EPC project, the

solution will perform as expected.Projects include distribution and

pad-mounted substations,capacitor banks and harmonic

filters, regulator stations, relaycontrol houses and retrofits,

distribution automation systemsand advanced protection systems.

CUSTOMER

BENEFITS Only One Contract To

Administer

Less Technical AndFinancial Risk

Accelerated Project Schedule

Investment ReturnRealized Sooner

An Innovative Cooper Solution

CPS Performance Guarantee

For more information, see our

ad on the back cover of this issue,

visit our Web site atwww.cooperpower.com/guaranteed, or, contact

Rich Marking-Camuto, P.E. at

1-414-768-8304 orrcamuto@cooperpower.com.THE LINE

Customer's ProjectManager

CPS as EPCProject Manager

CPS PM Support

CPS SystemsEngineering ContractedPartnersCPSProcurement CPS Techervices

Estimating Sc e u e & Document ControContact Administration & LegalAccounting & Finance

Conceptual DesignSystem Modeling,

Simulations & StudiesSystem IntegrationEquipment SpecsDesign Validation/QC

- Equipment ProcurementMultiple Factory Order

CoordinationExpeditingTransportation

Coordination

CommissioningTechnical DirectionTrainingSite ManagementWarranty Administration

Civi Structua Des i nSurveying & Soil

TestingConstruction Labor &

SupervisionConstruction Equipment,

Tools & MaterialsPermitting & Bonding

Task Descripti on Duration-2Y -1Y

Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1-14M -13M -12M -11M -10M -9M -8M -7M -6M -5M -4M -3M -2M -1M 0M 1M

Traditional Project(non-fast track) 2400h

Develop RFP for Engineering Services 2w

Bid Engineering 3w

Review Engineering Bids 1w

Engineering Phase 20w

Bid Construction 3w

Review Construction Bids 2w

Order Equipment 1w

Recieve Equipment 2w

Construction Phase 22w

Commission 2w

Negotiate Contract 4w

Engineering Phase 20w

Order Equipment 1w

Recieve Equipment 2w

Construction Phase 22w

Commission

Engineer-Procure-Construct 1600h