How to Manage the Trend to Mega–Sized Engineering Projects

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Owner’s Engineers Looking for the Best Project Execution Model

Under the present circumstances, the engineering teams at the chemical companies need to find the right balance between internal resources and third-party engineering services and they must decide how to allocate the roles and responsibilities. Given the current shortage of construction resources in North America, few suppliers can afford to commit themselves to a lump sum turnkey price set long before project completion.

Even investors that have substantial owner’s engineering capacity simply do not have the manpower to execute the projects entirely on their own. As a result, a number of different project execution models are currently being employed in the chemical industry. The traditional approach taken by the internal engineering teams is the EPCM (Engineering Procurement Construction Management) model. In contrast to EPC contracts where the client turns over complete engineering, procurement and construction responsibility to an industrial plant manufacturer, customers using the EPCM model retain complete responsibility for, and control of, the project.

EPCM vs EPC vs Engineering Partnerships

Both the EPCM and the EPC models are used by the engineering teams at BASF, for example. In addition, the company also establishes “engineering partnerships” under which industrial plant manufacturing partners take responsibility for projects at pre-defined conditions without a bidding process. The engineering partners are selected up front following a request for quotations which is not related to any specific process.

“One thing is clear however. During the conceptual design phase, we use our own people to the maximum extent possible because that is where we can apply maximum value leverage,” explained Prof. Wolfgang Gerhardt, Senior Vice-President of Engineering at BASF.

Which Model to Use When?

Which project execution model is selected depends on a number of factors. For BASF projects which are based primarily on the company’s own technology and where new facilities are being integrated into existing sites and facilities, the owner’s engineering based ECPM model is preferred. If facilities and equipment which are similar in nature are built multiple times based on third-party technology, execution follows the standard EPC model. When time is of the essence, the owner’s engineers skip the request for quotation phase and work with engineering partners which have been previously selected following a competitive bidding process.

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