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Payment Terms in EPCM Contracts (Fixed Fee and Manhour Rates)

As discussed elsewhere, since EPCM pricing is a combination of fixed and reimbursable items: fixed basis (fixed fee) for known scope i.e. engineering and procurement Services and reimbursable basis for construction management, procurement and other services on unit rate basis, the following method of compensating Contractor is generally adopted:

Fixed Fee: Payment is made in accordance with milestones actually achieved by the Contractor during execution of Services. For example upon:

  1. Issuance of requisitions for procurement of all materials - __ %
  2. Submission of all procurement material bid evaluations, Client’s approval and placing of Purchase Orders - __ %
  3. Submission and Client approval of final Invitation to Tender package/documents (fully complete with drawings, specifications, procedures and other attachments) for Construction and Commissioning Contracts for permanent Works as required - __ %
  4. Award of construction Contract for permanent Works - __ %
  5. Achieving Ready for Commissioning and issuance of Provisional Acceptance Certificate to the Contractor - __ %

Home Office Services Costs

Contractor is paid the bare cost of its manhours that it would use in the execution of the Services in its Home Offices:

  • Fixed manhour rates for various categories of personnel for the actual manhours directly worked by Contractor's personnel and as approved by Client (thru timesheets or other methods). The pricing section should contain a detailed list of disciplines that the Contractor would engage in the performance of Services with rates and estimates of hours required, if any.

    The maximum hours to be worked and cost should is separately. Any hours worked over the Contract maximum guaranteed manhours should be approved by Client in writing.

  • Contract could include reimbursement to Contractor at fixed man hourly rates towards costs and expenses such as reproduction of drawings and other documents in the quantities required specifically stated in the Contract, computer usage, secretarial services, Office supplies, special stationery, documentation, communications, telephone calls, facsimile, telexes, telegraph, Courier.

  • Cost related Company visits to Contractors Home Offices based on specific stipulations in the scope.

Remuneration for Field Services

Contractors scope under the Field Services typically involves managing the construction Contractors activities for the duration of the proposed constructions works. Hence this element has a direct relation to the schedule of construction activities.

For Field Services, Contractor is paid on the basis of Fixed manhour rates for various Client approved Contractor personnel, for the actual time spent directly in the activity related to the Field Services.

The target hours to be worked and cost should be separately highlighted.

Other / Provisional Items costs

Some of the other costs that could be included as estimates based on requirements under the Contract are:

  • Project Office / Site costs, telephone, telefax, secretarial, clerical, computer usage, etc.
  • Cost of approved business trips i.e. economy airfare, subsistence allowances, limited hotel charges, a per diem, etc by Contractor's Home Office personnel travelling for Services not forming part of Home Office Services and Field personnel travelling outside Clients Field locations:

If Reimbursable costs are for manhours, payments are made on the basis of manhours consumed against approved timesheets. If they are on other basis, appropriate measurement of progress is adopted.

Other reimbursables for business trips authorised by Client, subsistence for such business trips (day rates) and rates for other administrative items such as reprographic costs, telephone, etc. are on the basis of fixed rates and documented costs, as approved by Client representatives.

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