Do not understand these seven engineering contracting mode, never say you are doing engineering

With the continuous improvement of the level of modern science and technology, China's building construction technology has also made significant progress. Especially in recent years, due to the rapid development of the construction industry, engineering construction mode plays an important role in the building construction industry.

As a construction company which can not understand the EPC, PMC, DB, DBB, CM, BOT, PPP and other modes, the following to analyze the advantages and disadvantages of each mode.

1, engineering general contracting (EPC) mode

EPC engineering general contracting that Engineering Procurement Construction mode, also known as design, procurement, construction integration mode.

It refers to the decision-making stage of the project, starting from the design, after bidding, entrusted to an engineering company on the design - procurement - construction of general contracting.

EPC general contracting

In this mode, according to the lump-sum price or adjustable lump-sum party stipulated in the contract, the engineering company is responsible for the management and control of the project's progress, cost, quality and safety, and complete the project according to the contract.

EPC has many kinds of derivations and combinations, such as EP+C, E+P+C, EPCm, EPCs, EPCa and so on.

Advantages

(1) the owner of the project design, procurement, construction and start-up services are all entrusted to the general contractor responsible for the organization and implementation of the project, the owner is only responsible for the overall, the principle, the goal of the management and control of the general contractor is more able to play a subjective initiative, can use its advanced management experience for the owner and the contractor to create more benefits for themselves; improve the efficiency of the work. Reduced coordination workload.

(2) Fewer design changes, shorter construction period.

(3) Because of the use of lump-sum contracts, basically no need to pay claims and additional project costs; the final price of the project and the required duration of a greater degree of certainty.

Disadvantages

(1) The owner cannot control the project throughout.

(2) The general contractor is responsible for the cost schedule and quality of the entire project, increasing the risk to the general contractor, who, in order to reduce the risk of obtaining more profits, may reduce costs by adjusting the design program, which may affect the quality of the long-term sense.

(3) Because of the use of lump-sum contracts, the contractor has little flexibility to obtain change orders and additional costs from the owner.

2, project management contracting (PMC) mode

PMC is Project Management Consultant, that is, project management contracting.

The project management contractor on behalf of the owner of the project to carry out the whole process, all-round project management, including the overall planning of the project, project definition, project bidding, selection of EPC contractors, and design, procurement, construction, commissioning for the overall management of the project is generally not directly involved in the design, procurement, construction and commissioning stage of the project, such as the specific work.

Project Management Contracting

The PMC model reflects the separation of preliminary design and construction drawings design, construction drawings design into the field of technical competition, except that the preliminary design is completed by the PMC.

Advantages

(1) It can give full play to the management contractor's professional skills in project management, and unify the coordination and management of the project design and construction to reduce conflicts.

(2) It is conducive to saving investment in construction projects.

(3) The model can optimize the design of the project, and can achieve the lowest cost in the survival of the project.

(4) In order to ensure the quality of the contractor to obtain the right to future shares of the project or the right to share the proceeds, can shorten the construction period, in high-risk areas, usually used in the form of shares to stabilize the team.

Disadvantages

(1) The owner's participation in the project is low, the right to change is limited, and coordination is difficult.

(2) The owner's great risk lies in the ability to choose a high-level project management company.

(3) This model is usually applicable to: large-scale projects with project investment of more than 100 million U.S. dollars; projects in countries and regions lacking management experience, the introduction of PMC can ensure the successful completion of the project.

At the same time to help these countries and regions to improve the level of project management; the use of banks or foreign financial institutions, consortiums, loans or export credits for the construction of the project; the process of the device is more and more complex, the owner is not familiar with the process of these huge projects.

3, design-build (DB) model

DB that is, the design-build model (Design And Build), also known as the turnkey model (Turn-Key-Operate) in the international arena, and in China, the design-construction general contracting model (Design-Construction).

After the principle of the project is determined, the owner selects a company to be responsible for the design and construction of the project.

This approach is based on a lump-sum contract at the time of bidding and contracting.

Design-Build General Contractor Model

The Design-Build General Contractor, who is responsible for the cost of the entire project, first selects a consulting design firm to do the design, then uses competitive bidding to select subcontractors, or of course, utilizes his own design and construction forces to complete a portion of the work.

DB avoids the contradiction between design and construction, which can significantly reduce the cost of the project and shorten the construction period.

However, the focus of the owner's concern is to complete the project and deliver it according to the contract, and does not care how the contractor goes about implementing it.

At the same time, in the selection of contractors, the merits of the design program as the main factor in the evaluation of bids, can ensure that the owner to get high-quality engineering projects.

Advantages

(1) Working closely with the contractor to complete the project planning up to acceptance reduces the time and cost of coordination.

(2) Contractors can incorporate their knowledge and experience of materials, construction methods, structures, pricing and markets into the design at an early stage of involvement.

(3) It is conducive to cost control and cost reduction. Foreign experience has proved that the implementation of DB mode can reduce the cost by about 10% on average.

(4) It is conducive to schedule control and shorten the construction period.

(5) Single responsibility. In general, the contractual relationship of the construction project is between the owner and the contractor, the owner's responsibility is to pay in accordance with the contract, the general contractor's responsibility is to provide the products required by the owner on time, and the general contractor has full responsibility for the whole process of project construction.

Disadvantages

(1) Less control over final design and details.

(2) The merchant's design has a significant impact on the economics of the project, and the contractor assumes greater risk under the DB model.

(3) Quality control depends largely on the quality of the functional descriptor when the owner solicits bids, and the level of the general contractor has a greater impact on the quality of the design.

(4) Shorter time, lack of specific laws and regulations, no specialized insurance.

(5) the way to operate complex, less competitive.

4, parallel contracting (DBB) mode

DBB that is, design-bid-build mode (Design-Bid-Build), which is a more common in the international and the earliest application of one of the contracting mode of engineering projects.

The owner entrusts the architect or consulting engineer to carry out the preliminary work (e.g., opportunity study, feasibility study, etc.), and then carry out the design after the project is evaluated and established.

Design-Bid-Build Mode

Construction bidding documents are prepared at the design stage, and the contractor is subsequently selected through bidding; while subcontracting of the relevant individual works and procurement of equipment and materials are generally carried out by the contractor who enters into separate contracts with subcontractors and suppliers and organizes the implementation of such contracts.

In the project implementation phase, the engineer provides construction management services for the owner.

The most prominent feature of this model is to emphasize that the implementation of the project must be carried out in accordance with the sequence of D-B-B, only one phase is completed before the other phase can begin.

Advantages

Advantages are that the management method is more mature, all parties are familiar with the relevant procedures, the owner is free to choose the consultant designers, the design requirements can be controlled, free to choose the engineers, and the standard contract text can be used, which is familiar to all parties, and is conducive to contract management, risk management, and reduction of investment.

Disadvantages

(1) The project cycle is long, the owner contracts with the design and construction parties separately and manages the project on its own, with higher management fees.

(2) Poor constructability of the design and poor ability of the engineer to control the project objectives.

(3) Not conducive to the division of responsibility for engineering accidents, due to the drawings of the problem of disputes arising from more claims, etc..

This management mode is the most common in the international arena, and it is used in projects based on the contract conditions of the World Bank, ADB loan projects and the International Federation of Consulting Engineers (FIDIC).

China's current widely used "project legal person responsibility system", "bidding and tendering system", "construction supervision system", "contract management system" basically refer to the World Bank, ADB loan projects and the International Federation of Consulting Engineers (FIDIC) contract conditions. Management system" basically refers to this traditional model of the World Bank, ADB and FIDIC.

5, construction management contracting (CM) mode

Construction Management Approach mode is also known as "design and construction" mode.

Phased contracting approach or fast track approach, CM mode is commissioned by the owner of the CM unit, in the capacity of a contractor, to take the conditional "design and construction", with a view to shortening the project cycle, also known as the fast track method.

That is, Fast Track production organization to carry out construction management, direct construction activities, to a certain extent, affect the design activities, and its contract with the owner usually adopts a "cost + profit" approach to such a contracting model.

This way through the construction manager to coordinate the design and construction of the contradictions, so that the decision-making open.

It is characterized by the owner and the owner commissioned by the project manager and engineers to form a joint team **** with the organization and management of the project planning, design and construction.

Completion of a part of the sub (single) project design, that is, the part of the bidding, contracted to a contractor, no general contractor, by the owner directly according to each individual project and the contractor to sign a contract respectively.

This is widely popular in recent years in foreign countries, a contract management model, this model is different from the past that the design drawings are all completed before bidding for the continuous construction production model.

Two forms of realization of the CM model: the services of the CM unit, divided into agency type and non-agency type.

1, Agency type CM ("Agency" CM): to work as the owner's agent, and receive remuneration for services.

2, At-Risk CM ("At-Risk" CM): in the capacity of a general contractor, can be distributed directly, directly with the subcontractor contract, and to the owner to undertake to ensure that the maximum cost of the project GMP, if the actual cost of the project exceeds the GMP, the exceeding portion of the CM unit to bear.

Advantages

(1) In terms of project schedule control, as the CM mode adopts decentralized contracting and centralized management, it makes the design and construction fully overlap, which is conducive to shortening the construction cycle.

(2) The CM unit strengthens the coordination with the design side, which can reduce the delay of the construction period caused by the modification of the design.

(3) In terms of investment control, through the coordination of design, CM unit can also help the owner to use value engineering and other methods to put forward rationalization proposals to the design, in order to explore the potential for saving investment, but also can greatly reduce the construction phase of the design changes.

If the CM model with GMP is adopted, the CM unit will take more direct financial responsibility for the control of project costs, thus greatly reducing the owner's risk in the control of project costs.

(4) in the quality control, the combination of design and construction and mutual coordination, the use of new technologies, new methods in the project, is conducive to the improvement of the quality of construction.

(5) The selection of subcontractors is more intelligent as it is decided by both the owner and the contractor*** together.

Disadvantages

(1) The requirements for the qualification and reputation of the CM manager as well as his organization are higher.

(2) Sub-bidding results in potentially higher contracting costs.

(3) The CM model generally adopts a "cost plus fee" contract, which requires a high level of model contracts.

6, Build-Operate-Transfer (BOT) model

BOT is the Build-Operate-Transfer (BOT) model.

It means that a consortium or investor is the initiator of a project, obtains a concession from a national government to build a project infrastructure, and then independently joins with other parties to form a project company, which is responsible for financing, designing, building and operating the project. Throughout the concession period, the project company earns a profit from the operation of the project and uses this profit to repay its debts.

At the end of the concession period, the entire project is handed over by the project company to the host government at no cost or at a minimal nominal price.

The most important feature of the BOT model is that it is sometimes possible to obtain preferential policies and broaden the financing channels due to governmental permission and support.

BOOT, BOO, DBOT, BTO, TOT, BRT, BLT, BT, ROO, MOT, BOOST, BOD, DBOM, and FBOOT are all different evolutions of the standard BOT operation, but their basic characteristics are the same, i.e., the project company must be granted concessions by the relevant governmental authorities.

This model is mainly used for a number of infrastructure projects such as airports, tunnels, power plants, ports, toll roads, telecommunication, water supply and sewage treatment, etc., where the investment is large, the construction period is long and the operation can be profitable.

Advantages

(1) It can reduce the government's sovereign debt borrowing and debt servicing responsibilities.

(2) It can transfer the risk from the public agency to the private contractor, avoiding the public agency from bearing the entire risk of the project.

(3) It can attract foreign investment to support the construction of domestic infrastructure and solve the problem of lack of construction funds in developing countries.

(4) BOT projects are usually contracted by foreign companies, which will bring advanced technology and management experience to the country where the project is located, which will bring more development opportunities for national contractors and also promote the integration of the international economy.

Disadvantages

(1) During the concession period, the government will lose control over the ownership and operation of the project.

(2) Multiple participants, complex structure, excessively long project lead time and high financing costs.

(3) It may lead to a large amount of tax revenue loss.

(4) May result in predatory operation of facilities.

(5) There will be a significant outflow of foreign currency after the project is completed.

(6) Asymmetric risk sharing, etc. Although the government transfers the risks of construction and financing, it takes on more other responsibilities and risks, such as interest rate and exchange rate risks.

7, the public **** sector and private enterprise cooperation mode (PPP)

PPP private participation in public **** infrastructure construction and public **** affairs management mode collectively referred to as public-private (private) partnership (PublicPrivate Partnership- referred to as PPP).

Specifically refers to the government, private enterprises based on a project and the formation of a partnership between each other a franchise project financing model.

The project company is responsible for financing, constructing and operating the project, and the government usually enters into a direct agreement with the financial institution providing the loan, which is not a guarantee of the project, but rather an undertaking by the government to the lending institution that it will pay the relevant costs in accordance with the contract signed between the government and the project company.

This agreement allows the project company to obtain loans from the financial institution more smoothly.

And the project's expected revenues, assets, and the level of government support will have a direct impact on the amount and form of the loan.

The essence of adopting this form of financing is that the government grants private companies long-term concessions and revenue rights in exchange for accelerated construction and effective operation of the infrastructure.

PublicPrivate Partnership

The PPP model is suitable for projects with large investments, long construction periods, and slow returns on capital, including the transportation sector such as railroads, highways, bridges, and tunnels, the energy sector such as electric power and gas, and the communications sector such as telecommunications networks.

PPP Whether in developed or developing countries, the PPP model is increasingly widely used.

The key to a successful project is that the participants and shareholders of the project have a clear understanding of all the risks, requirements and opportunities of the project in order to be able to fully enjoy the benefits of the PPP model.

Advantages

(1) The public ****sector and the private sector ****participate in the demonstration at the initial stage, which is conducive to determining the feasibility of project financing as early as possible, shortening the cycle of preliminary work, and saving government investment.

(2) Risk allocation can be realized at the initial stage of the project, and at the same time, since the government shares part of the risk, so that the risk allocation is more reasonable, reducing the contractor and investor risk, thus reducing the difficulty of financing.

(3) Private enterprises involved in project financing are involved in the early stage of the project, which is conducive to the introduction of advanced technology and management experience by private enterprises at the outset.

(4) With the public ****sector and private enterprises*** participating in the construction and operation together, the two sides can form a mutually beneficial long-term goal to better serve the society and the public.

(5) Enabling the integration of all parties involved in the project to form a strategic alliance plays a key role in harmonizing the different interest objectives of each party.

(6) The government has some control.

Disadvantages

(1) For the government, how to determine the cooperation company adds difficulty to the government, and in cooperation with a certain degree of responsibility, increasing the government's risk burden.

(2) The organizational form is more complicated, which increases the difficulty of management coordination.

(3) How to set the rate of return of the project may become a controversial issue.

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