Shortcomings in the application of the EPC contract
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Shortcomings in the application of the EPC contract
  • NGUYEN ANH DUONG 기자
  • 승인 2017.01.31 14:00
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HANOI, JANUARY 31 (Engineering Daily) -- Mr. Nguyen Dang Truong, Director of Procurement Management under the Ministry of Planning and Investment said that last time, the application of the EPC contract has gained certain achievements. Many projects have been put into operation, changing the face of infrastructure, contributing to socio-economic development.

However, according to Mr. Truong, Vietnam remains a fact that many investors and the tenderers have not properly understood the EPC contract and arbitrarily applied, even abused it. For example, with the bid package as simple as a backfill, construction of an office building or a road without any complicated technique, but investors still apply an EPC contract.

In addition, the investors often push out the risks to the contractors. Nevertheless, the application of EPC contract does mean to maximize the risk transfer to contractors, it is to optimize the risk allocation. The unreasonable risk allocation is the biggest risk to the investors.

Mr. Ninh Viet Dinh, an independent consultant, said that it is not necessary to utilize an EPC contract for all the work of a project. A project can have multiple bid packages in comply with the various forms of contract, including the implementation of EPC bidding package or non-EPC bidding package.

According to Mr. Adu Gyamfi Abunyewa, a senior bidding specialist of World Bank, the EPC contract shall be only applied for packages that are large scaled, complicated, hi-tech required along with copyright of contractor and manufacturer. The uniformity and consistency shall be tightly conformed from design, procurement, construction, technology transfer, warranty and long-term maintenance.

Mr. Adu also shared, misinterpretation and abuse of an EPC contract can lead to many risks such as contractors will charge an extra cost for the risk to make a tender package price higher; investors have less control; Contractors perform only minimum standards to reduce costs; reduce competition; Contractors often raise claims to compensate for the risk transfer and indemnification for losses.



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