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EPCM (engineering, procurement, and construction management) is a common form of contracting arrangement for very large projects within the infrastructure, mining, resources and energy industries. In an EPCM arrangement, the client selects a head contractor who manages the whole project on behalf of the client. The EPCM contractor coordinates all design, procurement and construction work and ensures that the whole project is completed as required and in time. The EPCM contractor may or may not undertake actual site work.
An EPCM contract is a sophisticated project management or agency arrangement where the EPCM contractor:
- Is responsible for the detailed engineering and design for the project
- Manages the project as the principal's agent or representative, including providing programming and strategic management services, and
- Is typically responsible for breaking down the procurement and construction work into packages, managing their tender, overseeing the principal's entry into the trade/supply contracts and managing those trade/supply contracts for the principal to ensure completion of the project.
- Unlike EPC contracts, EPCM contracts are almost always 'cost plus' (or 'cost-reimbursable'). The principal pays the subcontractors directly for materials, equipment and on-site works, and only pays the EPCM contractor its actual direct costs (mostly labour) for performing engineering and supervisory services, plus an agreed margin. The margin charged by EPCM contractors varies depending on the risk assumed (which is usually low), the size of the project (small projects usually have higher margins) and supply/demand position in the economy.
EPCM contracts are commonly used for the construction or expansion of large-scale heavy engineering facilities or manufacturing plants in the petrochemical oil and gas, mining and power sectors, where engineering and project management skills are more likely to be separate to construction and supply capability. EPCM contracts are not generally used for civil projects, except where the project can be delivered by relatively small, self-contained packages awarded to multiple contractors.
There are, of course, many other differences between the EPC and EPCM. The fundamental difference, however, lies in the 'M'. The 'Construction Management' component of the project delivery method means that the EPCM contractor does not perform construction work and does not usually take full responsibility for delivering the completed project. As with any project delivery method, deciding whether an EPCM contract is appropriate for your project can be a complex process, and requires a rigorous analysis of project objectives, constraints and key risks to address suitability on a transaction-specific basis. 
An EPCM contract is a natural progression for an EPC contractor as, if one is able to do an EPC of a project, then getting a bigger EPCM job is advantageous. It helps to tap the already present competencies while ensuring better control over the project. Also, the value of the project managed through an EPCM contract is far greater than the individual EPC contracts.
Normally, an EPCM contractor completes the basic work such as site surveys, getting clearances from authorities, doing the basic engineering and preparing the site for the subcontractors. Subcontractors are chosen by the EPCM company, but they have an agreement directly with the final customer (investor).
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