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In the oil & gas industry, EPCIC (Engineering, Procurement, Construction, Installation and Commissioning) contracts may encounter delays which can result in billion-dollar losses and multiple lawsuits. Thus, prudent parties would often start scheduling for a project from the Invitation to Bid (ITB) stage itself. Therefore, it is imperative that contract professionals understand how to better manage these cost impact clauses to circumvent or mitigate the effects that delays could result in. In this post, we’ll cover how to manage issues like delays when drafting the contractual terms of an EPCIC contract.
Regardless of the role in the organisation, it is easy to notice that most EPCIC projects will experience delays regarding the contractual project completion date. In fact, project delays almost feel inevitable. However, they can be avoided if we understand and identify their causes before the start of the project—and try to mitigate the gaps during the project lifecycle.
There are several causes for delays in EPCIC projects during its project life cycle. Listed below are a few of these causes for each stage of the project life cycle.
- Mistakes in bidding and estimation
- Aggressive or unrealistic schedule being set
- Complexities of the project
- Informational change
- Delays in approval of deliverables by the client
- Poor planning process of project
- Ineffective leadership which led to poor decisions being made
- Delay in the manufacturing and delivery of materials needed
- Economical and Geopolitical conditions
- Absence of effective communication
Monitoring & Controlling Phase
- Poor monitoring and control of the project
- Scope changes and variations
- Lack of project risk identification, analysis and mitigation
- Early demobilization of project management team
- Improper or deficient project closeout report
- Delay in provisional acceptance certificate issuance
As such, while these delays may vary in terms of how critical it may be, as a project manager, it is important to know what is required to mitigate these possible causes of delay in EPCIC projects.
Steps to take when trying to manage issues like delays for EPCIC projects
- Be sure to negotiate better contractual terms with regards to delays to protect both the company seeking the project and the contractor.
- Actively seek out classes to understand more about EPCIC contracts and projects since these contracts are relatively rare in the industry and market.
- Managers and contractors need to set checkpoints during the course of the project schedule so as not to confuse with actual project schedule and prevent delays from happening since they are able to check up on the contractor’s progress.
- Detail all the risky activities, sources of risks and ranking, to avoid any injuries from happening which will result in delays.
- Include planned durations and a pessimistic duration of activities in the project schedule to provide a buffer time for the project and calculate time loss and gather data to improve future iterations of the project
- Real-time progress reports and updating of actual work completed needs to be adhered to
To find out more about EPCIC contracts and how to negotiate for better contract terms which can lead to a better EPCIC project,
EPCIC Contracts Masterclass is a 3-day online training course. Designed to provide participants with a well-tested and practical guide on EPCIC contracts, the course addresses the key issues that relate to all parties to the contract. These issues include the allocation of risk and liability, managing the exposure of parties and effective contracting strategies.
Interested to find out more?
To see how EPCIC may differ from EPC contracts,