CHAPTER 4Exploring Why They Work the Way They Do
In this chapter, we will explore why the various primary contracting strategies perform in characteristically different ways. We will ask if there are ways to mitigate some of the problems we see in certain important contracting approaches, EPC‐LS and EPCM in particular. Given the popularity of EPCM around the world, any approaches to improving the outcomes of that particular contract form would be very useful. We will also discuss one of the great paradoxes in contracting strategy: why the best contracting strategies (for owners at least) are less popular than strategies that are more damaging to owner interests in cost and schedule effective projects.
Traditional EPC‐LS (Design‐Build Fixed Price)
EPC‐LS is the contracting strategy that minimizes the joint product nature of capital project delivery. The goal is to divide the project into three clearly delimited phases: owner‐led project preparation, contractor execution, and owner operation. Sometimes, contractor execution extends to starting up the facilities, in which case the contract form is “turnkey.” (We will address whether that is a good idea later.) The clear demarcation of responsibilities is one of the key features of EPC‐LS. It simplifies the management of the approach while creating important limitations as well.
The EPC‐LS form is used in some regions as the primary contracting strategy because government rules make other forms impossible or impractical. Government‐owned ...