EPC Contract Management

EPC Contract Management: Key Considerations for a New PM

Published on 2025-02-28

In EPC projects, contract management is one of the most critical aspects of project execution. For a newly appointed project manager (PM) on the owner’s side, understanding and effectively managing contracts with both the client and the general contractor is crucial to mitigating risks and ensuring successful project completion.

1. Immediate Actions Upon Appointment

Upon assuming the role of PM, the first and foremost task is to review the contract documents. A comprehensive understanding of the contractual framework is essential to avoid potential disputes and ensure smooth project execution.

Key actions include:

Reviewing the EPC contract with the client and the agreement with the general contractor.
Identifying key contractual obligations, including scope, payment terms, delays, and penalties.
Recognizing quality and safety requirements outlined in the contract.
Assigning a dedicated document control manager to oversee contract management and record-keeping.
Utilizing AI tools (if permitted) to generate contract summaries for quick reference.

2. Key Contractual Aspects to Manage

A thorough review should cover the following areas:

Scope and Change Management

Ensure alignment between the client contract and the contractor agreement to prevent scope gaps.
Clearly define procedures for scope changes and approvals.

Cost and Payment Terms

Understand payment schedules, milestones, and invoicing requirements.
Check for price escalation clauses and reimbursement conditions.

Delays and Liquidated Damages (LD)

Identify penalties for project delays and ensure mitigation strategies are in place.
Check whether there is a cap on LD and conditions under which delays are excused.

Quality and Safety Compliance

Understand HSE (Health, Safety & Environment) requirements.
Review testing, inspection, and defect liability obligations.

Claims and Dispute Resolution

Clarify the process for submitting claims, including deadlines and required documentation.
Confirm whether arbitration or litigation is the preferred dispute resolution mechanism.

3. Utilizing AI for Contract Review

AI tools can help summarize and extract key contractual terms efficiently. Below are example prompts to streamline contract review:

Prompt for Overall Contract Summary


      Summarize the contract by extracting key details:
      1. Contract type (EPC, Construction, Procurement)
      2. Parties involved (Owner, Contractor, Subcontractors)
      3. Key terms (Budget, Schedule, Payment terms, LD, Warranties)
      4. Change management process
      5. Quality and safety obligations
      6. Dispute resolution mechanisms

Prompt for Payment Terms Extraction


      Identify payment terms in the contract:
      - Payment method (Lump Sum, Milestone, Reimbursable)
      - Payment cycle (e.g., 60 or 90-day cycle)
      - Conditions for payment release
      - Late payment penalties

Prompt for Quality and Safety Requirements


      Extract quality and safety obligations from the contract:
      - HSE (Health, Safety & Environment) requirements
      - Testing and inspection standards
      - Warranty periods and defect liability conditions

Conclusion

For a newly appointed PM in an EPC project, understanding contract terms and ensuring proper documentation management is essential. By proactively reviewing contracts, assigning document control personnel, and leveraging AI for contract summaries, project risks can be minimized while ensuring compliance with quality and safety standards.