EPC and EPCM

delivery models
Engineering, Procurement
and Construction

17 Management (EPCM) and

Delivery Partner Models
Investing in Energy Transition Projects
March 2023

www.pwc.com.au
Key features of EPCM and
Delivery Partner Models
1.1 Introduction
Summary of key takeaways
Over the course of PwC’s experience working with clients
• There is no ‘one size fits all approach’ or definition of on large scale public infrastructure projects, it has become
the Engineering, Procurement and Construction apparent that there are significant differences in the
Management project delivery model (EPCM Model) application and understanding of both the EPCM and
and Delivery Partner Models. Both models are Delivery Partner Models. Rather than reporting on the
adaptable depending on client and project sometimes contradictory views, this paper provides a
requirements. description and discusses the application of the models,
• Neither model replaces traditional contracting incorporating PwC’s experience and observations in the
approaches for individual packages such as PPP, application of the models.
Alliance or D&C but rather supplements the risk It is also apparent from PwC’s experience that:
allocation achieved under the contracting
approaches with additional design development and • other than identified differences in the level of
a disaggregated, progressive approach to project accountability
packaging and procurement.
• the extent of self-performance of design
• The drivers for appointing an EPCM/Delivery Partner
the key features and drivers for using the EPCM and
vary in line with client and project specific
Delivery Partner Models are largely the same. Accordingly,
requirements and each client’s core business and
except where the context requires the models to be
level of experience and expertise in project delivery.
distinguished, this section uses the terms ‘EPCM/Delivery
• While EPCM/Delivery Partner means different Partner Models’ and ‘EPCM/Delivery Partner’
things to different market participants, commonly interchangeably. This paper is prepared on the basis that
accepted hallmarks of the EPCM/Delivery Partner the client is the project Principal.
approach are:
1.2 Overview of the EPCM/Delivery
– access to an additional pool of highly specialised
project delivery resources
Partner Models
– stage gated engagement across the project A recurrent theme from PwC’s industry experience is that
lifecycle there is no precise or universally accepted definition of
EPCM Model or Delivery Partner Model. The definition of
– detailed scope development prior to investment each model varies from project to project depending on
decision and going to market the project characteristics, delivery requirements and
resourcing needs of the client.
– end-to-end procurement and project delivery
focus based on overall critical path to completion The EPCM Model is a project delivery and client-side
resourcing approach for complex mega projects. It has
– application of accountability and incentive
been used extensively in the oil and gas, petrochemical
mechanisms
and mining and resources industries. The model is centred
– a disaggregated, more granular packaging on the staged engagement of a multi-disciplinary
approach to project delivery organisation (EPCM Partner) throughout the project
lifecycle under a professional services agreement. The
– enhanced management of client risk including EPCM Partner provides specialist project delivery
integration risk resources (including personnel, systems and processes)
– application of specialised systems and processes for the project engineering, procurement and construction
which span the project lifecycle. management interface and coordination functions.

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The Delivery Partner Model is a more recent emanation of Typical activities performed by the EPCM/Delivery
relationship contracting/partnering used on complex mega Partner include:
projects in the public sector. The Delivery Partner Model
• management of engineering and design (and in EPCM
shares many characteristics of the EPCM, Managing
some instances of self-performance of Front End
Contractor and Alliancing models and has been adopted
Engineering and Design (FEED) and detailed
on projects in the United Kingdom, including London
engineering and design, albeit some clients may
Olympics, Crossrail and, in Australia, on the RMS led
preclude the EPCM from any self-performance due to
Woolgoolga to Ballina Pacific Highway Upgrade, and in
perceived conflicts of interest)
part on Western Sydney Airport and Sydney Metro. As with
engaging an EPCM Partner, clients use delivery partners • procurement and packaging options analysis
(Delivery Partners) to assist with project planning,
programming, design management, procurement and • implementation and management of the tendering
construction management functions across various stages and procurement processes for the various work
of the project lifecycle. packages

Under both the EPCM and Delivery Partner Models, the • overall project and construction management, including
client adopts a disaggregated project procurement interface coordination and claims management.
strategy. With the assistance of the additional Further examples of typical EPCM/Delivery Partner
EPCM/Delivery Partner resources, the client activities over the project lifecycle are outlined in Section
disaggregates, and progressively procures the project 1.11. The scope of services and EPCM/Delivery Partner
scope with multiple Contractors and suppliers under accountability varies and is tailored for each project based
separate packages and potentially different delivery on a range of factors. These are discussed in further
models. This is opposed to a single point of responsibility detail below.
procurement approach where the client engages one
entity (or a consortium) under a single contractual 1.3 Integration with traditional
arrangement to deliver the entire project scope, creating a contracting and procurement
contractual layer and separation between the client and
the rest of the construction supply chain. approaches
The EPCM/Delivery Partner Model does not replace
The disaggregated procurement approach is traditional contracting and procurement approaches, such
predominantly selected where the scale of the as Construct Only, Design and Construct (D&C), Supply
project, combined with contracting market capacity and Install (S&I), Engineering, Procurement and
constraints and competition issues, preclude Construction (EPC), Public Private Partnerships (PPPs) or
procurement of the entire project scope under Alliance Contracting.
one package. Rather, the EPCM/Delivery Partner Model facilitates and
enables the appropriate use of traditional contracting and
procurement approaches for the various work packages
The disaggregated procurement approach is under a disaggregated project package structure.
predominantly selected where the scale of the project,
combined with contracting market capacity constraints and In the private sector, clients and EPCM/Delivery Partners
competition issues, preclude procurement of the entire have traditionally relied more upon Construct Only, D&C,
project scope under one package. However, S&I and EPC approaches for the procurement of those
disaggregation results in an increase in complexity works packages.
(particularly in respect of interface coordination) and client An example EPCM Model contractual framework diagram
retained risk to be managed. The EPCM/Delivery Partner for the delivery of a large, complex mine expansion, deep
is typically engaged by the client to manage these water port and heavy haul rail project in the private sector,
resultant factors by supplementing its internal project where these models have been extensively used in the
delivery capability and capacity with additional specialist past, is illustrated in Figure 1.
project delivery resources.
It shows the indicative project participants and contractual
EPCM/Delivery Partners are often engaged early in the relationships, together with the work packages for the
project feasibility analysis and early planning stage and main project scope components and contracting and
provide services for the remainder of the project lifecycle procurement approaches for each package. It also
on a staged engagement basis. In most instances, the illustrates how the EPCM Model incorporates multiple
client will have the option to end the engagement at key interfacing work packages.
project decision points which are aligned (such as the
outcomes of project feasibility studies or external finance
credit approval).

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Figure 1: Example EPCM Model contracting structure and key packages for a multi-billion dollar interfacing mine,
port and rail project

Finance
Sponsors
Guarantees
Mine, Port and Rail
Operators
Joint Venture
O&M
Agreements
Agreements Coordination of
Design, Construction
& Handover Inputs/
Finance Project Requirements
Lenders
Agreements Company

Finance Tripartite EPCM

Works Package EPCM Partner
Agreements for Contract
Contracts
Material Contracts
Coordination,
Supervision & Contract Design/SME
Administration Sub-consultants

Mine Packages Port Packages Rail Packages

Satellite Camps &

Breakwater
Camp (D&C) Concrete Batch
(Construct Only)
Plants (D&C)

Rail and Sleeper

Offices Buildings & Offices Buildings &
Materials
Infrastructure (D&C) Infrastructure (D&C)
(Supply Only)
Interface Agreements

Site Access Roads Site Access Roads Earthworks &

Coordination &

& Earthworks & Earthworks Subgrade Prep

Interface Agreements

(Construct Only) (Construct Only) (Construct Only)

Coordination &

Train Unloading/
Crusher & Rail Overpass
Materials
Interface Agreements
Conveyors (DS&I) Bridges (D&C)
Handling (DS&I)
Coordination &

Track Laying
Process Plant (EPC) Wharf (D&C)
(Construct Only)

Signals &
Train Loading
Ship Loader (DS&I) Communications
Facilities (DS&I)
(DS&I)

Rolling Stock
(DSI&M)

In the public sector, clients and EPCM/Delivery Partners have relied upon a combination of multiple interfacing work
packages for separate contracting and procurement and, increasingly, PPP and Alliance approaches for the procurement of
major works packages (e.g. rolling stock). For example, each of Crossrail, Sydney Metro and, we understand, Western
Sydney Airport have adopted both PPP and Alliance contracting and procurement approaches for certain packages.
An example EPCM/Delivery Partner Model contractual framework diagram for the delivery of a mega transport project,
incorporating some of the traditional contracting approaches used by public sector clients, is illustrated Figure 2.

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Figure 2: Example EPCM/Delivery Partner Model contracting framework diagram for the delivery of a public sector
mega transport project

Franchise/ Franchisee/
State concession Operator
Agreement

Enabling Coordination of
Legislation Design, Construction &
Handover Inputs/
Requirements

EPCM/Delivery Project Services

Partner Authority Agreement
Technical Advisor

Figures 8 & 9 – Indicative Org

Structure of the EPCM/Delivery
Partner and the Project Authority Design/SME
Sub-consultants
Works Package
Contracts & State
Direct Agreements
Independent
Independent
Certifier
Certifier
Agreements

Tunnel & Base Rolling Stock and

Connecting Rail and
Infrastructure (PPP Station systems (PPP or
Road Infrastructure
or Design, Construct Fit-out (D&C) Design, Supply &
(D&C or Alliances)
& Maintain) Maintain)

Coordination &
Interface Agreements

Subcontract and supply Subcontract and supply Subcontract and supply Subcontract and supply
agreements agreements agreements agreements

1.4 Impact of EPCM/Delivery Partner Model on risk allocation

For each of the Crossrail, Sydney Metro Central and Southwest and Pacific Highway public sector mega transport projects,
the intention in engaging an EPCM/Delivery Partner was to:
• maximise the likelihood of achieving project objectives
• ensure appropriate resourcing to manage the complexity, interfaces and client retained risks of mega projects.
Importantly, engaging an EPCM/Delivery Partner does not necessarily alter the contractual allocation of risk under the
various work packages. Nor does engaging an EPCM/Delivery Partner avoid the client retaining overall accountability for the
coordination and integration of the various work packages. These risks and responsibilities are ultimately retained by the
client where it elects to procure projects in multiple, disaggregated packages, irrespective of whether the client engages an
EPCM/Delivery Partner.

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 So, rather than operating as a mechanism for the
Example contractual allocation of project delivery risk, engaging an
EPCM/Delivery Partner is more about providing additional
For the RMS led Pacific Highway Upgrade project delivery assurance as part of the client’s strategy
Project, New South Wales Government standard for managing client retained risks and responsibilities.
form contracts were used to contract for discrete
works packages. This means that the standard EPCM/Delivery Partners are typically required by clients to
allocation of risk as between the State and actual put a component of their fees at risk aligned to the
delivery Contractor was unaltered by adoption of a achievement of measurable project outcomes. Outside
Delivery Partner on that project. Rather than risk those incentive arrangements and any design warranties
allocation, the motivation for appointing a Delivery provided by EPCM/Delivery Partners, they do not take
Partner on this project was to enable rapid assembly overall project completion, integration or performance risk.
of a client-side team, accelerate overall programme In that context, the relationship between the client and
delivery and access a broader cross-section of the EPCM/Delivery Partner reflects more of a partnering
contracting market for package delivery. The Pacific arrangement along the lines of an integrated team. Typical
Highway Upgrade Project is discussed further in EPCM/Delivery Partner incentive arrangements are
Figure 3 below. discussed in Section 1.13 of this paper in terms of their
potential application in the public sector context.

1.5 Structure and features of the EPCM/Delivery Partner Model

The structure and features of the EPCM/Delivery Partner Model vary from project to project. Figure 3 identifies the key
factors influencing the model.
Figure 3: Factors influencing the use and structure of the EPCM/Delivery Partner Model

Timing of project in ‘boom’ — bust

Client's requirements as to
market cycle and number of project:
level of involvement and
competing for client-side and
Pro control over project delivery
contracting resources ng je
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Co Mark ions sig rol
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Criticality of clients business Clients internal

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and ramifications if the project delivery

nt I
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project objectives are resources capability

nte
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not achieved and capacity

rna
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EPCM/Delivery
Partner Model
Pro ustry ,
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project complexity to and project specific

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be managed influences

Int Team ted

eg jec se
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Level of integration between the ion P erti Sophistication and expertise of the
Exp
client and EPCM/Delivery Partner client and other project participants
teams and personnel

While the detailed application and structure of the EPCM/Delivery Partner Model varies, there are a number of key features
that appear across mega projects. These are described in Table 1.

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Table 1: Key features of EPCM/Delivery Partner Model

Feature Description

Engagement of • Rapid deployment of multi-disciplinary project resources drawn from a global employee pool
external that transfers from project to project and between different countries and regions based on
engineering and engagements.
project delivery
• Still requires integration with local subject matter expert and operations/maintenance
resources across
resources for certain project scope elements or location and industry specific requirements
the project
and nuisances.
lifecycle
• EPCM/Delivery Partner commonly brings proprietary and other project delivery processes and
systems which incorporate lessons learned from accumulated experience in project delivery
over many years. To a degree, these processes and systems can be tailored to integrate with
existing client systems and processes.
• Clients retain overall decision making and leadership control and continue to directly employ
and engage resources to perform project delivery functions that the client is better placed to
manage (i.e. planning and regulatory approvals, financial and legal advisory functions,
stakeholder negotiations etc).
Staged • EPCM/Delivery Partner engagement terms typically include progressive award of scope and
engagement commencements of services aligned to the client’s investment approval stage gates (with the
aligned to client’s client having the option to end the engagement at each gateway).
investment
• EPCM/Delivery Partner’s level of accountability and extent of commercial incentives increases
approval stage
as its engagement progresses through each stage gate.
gates
Staged • EPCM/Delivery Partner Model is typically only used on large complex projects where
procurement disaggregation of the project scope into multiple packages is unavoidable due to resourcing,
throughout the material supplier and contracting market competition constraints.
project
• Increased complexity and volume of work arises from having multiple packages and interfaces,
as opposed to contracting with one party for the entire scope.
• EPCM/Delivery Partner acts as the client’s representative while the client retains overall
accountability for the end-to-end integration and delivery of a project.
• Client retains overall project delivery accountability and control throughout the project lifecycle
rather than handing over accountability and transferring risk for project implementation to
another party.
• EPCM/Delivery Partner Model approach seeks opportunities to further disaggregate project
scope (either horizontally or vertically) and optimise work package sizes during FEED
development and procurement to align with Contractor specialisations and to maximise
Contractor and supply competition and broaden resource capability and capacity.
Developed scope • Client investment parameters and/or financier requirements generally dictate more advanced
and design prior scope development (i.e. in the order of 20-40% design development) to support the capital
to investment cost and programme estimates underpinning the investment decision.
decision and
• The scope development and FEED process incorporate constructability assessments,
going to market
operations and maintenance and procurement analysis from the outset and throughout the
design process to inform and optimise the design and engineering solutions and reduce risk of
scope creep in later stages of the project.
• Typically, more developed designs (for example issued for construction) are developed prior to
going to market. This is with a view to paying less upfront risk premiums to Contractors and
seeking to derive more value from progressive allocation of risk to the contracting market as
the design matures (i.e., rather than transferring risk to a Contractor at an earlier stage of
design development when scope is more uncertain and risks are less defined).

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Table 1: Key features of EPCM/Delivery Partner Model (Cont’d)

Feature Description

End-to-end • As the project is not delivered under one package with risk transferred to a single contracting
procurement and entity, there is a shift in focus from managing a single transaction and contracting entity to
project delivery managing multiple packages and interfaces and counterparties.
focus based on
• Resources, activities and procurement are allocated and prioritised based on the critical path
overall critical
to completion of the project rather than achievement of transaction milestones.
path to completion
• An EPCM/Delivery Partner is typically engaged from early in the project lifecycle and is
required to adopt an end-to-end project focus and incentivised to assist the client to achieve
whole-of-life project objectives, rather than a focus on achieving specific transaction
milestones (i.e. contractual or financial close).
Staged • The scope and procurement approach for each work package is identified in the project work
procurement of package breakdown structure. This remains a live document and is updated if required to
work packages respond to programme updates or market sounding and tender responses.
• Work package scope and battery limits are determined based on a combination of factors
including:
– the critical path to project completion i.e. the procurement of project scope is broken down
and prioritised based on what is needed to achieve overall project completion milestones
– maximising the pool of available Contractor resources for delivery and creating appropriate
levels of competition
– the number of other projects competing for resources at the same time and manufacturing
and materials availability.
• The drivers must be balanced against the client’s appetite for interface risk and financier
requirements for bundling of packages to reduce dilution of performance and completion
guarantees underpinning the project finance arrangements.
• The FEED process continues throughout the procurement phase to avoid gaps in scope and
ensure end-to-end design and system integration between work packages. A disciplined
approach to change management is required to ensure ongoing design changes are minimised
and scope creep that doesn’t deliver the required return on investment hurdle
rate is avoided.
Risk allocation • EPCM/Delivery Partners do not take overall project completion or performance risk which is
and incentive typical for professional services and project management arrangements.
mechanisms
• EPCM/Delivery Partners are generally incentivised by having a component of their fees and/or
bonuses at risk, aligned to achievement of project objectives. The extent of incentivisation and
skin in the game varies for each engagement. It is a point of distinction from standard technical
adviser and project manager engagements which are often only based on reimbursable fee for
services arrangements.
• Incentive regimes usually incorporate both behavioural and harder project outcomes based
Key Responsibility Areas (KRAs) and Key Performance Indicators (KPIs), assessed on both a
rolling and end of project basis.
• Extent of the EPCM/Delivery Partner risk and ‘skin in the game’ is influenced by the extent of
the role and fees to be generated and the level of accountability and ability to influence
project outcomes.

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1.6 Common variables identified in EPCM/Delivery Partner Models
There are a number of variables across projects at both ends of the spectrum (i.e. active client and ‘light’ EPCM/Delivery
Partner and passive client and ‘heavy’ EPCM/Delivery Partner). These are outlined in Table 2.
In practice, the approach adopted for each variable is determined by client resource requirements, project specific
characteristics and market capability and capacity.
Table 2: EPCM/Delivery Partner Model common variables

Active Client – EPCM/Delivery Passive Client – EPCM/Delivery

Variable
Partner ‘light’ Partner ‘heavy’
Level of • Predominately client employed project • Thin client organisation with limited internal
EPCM/Delivery leadership and delivery resources. project delivery capability.
Partner resource
• EPCM/Delivery Partner provides specialised • Majority of project leadership staff and
engaged
resource augmentation integrated with project delivery resources sourced from
existing client team and governance EPCM/Delivery Partner, with minimal client
structures. interface other than at very senior levels.
• Use of established client systems and • EPCM/Delivery Partner provides all or the
processes with EPCM/Delivery Partner majority of project governance and delivery
supplementing some processes systems and processes.
and systems.
Level of delegated • EPCM/Delivery Partner does not have any • EPCM/Delivery Partner has delegated
authority delegated authority to commence market authority to commence market engagement
engagement, enter into contracts or and enter into contracts on behalf of the
otherwise make commitments on behalf of client without the client’s prior approval for
the client without the client’s prior approval. certain work packages up to pre-agreed
contract values. All other commitments
• EPCM/Delivery Partner is required to follow
remain subject to client prior approval.
procurement procedures and processes,
and use tender and contract documentation • EPCM/Delivery Partner implements its own
prepared and ultimate final approval by the procurement procedures and processes
client’s commercial and legal team in incorporating client approval in line with the
procuring all work packages. agreed delegated authority.
• EPCM/Delivery Partner is required to review • EPCM/Delivery Partner proposes
and provide its opinion on the contractual proprietary standard contract forms which
risk allocation from a market and value for are reviewed and amended based on
money perspective but the client retains comments from the client’s commercial and
ultimate final approval rights. legal teams.
Extent of project • Client and/or financier requirements dictate • Client is funding project on balance sheet
disaggregation a limited number of horizontally integrated and not restricted by finance requirements
and interface risk work packages and/or is in a position to provide its own
completion guarantees to financiers.
• Scope components are bundled and
delivery risks wrapped to the greatest extent • Client has the appetite and track record to
possible based on contracting market successfully manage interface risk and
capacity and appetite for risk divides the project scope into many
horizontally and/or vertically integrated work
• Clients prepared (or required by financiers)
packages, seeking to create greater
to pay an upfront risk premium to reduce
competition from reducing package sizes
interface risk and wrap a greater amount of
and derive greater value from progressive
risk under individual packages.
allocation of risk to the contracting market.
• A fast track project schedule and hard
completion deadlines require long lead
items that need to be procured immediately
and the progressive procurement of scope
elements in many separate work packages
to maintain progress in line with the project
critical path.

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Table 2: EPCM/Delivery Partner Model common variables (Cont’d)

Active Client – EPCM/Delivery Passive Client – EPCM/Delivery

Variable
Partner ‘light’ Partner ‘heavy’
Timing and • EPCM/Delivery Partner is engaged after • EPCM/Delivery Partner is engaged in
duration of investment approval primarily to assist the stages throughout the project lifecycle, from
EPCM/Delivery client with procurement and construction pre-feasibility through to final completion.
Partner management.
• EPCM/Delivery Partner’s ongoing
engagement
• Primarily performs a project management participation in the project is a requirement
support function (i.e. akin to a project of client investment committee and finance
management Contractor arrangement). approval.
• Engagement ends on achievement of • The EPCM/Delivery Partner resources ramp
practical completion of the project, with the up and down in line with typical project
client responsible for managing defects s-curve, and the engagement does not end
and warranty periods and project until expiry of defects and warranty periods
close-out activities. and project close-out and knowledge
transfer activities are complete.

Engineering and • No self-performance of design. • Self-performance of FEED where permitted

design by the client, reference designs for D&C
• Management and limited peer review of
accountability work packages and detailed design for
design prepared by other consultants
Construct Only work packages.
engaged by the client.
• Review and coordination of detailed design
• Very limited or no accountability for design.
prepared by work package Contractors and
certification and inspection of works for
compliance with approved design.
• EPCM/Delivery Partner has level of
accountability for self-performed FEED and
detailed design achieving agreed cost,
constructability and performance
parameters.
• EPCM/Delivery Partner has level of
accountability for end-to-end design
integration for both self-performed design
and compliant design prepared by work
package Contractors.
• Extent of EPCM/Delivery Partner design
accountability and liability is typically
capped to re-performance of defective
services and a component of the fee at
risk, plus any proceeds recoverable from
PI insurance.
Business case and • No involvement in or accountability for • EPCM/Delivery Partner performs a major
investment business case development. role in preparing the business case.
recommendation
• Limited accountability for peer reviewing • EPCM/Delivery Partner has level of
and commenting on project cost and accountability for business case
schedule estimates prepared by or on development and recommendations,
behalf of the client. primarily in respect of project cost and
schedule estimates, plus the FEED upon
• No self-performance of FEED for the
which those estimates are based.
business case and limited constructability
peer review of design prepared by, or on • Extent of EPCM/Delivery Partner
behalf of, the client. accountability and liability is typically
capped to a component of the fee and/or
incentive payment at risk, plus any
proceeds recoverable from professional
indemnity insurance for design. The
accountability is also diluted by client inputs
and decisions influencing business case
recommendations.

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Table 2: EPCM/Delivery Partner Model common variables (Cont’d)

Active Client – EPCM/Delivery Passive Client – EPCM/Delivery

Variable
Partner ‘light’ Partner ‘heavy’
Amount of • Incentive arrangements based on KRAs and • Base incentive arrangements based on
incentivisation KPIs in respect of the EPCM/Delivery KRAs and KPIs in respect of the
(‘skin in the Partner’s performance and retention of EPCM/Delivery Partner’s behaviours, timely
game’) integrated personnel. performance of activities and deliverables,
scope control and change management,
• Relatively low percentage of fees/bonus
retention of key personnel and
payments at risk, reflecting limited
demonstrated use of both local content and
involvement in business case and
a global pool of client-side resources.
augmented resources structure and with
delegated authority or project delivery • Additional incentive arrangements based on
autonomy to influence project outcomes. overall project KRAs and KPIs in respect of
the overall project objective (i.e. output
performance, cost and on time delivery),
incorporating mechanisms to adjust for
material adverse events or major project
scope changes outside the EPCM/Delivery
Partner’s control.
• Higher percentage of fees/bonus payments
at risk, reflecting greater involvement in
business case, team comprised majority of
EPCM/Delivery Partner resources structure
and with greater delegated authority or
project delivery autonomy to influence
project outcomes.

The EPCM/Delivery Partner ‘heavy’ approach outlined above is generally only adopted by clients where project delivery is
not their core business and their preference is to outsource the majority of the project delivery function rather than develop
in-house capability. This is most commonly the case in the oil and gas, petrochemical and mining and resources sectors.
The ‘heavy’ approach is not typically used where a client actively participates in project delivery and has a track-record in
delivering major projects with sophisticated project delivery frameworks and in-house capability. In those circumstances, the
client is more informed and better placed to take an active role and lead the project because it has delivered similar projects
before and can draw on proven success factors and lessons learned from those projects.
Chevron, Roads and Maritime Services, Crossrail and Sydney Metro demonstrate that even active project developers with
sophisticated internal project delivery capability see value in engaging an EPCM/Delivery Partner under a ‘light’ approach.
This is particularly in relation to accessing additional specialised resources to enhance or supercharge existing internal
capability and capacity for certain functions or in jurisdictions where the client has not previously delivered projects. Those
entities recognise there is a commercial trade-off between retaining overall project delivery control and authority and the
extent to which the entity can allocate risk of not achieving project objectives to the EPCM/Delivery Partner.

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1.7 How is it different from the appointment of a Technical Adviser(s)
The following table sets out the differences between the appointment of a technical adviser(s) and the appointment of a
Delivery Partner.
Table 3: Differences between the appointment of a Technical Adviser(s) and a Delivery Partner

Feature Technical Adviser(s) Delivery Partner

Front-end Focus on discrete deliverables: Focus on whole of life project needs:

Engineering and
• Reference design • Constructability
Design
• Process map • Market conditions
• Raw material availability

Commercial terms Typically employed on a ‘Fee for Long term contract with KPI regime tied to
of engagement Service’ basis. specific project outcomes including:
• Accuracy of cost estimates
• Adherence to planning requirements
• Staff retention
• Organisational/cultural cohesion
Ongoing commercial tension throughout project
lifecycle provided from stage gates, and the
Principal’s prerogative to expand or diminish
Delivery Partner’s role.
Market conditions Very high quality pool of existing resources. Limited existing Delivery Partner presence in
However, scale of current infrastructure Victorian civil infrastructure market. However
Programme means this market is at or deep pool of available expertise and
over capacity. appetite from:
• International DP/EPCM firms
• Resources currently working in other
sectors (mining/petrochemicals)
• Technical Advisers looking to scale up into
DP/EPCM Contractors
Resource Technical design and engineering expertise Ability to rapidly scale up DP capability using
mobilisation deployed in response to discrete tasks as international resources, including access to
procured by delivery authority. highly specialised technical skills.
Limited capability in procurement and
construction management.

Resource Ability to incentivise retention of key resources Can incentivise retention of key resources over
retention limited by ‘fee for service’ nature of contract. the project lifecycle through DP contract.

Design risk Varies depending on procurement method Design risk stays with the Principal, but allows
adopted. On PPP project, transferred to private cost control through value engineering and
sector through tender process. refinement throughout project delivery.

Procurement First major procurement milestones occur with First major procurement milestones occur
milestones tending and award of primary D&C/PPP during development phase, with appointment of
package(s). Delivery Partner.

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1.8 Drivers for using the EPCM/Delivery Partner Model
There are a number of key drivers for using the EPCM/Delivery Partner Model. These are summarised in Table 4, which
includes examples identified from case studies to provide further context.
A recurring theme is that the EPCM/Delivery Partner Model is primarily adopted to access an additional pool of specialised
project delivery resources. Accessing these additional resources is intended to maximise the likelihood of achieving project
objectives and ensure the client is appropriately resourced to manage the additional complexity, interfaces and client
retained risks arising in complex mega projects.
Another key driver for adopting the EPCM/Delivery Partner Model is the need for greater project disaggregation and
progressive procurement of work packages in response to contracting market constraints and competition issues in a
booming market, and to achieve aggressive fast-track target delivery timeframes to achieve project benefit realisation as
early as possible (for example ‘first ore on ship’ ahead of competitors in the mining and resources context).
Table 4: Drivers for adopting EPCM/Delivery Partner Model

Drivers Context Examples

Thin/passive • Delivery of projects is not the 1. Small or mid-cap mining company with extensive
client driver client’s core business or the client in-house exploration and mining expertise but limited
otherwise wants to retain a thin mining infrastructure delivery experience. Only has
organisational structure and one project with investment approval and does not
outsource the majority of the want to develop internal project delivery capability. Is
project delivery functions. also open to divesting interest in the project as it
progresses and is de-risked and wants to maintain
• Client does not see value in
minimal permanent overheads and to outsource
investing in developing its own
project delivery to an EPCM/Delivery Partner.
project delivery systems and
processes for one project and 2. Special purpose organisation or project vehicle
wants to leverage an established solely for the purpose of delivering one
EPCM/Delivery Partner’s purpose project. With a finite purpose and duration, the
built project delivery systems client’s preference is to only directly retain a number
and processes. of key personnel and outsource the balance of the
project delivery functions to an EPCM/
Delivery Partner.
Client-side • Booming market conditions with a 1. Mining company seeking to deliver a project during
resource large number of competing existing the mining boom. Is not able to recruit and retain the
constraints in projects and project in the pipeline. necessary resources to deliver its project by target
heated market deadlines. The resultant project delivery delays and
• Client needs rapid access to an
extended time frames risk the overall project viability
additional pool of client-side
as the client will lose sales if it is not able to
resources to properly staff its
complete the project and deliver ore earlier to
project and wants to leverage an
customers. Despite paying a premium it elects to
EPCM/Delivery Partner’s
engage an EPCM/Delivery Partner on the basis it
established network of existing
can rapidly deploy the necessary resources within
resources and expertise.
required timeframes.
2. Client has a number of large projects to deliver in
parallel. It has extensive internal project delivery
capability and experience. However, the scale,
complexity and number of parallel projects has
exhausted internal capacity. Rather than defer the
project until other projects are completed and
resources become available, the client elects to
engage an EPCM/Delivery Partner to assist it to
deliver one of its projects under the direction of a
client project leadership team.

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Table 4: Drivers for adopting EPCM/Delivery Partner Model (Cont’d)

Drivers Context Examples

Larger more • Client is forced to split the project 1. The project value is greater than AUD10 billion and
complex projects scope into a number in response to is too big even for a consortium of large Contractors
with greater specialised technology needed to wrap the delivery. Client also wants to restrict joint
disaggregation and/or contracting market venture arrangements to maintain competition. The
required constraints and competition issues. client is forced to split project scope into a large
number of smaller packages resulting in more
client-side work and resources required to manage
additional complexity and risks. Client has internal
project delivery capability and experience in
delivering projects of less than AUD3 billion in value
and wants to supplement that expertise with
additional EPCM/Delivery Partner resources with
complex mega project experience.
2. Client intends to deliver a highly complicated
petrochemical plant with multiple specialist
equipment suppliers and first of its kind technology. It
is not practical or commercially feasible to obtain a
wrap of all or major scope components. The client
has to break the project up into a large number of
smaller more manageable specialist trade packages.
While the client has internal project delivery
capability and experience, it does not have sufficient
resources currently available to manage the
additional complexity, volume of work and interface
risk. It elects to engage an EPCM/Delivery Partner to
assist it to manage these factors on a staged
engagement basis.
Project delivery in • Client is expanding its business 1. Client intends to deliver a petrochemical plant in a
foreign country or into new markets and needs to country in the Middle East. It has a core team of
different industry develop infrastructure assets in experienced project delivery personnel who have
sector or those countries to support the delivered similar projects that will be deployed to the
asset type business’ expansion. project location. However, it has not previously
delivered a project in the Middle East and elects to
• Client has significant internal
engage an EPCM/Delivery Partner which has a team
domestic project delivery
of personnel with a proven track-record of delivering
experience but limited experience
similar projects in the region which it will make
in those countries or access to
available for the project.
resources on the ground in those
locations. 2. Client is a mining company with assets in China. It is
in the process of a major mine expansion and needs
• Alternatively, the client may have
to develop new rail, port and power infrastructure to
delivered projects in the country
support the expansion and provide supply chain
but not the type assets needed.
certainty to customers. The client has delivered mine
infrastructure assets in China previously but not rail,
port or power assets. It engages an EPCM/Delivery
Partner to who was recently involved delivering
similar assets in another region of China.

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Table 4: Drivers for adopting EPCM/Delivery Partner Model (Cont’d)

Drivers Context Examples

Criticality of • Client is embarking on the delivery 1. Client has secured several major offtake agreements
achieving project of a major strategic infrastructure that will underpin its profits for the next ten years.
objectives and on asset that is critical to the overall Management is confident it has the resources it
time project business strategy. needs to deliver the infrastructure assets required to
delivery meet the commitments. However, the penalties
• The ramifications to the business if
under the offtake arrangements and consequential
the project is not delivered on time
business interruption impacts if the assets are not
and in accordance with other
delivered on time to deliver on supply commitments
objectives are such that it requires
are such that the Board requires a greater level of
an additional level of project
project assurance and directs the engagement of an
assurance and the client is
EPCM/Delivery Partner to supplement the internal
prepared to pay a premium to
resources.
secure the necessary resources.
2. Client is a special purpose government agency
• Client engages an EPCM/Delivery
established to deliver a major international sporting
Partner to gain access to additional
event. On time delivery of the required stadiums and
‘best in class’ global project
associated infrastructure is imperative and not
delivery to supercharge its existing
negotiable. In response, the government agency
project delivery capability with
engages an EPCM/Delivery Partner consortium to
experience and lessons learned
gain access to ‘best in class’ global project delivery
from delivering projects under
resources with experience and lessons learned from
similar brownfield conditions and
delivering projects under similar brownfield
levels of public scrutiny.
conditions and levels of public scrutiny.

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1.9 Opportunities for the EPCM/Delivery How: Dividing the project scope into a greater number
of smaller, more manageable, packages enables
Partner Model to add value tendering across a broader contracting pool than would
For both private sector market participants and be possible under a single contract package. This is
government stakeholders, there are several opportunities particularly the case for projects where some
where an EPCM/Delivery Partner may add value. These Contractors may have significant project delivery
observations were made in light of the current capability, but for commercial reasons are only
infrastructure boom and indications of a potential up-turn prepared to contract directly with the client and are not
in project development in the mining and resources sector. willing to subcontract to a tier 1 head Contractor
These conditions are resulting in increased competition to consortium. This outcome of the Delivery Partner
secure both client-side and contracting resources, similar Model can be observed on the Pacific Highway
to the conditions encountered during the mining and Upgrade Project, where project disaggregation
resources and oil and gas boom in Australia a decade ago. increased the number of tier 2 Contractors able to
tender for work packages. Broadening the pool of
The main opportunities identified for an EPCM/Delivery Contractors able to bid on projects is expected to
Partner to add value include: become increasingly important in enabling delivery of
• Access to additional specialised resources – mega projects in the pipeline that are so large that
access to, and rapid deployment of, highly specialised even a consortium of tier 1 Contractors is unable or
project resources with mega project experience to unwilling to wrap the delivery of the end-to-end project
respond to a heated and resource constrained under a single contacting arrangement given the extent
domestic project environment and future pipeline. of project delivery risks and balance sheet constraints.
However, the benefits of reducing the size and
How: The domestic infrastructure market is increasing the number of work packages to address
increasingly facing a drain of specialised client-side competition issues has to be balanced against the
project delivery resources and is nearing or is at client’s appetite for managing interface risk and
capacity. Some global EPCM/Delivery Partners have financier requirements for bundling of packages
established domestic and international pools of where applicable.
resources which can be drawn upon as required at
various stages of the project lifecycle. This enables the • Flexibility for greater project disaggregation –
client to leverage core project delivery disciplines and progressive allocation of risk as the scope
subject matter expertise which can be deployed in definition matures – there is an opportunity to derive
multiple locations and across different time zones. For more value from progressive allocation of risk to the
example, certain EPCM/Delivery Partners use locally contracting market as the design matures and external
based core project delivery resources and subject stakeholder requirements and risks are better
matter experts, combined with offshore global experts understood by all parties.
and design hubs (for more generic or non-location How: The procurement of project scope is broken
specific aspects of design) to introduce efficiencies into down and procurement activities prioritised based on
the project scope definition and design development design maturity and what scope components need to
process. Some EPCM/Delivery Partners may also be prioritised to achieve overall project completion
have global procurement arrangements in place with milestones. Other than critical long lead items and
international material suppliers and equipment scope components which need to commence earlier,
manufacturers which a client can leverage to increase tender packages are generally only released once the
competition and potentially secure priority relevant reference design has reached an appropriate
manufacturing slots at competitive rates (i.e. for steel level of design development and the project scope,
supply or tunnel boring machines). Access to an stakeholder requirements and risks have been
established pool of resources can also enhance a assessed. The FEED process continues throughout
client’s ability to rapidly deploy additional procurement the procurement phase to avoid gaps in scope and
and implementation resources and respond to surges ensure end-to-end design and system integration
in project activity in the event that tender and between work packages. This requires a disciplined
contracting market responses dictate further approach to change management to ensure ongoing
disaggregation of project scope into design changes and scope creep are controlled and
smaller packages. minimised where it doesn’t deliver the required
• Flexibility for greater project disaggregation – benefits/return on investment. Again, the number of
access to a broader cross section of the work packages has to be balanced against the client’s
contracting market – by adopting an EPCM/Delivery appetite for managing interface risk and financier
Partner Model approach to project disaggregation, requirements where relevant.
procurement of work packages can occur progressively
once project scope and design matures. Further
disaggregation can also increase competition in an
already constrained contracting market facing
increasing capacity constraints and competition issues.

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• Enhanced management of client risk – Incentivising How: It is generally accepted that EPCM/Delivery
external client-side resources to drive best for project Partners have deep programming, site supervision and
behaviours and outcomes – adoption of typical contract management expertise. A client can leverage
EPCM/Delivery Partner accountability allocations and that expertise to ensure it is more fully informed and
incentive regimes, if structured appropriately, can drive has access to the necessary information and records
better alignment and best for project behaviours to throughout the implementation phase to assess actual
support achievement of overall project objectives. This progress versus the target project critical path and the
is as opposed to traditional fee for services root causes of delays and scope variations. It was
arrangements for external engineering and project observed that a lack of detailed information and
delivery resources which rely heavily on reputation and records on actual progress and performance on site is
existing relationships, and have generally been a major hindrance for the client to be in a position to
structured around achieving a single transaction properly respond to and defend claims if necessary.
outcome and assisting the client to ensure the EPCM/Delivery Partner Model also adopts a ‘one
contracting entity delivers the contracted project source of the truth’ approach similar to Alliances,
outcomes and obligations. where the client, with the assistance of the
EPCM/Delivery Partner, establishes and maintains
How: While engaging an EPCM/Delivery Partner does
project wide programme, systems and records which
not fundamentally alter the allocation of risk between
Contractors are required to integrate with and use but
client and Contractor based on chosen contracting
which are ultimately controlled by the client.
approach, it can provide access to additional
resources (personnel and systems) to manage client
retained risks.
Example
Complementing this is the ability to impose commercial
Large clients in the oil and gas and petrochemical
incentives which drive an EPCM/Delivery Partner to
sectors often undertake project delivery as an
manage risk on a whole of project basis rather than
important part of their core business. Those clients
transactional basis (i.e. working to achieve project
actively participate in project delivery and have
delivery rather than to achieve, for example, contract or
established project governance frameworks and
financial close). The respective roles and
processes developed over many years. They also
responsibilities of the client, EPCM/Delivery Partner
retain specialised project delivery and technical
and other client-side resources are established during
engineering specialists that are arguably leaders in
upfront alignment sessions and clearly documented in
their respective fields. These clients have established
accountability matrices. Tailored incentive
project leadership approaches and ways of working
arrangements aligned to interim and overall project
that draw on demonstrated success factors and
specific objectives are agreed and assessed on both a
lessons learned over many years on past projects. In
rolling and end of project/engagement basis. As with
these circumstances, an EPCM/Delivery Partner
any incentive based regimes, appropriate and
‘heavy’ approach with a large team and significant
measurable KRAs and KPIs need to be agreed and
delegated authority is not required. In addition,
documented to reflect required behaviours and
deploying such an approach may disrupt and
outcomes. However, the extent of the EPCM/Delivery
adversely impact established project delivery
Partner’s ‘skin in the game’ and effectiveness of the
behaviours and cultures seen by the client as critical
incentive regime will be largely dependent on how
project success factors. However, these
early in the project lifecycle the EPCM/Delivery Partner
‘sophisticated’ active clients acknowledge the depth
is engaged and the extent of its authority and ability to
of highly specialised project delivery resources
influence project outcomes.
retained in-house by EPCM/Delivery Partner
• Additional project wide controls, supervision and organisations and frequently engage them on an
contract administration resources – Adoption of integrated EPCM/Delivery Partner ‘light’ basis to
typical EPCM/Delivery Partner Model approach to supplement the client’s internal capability
client controlled project programme, systems and and capacity.
records, combined with access to highly specialised
project delivery resources to enable the client to be
better informed on project progress and issues, and be
in a better position to respond to and resolve major
claims and disputes. This is critical on disaggregated
mega projects where the client has to manage multiple
Contractors and ultimately takes to end-to-end project
integration risk. These risks include exposures to
underperformance of one Contractor materially
impacting and delaying other work packages for which
the client bears the risk above EPCM/Delivery Partner
liability caps.

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1.10 Constraints in deriving value from • Without appropriate change control processes and
EPCM/Delivery Partner contractual disincentives, there
EPCM/Delivery Partner Model is potential for scope creep from ongoing design
Elements of the EPCM/Delivery Partner Model can add development. The EPCM/Delivery Partner also needs
value to most projects. However, engaging an to be managed to ensure disaggregation is controlled
EPCM/Delivery Partner may not be appropriate and will and an optimum work package breakdown structure is
not deliver value in all instances. adopted that reduces interfaces and EPCM/Delivery
Partner resources.
Many clients actively participate in project delivery and
have established and sophisticated project delivery • The benefits of disaggregation and the progressive
frameworks and capability in-house, including engineering procurement of work packages in an EPCM/Delivery
and project delivery personnel with significant practical Partner Model approach will be significantly reduced,
experience delivering projects in the relevant industry. Not where disaggregation is constrained by a client’s
surprisingly, this internal capability reduces the benefits limited appetite for managing interface risks and/or
and value that can be realised by a client from engaging financier requirements for bundling of work packages
an EPCM/Delivery Partner, particularly the use of the to the greatest extent possible.
passive client ‘heavy’ EPCM/Delivery Partner approach • Under more heavily disaggregated work package
described in Section 1.6. This is not a practical or breakdown structures there are greater difficulties in
economical option in those circumstances. coordinating and avoiding gaps in liabilities between
It was generally accepted that brownfield projects, the individual Contractors. There are also typically
particularly in urban environments, are subject to a large lower levels of liquidated damages and overall caps
number of external factors and stakeholder requirements. on liabilities.
These factors are typically beyond the control of an Further comparative analyses of the advantages and
EPCM/Delivery Partner and require retention of a disadvantages of the EPCM/Delivery Partner Model and
sophisticated client team to mitigate impacts on project other delivery models are discussed in other briefing
progress and risks of material scope changes. papers in this series.
Other constraints in applying and/or deriving value from
the EPCM/Delivery Model include:
• Potential for cannibalisation of existing local expertise
and resources which are already in high demand in a
heated and resource constrained domestic project
environment.
• Higher demand on client resources to manage the
EPCM/Delivery Partner. Specialised EPCM/Delivery
Partner resources come at a cost premium and their
engagement and ongoing management requires
disciplined management by dedicated client resources.
• Inserting an extra layer between the client and
Contractors may cause additional tensions and
disputes which needs to be considered in the context
of retaining existing strong client/contracting market
relationships.
• Advancing the FEED and design development prior to
going to market may, to an extent, stifle Contractors’
ability to gain a competitive advantage and/or increase
in margin during the tender and detailed design
phases.

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1.11 Typical EPCM/Delivery Partner activities over project lifecycle
The EPCM/Delivery Partner is typically engaged in stages aligned to the client’s internal gated project approval and
governance frameworks.
The client usually retains the discretion whether or not it will direct the EPCM/Delivery Partner to proceed with the next stage
of services beyond each stage gate. The EPCM/Delivery Partner’s scope of services also needs to be aligned with its level
of accountability and the risks it is assuming for project outcomes.
Typical activities performed by an EPCM/Delivery Partner are summarised in Table 5.
Table 5: EPCM/Delivery Partner typical activities

Phase Role Typical activities

Business Case Supporting or delivering the business • Basic and detailed engineering and design
case that underpins the project (often referred to as pre-feasibility/concept design
investment decision. and FEED).
• Constructability analysis.
• Materials and resource availability assessment and
contracting market sounding.
• Work package breakdown structure and
procurement approach recommendations in respect
of each package.
Procurement Procurement planning, package • Ongoing FEED, including development of work
preparation, implementation and package performance specifications, reference
management. designs and detailed designs for Construct Only
work packages).
• End-to-end design and systems integration of the
separate work packages.
• Further market sounding, preparation of tender
packages, tendering, tender evaluations and
recommendations for award of project packages.
• Dynamic updating of work package breakdown and
associated procurement approaches reflecting the
outcomes of market sounding and tender responses.
• Prioritising procurement of packages based on the
overall project critical path, maturity of design and
certainty of scope and stakeholder requirements.
• Overall procurement process management in
accordance with the client’s internal governance
frameworks and approved delegations of authority.

Implementation Construction management, • Design and systems integration management and

coordination, supervision and contract coordination between work packages, including
administration. reviewing detailed designs prepared by work
package Contractors.
• Site inspections and certification of completed work.
• Work package coordination and interface
management.
• Construction Programme monitoring and scenario
analysis.
• Contract administration and claims management.
• Contractor defect rectification management.

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1.12 Typical process for engaging Clients have noted a need for commercial protection from
price increases as an EPCM/Delivery Partner becomes
EPCM/Delivery Partner more embedded in a client team over the project lifecycle.
For both private sector market participants and To achieve some level of insulation from future price
government stakeholders, the process for engaging an increases, EPCM/Delivery Partners are often required to
EPCM/Delivery Partner varies significantly from project to commit to personnel pricing and margins (spanning the
project. project lifecycle) while there is competitive tension during
EPCM/Delivery Partner procurement.
Where clients have an existing relationship, and have
successfully delivered projects with the assistance of a Critical to the success of the EPCM/Delivery Partner
particular EPCM/Delivery Partner, it is common for them to Model is allowing appropriate time to undertake a
engage the same partner on a single source procurement client-side organisational capability and capacity gap
basis. In doing so, both parties leverage existing analysis prior to procuring an EPCM/Delivery Partner. This
relationships, proven team and project success factors process is necessary to determine the supplementary
and lessons learned on the past projects. To ensure project delivery skills and experience required from the
competitive pricing, clients reference the pricing and build EPCM/Delivery Partner.
on commercial arrangements used on the previous
projects. Open book pricing is often used and informed
clients generally have a good understanding of current
market rates for project delivery personnel.
Alternatively, the scale of the project and number of
personnel to be provided by the EPCM/Delivery Partner
may necessitate a competitive tender process. In addition
to creating competition, this enables a client to compare
capability and ability to access best in class personnel
across a range of tenderers. Subject to overriding time
constraints, this would typically follow an expression of
interest and request for tender process for professional
services, including evaluation and down selection of
tenderers in several stages. One or more preferred
candidates is then selected to proceed to a final pricing
and team selection and alignment phase before award of
the contract.
Clients often adopt a two stage engagement process.
Under this approach, a client will initially only tender for
and engage an EPCM/Delivery Partner for the feasibility
and business case preparation phase of the project under
a fixed or capped fee professional services arrangement.
In parallel with the performance of their respective
activities and the project scope development during that
phase, the parties continue to assess and align on the
project organisational structure and the extent and timing
of EPCM/Delivery Partner resources required for
subsequent phases of the project. They also continue to
negotiate the commercial terms and incentive
arrangements under a professional services agreement for
the balance of the project phases, which is aligned to the
agreed resources, accountabilities and delegated authority
(if any) of the EPCM/Delivery Partner (EPCM/Delivery
Partner Contract).
Where the parties reach agreement on the scope and
commercial terms, the client will engage an
EPCM/Delivery Partner under a fully termed
EPCM/Delivery Partner Contract. This form of contract is
typically subject to conditions precedent, including client
investment committee approval and financial close (if
external project financing is required). Clients also typically
reserve the right to go back to the market and tender the
EPCM/Delivery Partner services for the remaining phases
of the project or operations and maintenance, if for any
reason the client is not satisfied with the incumbent
EPCM/Delivery Partner’s performance or its personnel
during the initial phase, or the parties are otherwise unable
to reach agreement on commercial terms. These
provisions are often referred to as ‘off ramps’ or ‘stage
gates’ in an EPCM/Delivery Partner engagement.
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1.13 Key contractual concepts Whatever form of contract is used, the terms need to be
tailored for each project with clear delineation of the
between the client and the respective roles and accountabilities of the client and the
EPCM/Delivery Partner EPCM/Delivery Partner. Carefully considered incentive
arrangements aligned to the client’s project objectives are
The EPCM/Delivery Partner Contract is usually a bespoke
also critical to driving the appropriate behaviours and
professional services agreement prepared by the client’s
successful project outcomes. The EPCM/Delivery Partner
commercial and legal teams. Some EPCM/Delivery
Contract will also usually incorporate the award and
Partners propose their own forms of amended industry
commencement of the EPCM/Delivery Partner’s services
standard agreements incorporating collaborative
in stages aligned with the client’s project lifecycle phases
contracting elements which they have used on past
and investment decision points/gateways.
projects. This is not a recommended approach as it will not
take into account client-side preferences or reflect the Some of the contractual concepts to be considered for an
public sector staged approach to engagement. EPCM/Delivery Partner engagement are summarised in
Table 7. This table is not an exhaustive list and further
In its simplest form, an EPCM/Delivery Partner Contract is
detailed analysis of typical EPCM/Delivery Partner
a consultancy services agreement for the provision of
contractual issues and incentive arrangements are also
professional and technical services. At the other end of the
discussed in other briefing papers in this series.
spectrum, it is more akin to an integrated Alliance style
contract where the parties’ interests are aligned and risks
are shared through open book compensations frameworks
and KRA and KPI incentive mechanisms built into the
agreement.
There are many factors which influence the form of, and
risk allocation under, the EPCM/Delivery Partner Contract.
They include:
• the current market demand in the engineering/project
management sector.
• the size, complexity and risk profile of the project.
• whether the project is to be delivered on a fast-track
schedule.
• the requirements and approach to allocation of risk of
the project Sponsor(s).
• the requirements of the Lenders where the project is to
be financed on a limited or non-recourse basis.
• the requirements of other stakeholders.
• the extent of engineering and design already
undertaken by the client under separate contracts (if
any).

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Table 7: Key EPCM/Delivery Partner contractual concepts

Concept Description

Staged Contracts are typically structured in such a way so as to permit the client, in its absolute discretion,
engagement with to instruct the EPCM/Delivery Partner to proceed to the next stage. For example, at the conclusion
optional phases of the feasibility stage, the client can elect to end the engagement and go to market regardless of
whether an incumbent EPCM/Delivery Partner has properly performed the services. Similarly,
where the project is to be financed through limited or non-recourse project financing, the client
must be entitled to terminate the contract in its absolute discretion if the Lenders do not give
finance approval or the clients cannot raise the required capital.
Terms establishing the process, consequences (including payment on termination outlined above)
and risks in the services undertaken during a particular phase will need to be clearly articulated in
the contract.

Project objectives The contract should include a description of the client’s overarching project goals, list of project
and project scope objectives and a detailed description of the scope and the client’s project requirements. This would
usually be aligned to the business case objectives, scope and assumptions underpinning the
investment decision.
Traditional provisions regarding obligations to use all reasonable endeavours to perform the
services to ensure the defined scope is delivered in accordance with the project objectives and
requirements should be included. This also becomes the reference point for determining whether a
change is material giving rise to a variation or adjustment to KRA and KPI targets upon which
incentive payments are based as discussed below.
Accountability In addition to the detailed scope of services and agreed personnel and resource schedules, the
matrix contract should include a detailed accountability matrix for each phase of the services.
This is typically in the form of a table and includes a detailed list of all key project tasks and
activities during each phase, and delineates, at a high-level, the accountability of the client,
EPCM/Delivery Partner and other key project participants for the performance of or contribution to
each task or activity. The accountability matrix must align with the client governance and
organisational structure and the agreed resources to be provided by EPCM/Delivery Partner. The
process of preparing it often provides a good opportunity to identify and correct any misalignment
between the parties in terms of respective roles and responsibilities.
Client reserve Provisions should be included in the contract which clarify the ‘reserve powers’ held by the client to
powers and manage and direct the project, including:
delegated
• approval of systems and procedures governing the project
authority
• urgent protection of people and property
• issuing bid documents
• awarding implementation contracts
• approving variations and extensions of time or
• any event likely to have a major impact on the operation or viability of the project etc.
The extent of the EPCM/Delivery Partner’s delegated authority (if any) also needs to clearly
articulated and remain subject to change at the client’s discretion. Terms establishing the process
and consequences (including any impact on incentive arrangements) for a change in the
EPCM/Delivery Partner’s delegated authority must be clearly articulated.
Retention of key The traditional provisions regarding key personnel (i.e. the EPCM/Delivery Partner cannot remove
personnel them without the client’s prior approval) are likely to be too inflexible for complex mega projects
delivered over several years. Consideration should be given to alternate arrangements such as
incentives or payment of a liquidated amount where senior key personnel leave or are taken off
the project within a certain period. There will typically be exceptions to such payment for illness,
incapacitation and resignation, or if the personnel are temporarily absent on, for example,
annual, sick, long service or compassionate leave (provided a suitable replacement is deployed to
the project).

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Table 7: Key EPCM/Delivery Partner contractual concepts (Cont’d)

Concept Description

Overall design Early consideration of the scope of the EPCM/Delivery Partner’s design obligations is vital. In
integration particular, a client must consider whether an EPCM/Delivery Partner is responsible for:
responsibility,
• the end-to-end design integration of the various work packages
constructability
warranties and • guaranteeing that, when integrated, the design of the various project scope elements will
novation of exiting enable the overall project to meet the client’s functional and performance requirements for the
design whole project.
If an EPCM/Delivery Partner is responsible for end-to-end integration, there will need to be certain
carve-out to the design warranties for latent errors or deficiencies in detailed engineering and
design performed by the works package Contractor and Suppliers.
Where the EPCM/Delivery Partner is permitted by the client to self-perform FEED and detailed
design, it should be required to provide design constructability warranties and also warrant that the
design of the works will be fit for the purposes it was intended for.
In the event a major proportion of the engineering and design for the project has already been
undertaken under separate design/consultancy packages let by the client (i.e. FEED during the
initial project feasibility phase), the client should consider avoiding potential gaps in liability by
creating a single point of responsibility for the performance of the FEED. This is achieved, in part,
through the novation of the existing design to the EPCM/Delivery Partner so that it has contractual
rights against those consultants. If the EPCM/Delivery Partner is to be a single point of
responsibility for the performance of the FEED, the client must allow sufficient time and budget for
the EPCM/Delivery Partner to verify and correct errors or deficiencies in the existing design. Field
engineers coordinate specialist design and engineering resources to resolve design and
engineering issues until the works have been fully commissioned.
Intellectual The contract intellectual property (IP) regime needs to reflect:
property
• the range of Contractor and Supplier background IP being contributed
• the range of project IP being developed at the work package and supply contract level
• the corresponding need for licences and rights to use and develop that IP, including ensuring
appropriate IP warranties and indemnities in the work package and supply contracts.
The client should also ensure it retains ownership of and rights to use and adapt the IP in the
FEED and other materials prepared by or on behalf of the EPCM/Delivery Partner as part of the
business case. This will prevent the client from being restricted in using that material in the event it
elects to terminate the EPCM/Delivery Partner’s engagement at the end of the feasibility and
business case phase. The client should also specify the format and form by which this IP is
handed over in the event of a termination of engagement.
Insurance The whole of project insurance strategy is critical and will impact on the contract risk allocation and
extent of insurances to be procured and maintained by the EPCM/Delivery Partner. In addition to
any project wide insurance policies, the EPCM/Delivery Partner will usually take out and maintain
public liability and professional indemnity insurance. In reality the scope of the professional
indemnity insurance may not underwrite all of the contractually assumed liabilities under the
contract, in particular EPCM/Delivery Partner warranties and indemnities. This may or may not
influence negotiations of contract terms, including liability cap, depending on the EPCM/Delivery
Partner’s balance sheet capacity to meet its liabilities. The EPCM/Delivery Partner’s liability caps
are sometimes limited to the amount recoverable under insurance policies maintained under the
contract. If this position applies, the EPCM/Delivery Partner’s policy must operate on an ‘each and
every claim basis’ rather than an ‘in the aggregate basis’.
Overall project The EPCM/Delivery Partner is usually required to prepare a capital cost budget and programme
cost and for the business case. Once approved, the EPCM/Delivery Partner becomes responsible for
programme monitoring and managing actual cost and progress against the approved budget and Programme,
control and for providing the Principal with regular costs and Programme updates. Although the
EPCM/Delivery Partner does not take the risk of delivering the project on time and on budget, it
generally has an obligation to use reasonable endeavours to do so, and is incentivised to manage
the budget and Programme to ensure project cost or Programme overruns are avoided or
minimised through incentive payments.

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Table 7: Key EPCM/Delivery Partner contractual concepts (Cont’d)

Concept Description

EPCM/Delivery EPCM/Delivery Partners are typically remunerated on an cost-reimbursable basis, including the
Partner following components:
remuneration
• Fixed Fee: Pre-agreed fixed fee or percentage of the estimated cost for each phase of the
project to cover margin and overheads.
• Actual Personnel Costs: Reimbursement for directly and reasonably incurred personnel
costs at pre-agreed rates or on an open book costs basis, with typical deductions for
duplication of work undertaken due to defects in the services or otherwise for the
EPCM/Delivery Partner’s default.
• Reimbursable Expenses: Reimbursement for a discrete list of reimbursable expenses,
subject to the client’s approval prior to the expense being incurred (i.e. pre-approved work
related travel).
The EPCM/Delivery Partner will typically also be entitled to bonuses (or subject to a reduction in
payment) under an agreed incentive regime as outlined below. The EPCM/Delivery Partner may
also agree to fixed-fee arrangement for certain activities where it is able to reasonably estimate
the extent of work and resources required. However, any fixed fee or capped fee arrangements
need to be considered carefully and structured in a way that does not create behaviours which are
not in the overall project’s best interests.
Material variations Not all project scope changes will constitute a variation under the Contract which should include
mechanisms for determining what amounts to a material variation (i.e. a major change to the
project scope or other material adverse event not contemplated by the parties) and the
corresponding cost consequences (i.e. adjustment to fixed fee and overhead component or
payment of direct costs only). This area becomes more important in relation to the achievement of
KRA and KPI targets and whether the target costs and time frames are to be adjusted. Pre-award
workshops are often conducted to define the limited nature of events giving rise to a variation.
Incentive Given the cost reimbursable nature of the contracts, without incentive mechanisms, it is difficult, if
arrangements not impossible, to instil the same sense of urgency and efficiency in the EPCM/Delivery Partner
and its personnel over a long period as compared to a fixed price model. Therefore, the regime will
be critical in incentivising the EPCM/Delivery Partner to perform in a safe, productive, efficient and
timely manner in order to ensure the client’s key objectives for the project are realised – usually a
combination of time, cost, quality, safety, environment, stakeholder and community management.
It is critical when formulating the targets and methods of measuring performance, that there is
sufficient clarity of project scope and the client’s requirements. Whenever possible, the Principal
must allow sufficient time and resources to agree and clearly articulate quantifiable KRA and KPI
targets and corresponding methods of measuring performance against those targets.
The incentive regime should focus on maximising productivity and timely delivery whilst striking a
balance between time and budget, without sacrificing quality or safety. We have seen very detailed
and sophisticated incentive regimes, particularly in an Alliancing or relationship contracting context
and where project deliverables are to be measured over long time frames. Conversely, some
parties prefer to move away from (or limit the extent and impact of) incentive regimes, because
they believe these arrangements can create uncertainty (and therefore some risks in a rising cost
market) and drive the wrong behaviours due to additional friction between the parties, which does
not foster co-operation or trust between the parties. Some EPCM/Delivery Partners are also
unwilling to put a material percentage of their remuneration at risk based on an incentive regime.
However, if the incentive regime is structured with proper recognition of the current market
conditions and the issues below are addressed then successful outcomes are achievable.

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1.14 Financing a mega project using an Where government funded disaggregated mega projects
are financed by drawing on revenue through the State
EPCM/Delivery Partner Model budget, the EPCM/Delivery Partner can assist the State by
For private sector projects financed through limited or providing the same level of project due diligence and by
non-recourse project financing, the syndicate of Lenders monitoring cost and time overruns in the absence of
often demand certainty in terms of time and cost. This is private sector project finance by:
because security is reliant on achieving completion and • being engaged as part of FEED to prepare cost,
satisfying the completion tests to allow project revenues to budget and schedule estimates based on experience
flow during the operations phase. with other mega projects, and the parallel activities
Where the borrower is an entity newly established to being done in collaboration with the client’s team in
deliver, own and operate the project, this usually restricts respect of scope definition work, development of the
the use of an EPCM/Delivery Partner Model even though preliminary/full business case and design engineering
the outcome may potentially be cheaper and faster (with development.
some exceptions where there is government or Export • monitoring and reporting on anticipated costs of the
Credit Agency support or very strong Principal-financier Project as well as the progress of the build.
relationships or influence).
• implementing cost controls incentivised through the
Where an EPCM/Delivery Partner Model is used, it is not incentive regime.
uncommon for Lenders to require the client to provide
them with a completion guarantee. That is, the client (or its • playing an active role in monitoring and reporting
ultimate parent company) provides the Lenders with some during the testing and commissioning phase of the
form of company guarantee until practical works packages.
completion/commercial operation or a commitment to
• applying its integration management expertise.
cover cost overruns, delay costs and debt service
obligations during a period of delay. • taking end to end design responsibility.
That guarantee is usually capped, falling away upon
practical completion/commercial operation. Depending on
the requirements of the Lenders, the project
characteristics and the client’s and EPCM/Delivery
Partner’s track record for delivering similar projects, the
completion guarantee may be more limited and step down
prior to practical/commercial operation or as various
stages of the project are completed. Conversely, it may
extend beyond commercial operation to cover market
pricing risk depending on the type of project and output.
The processes that Lenders use to identify, allocate and
manage risks prior to financial close and during the
construction phase include:
• obtaining due diligence (including technical,
environmental and financial) as part of the credit
process.
• appointing Lenders’ technical consultants to review
project cost estimates and revenue projections, as well
as monitoring the progress of the project.
• appointing a certifier to assess the value of the work
completed and what it will cost to complete the
construction of the project.
• only allowing further drawdowns of the debt facilities if
the latest forecast ‘cost to complete’ does not exceed
the project company’s available funding and the latest
forecast date of completion will occur before the debt
sunset date.

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How to contact us

If you have any questions about this paper, please contact the editor, Damian McNair, Partner, Energy Transition.
PwC Australia has a dedicated Energy Transition business, consisting of a hub of 132 multidisciplinary and highly-skilled
experts helping to facilitate Australia’s successful transition to a decarbonised economy by 2050. We are helping accelerate
our clients through the energy transition and their related ESG priorities as Australia moves to a net zero economy.

Damian McNair Varya Davidson

PwC | Partner, Energy Transition PwC | Partner, Energy Transition
M: +61 421 899 231 M: +61 478 303 103
E: damian.mcnair@pwc.com E: varya.davidson@pwc.com
LinkedIn LinkedIn

Luke Westmore Rhiannon Hough

PwC | Partner, Energy Transition PwC | Director, Energy Transition
T: +61 402 074 040 M: +61 403 514 687
E: luke.westmore@pwc.com E: rhiannon.hough@pwc.com
LinkedIn LinkedIn

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