The EPC/Turnkey Project means the Contractor carries out all the Engineering, Procurement and Construction (EPC); providing a fully-equipped facilities, ready for operation (at the “turn of the key)

It is a tendency that many clients of EPC/ Turnkey projects, particularly in the public sector, intend to transfer some risks to the contractors, hence, the Contractor should be fully aware of the increased risks he must bear. Clearly the Contractor will rightly increase his tender price to reflect such extra risks.

The conditions of Contract for EPC/Turnkey Projects, which are prepared by the client(s) or the employer(s), or recommended by his representative, the Engineer(s), the conditions include some critical issues which are always argued between the client and the contractor of the EPC/Turnkey Project, namely：

(1) The Contractor shall be liable for Delay Damages, or Delay Penalty or Liquidated Damages with a rate of delay damages, ranging from 0.02% of the Contract price to 1% of the Contract price, and with a maximum amount, ranging from 5% of the Contract price to 100% of the Contract price or even with no ceiling if the project is delayed.

(2) The Contractor shall, at it’s cost, be liable for obtaining all necessary licenses and/or permits of the project.

(3) The Contractor shall, at it’s cost, be liable for obtaining the right-of-ways of the transmission and/or distribution line routes if electric power project is involved.

(4) The Contractor shall, at it’s cost, be liable for solving any protest arisen from local inhabitants.

As a matter of facts, whether an EPC/Turnkey Project is to be timely and satisfactorily completed, it depends not only upon the capacity of the Contractor, but also upon the manner of the Client who is willing to share some risks not only for decreasing the Contractor’s risks but also for economical reasons..

An EPC/Turnkey Project is able to be timely and satisfactorily completed if the Client is willing to deem the above critical issues on a fair basis for the Contractor.

It is strongly recommended some fair solutions for the above mentioned critical issues as follows:

I. For Delay Damages or Delay Penalty or Liquidated Damages of the Project

It is recommended that FIDIC’s Recommendation on ”Conditions of Contract for EPC/Turnkey projects “be adopted, i.e.,

The rate of delay damages shall be 0.02% of the Contract price as delay damage in respect of the works, payable (per day). The maximum amount of delay damages shall be ten percent (10%) of the Contract price.

* FIDIC is an international federation of national associations of Consulting Engineers, and was founded in 1913.

II. For obtaing All necessary Licenses and/or Permits for the Project

It is recommended that obtaing all necessary licenses and/or permits for the project shall be the client’s liability because the client is much more familiar with the red-tape application procedures of the relevant authorities of the Government and the client is able to achieve through the relevant authorities of the government, however, the contractor provide all necessary assistances for the client.

III. For obtaing Right-of-ways of Transmission Lines/Distribution Lines Routes

It is recommended that obtaing Right-of-Way of Transmission Line/Distribution Line Routes shall be the client’s liability because the client is much more familiar with the red-tape application procedures of the relevant authorities of the Government and the client is able to achieve through the relevant authorities of the government, further more, the right-of-ways involve some uncertain amount of compensation, which is very difficult to quote by the bidder during bidding stage, at the same time, the bidder’s higher price would put the client on hard position for contract award even the bidder is the most qualified.

IV. For Protest(s) Arisen from Local Inhabitants

It is recommended that the protest(s) arisen from local inhabitants shall be clearly incorporated in “Force Majeure”, because the protest(s) is totally beyond contractor’s control.

V. Conclusions and Recommendations

It is recommended that the client be willing to share some risks as above mentioned not only for decreasing the Contractor’s risks but also for economical reasons. It is also recommended that the contractor be willing to devote his experienced and professional field to the project.

It is credible that the project can be timely and satisfactorily completed if the above mentioned critical issues are properly solved on fair basis prior to the Contract signed, Therefore the Client and the Contractor can achieve the “WIN-WIN TARGET” on the same boat.