The EPCM model in China and alternative resolution

The EPCM model, a method of project procurement and management, is frequently used in most major international construction projects. However, except for practice and tradition, application of this model remains to consider the law and regulations of the host country. In a recent case relating to a foreign-invested construction project in China, the author found a dilemma when using the EPCM model under China’s legal system.

GAPS IN UNDERSTANDING

During the course of deal structure and pre-procurement discussions and analysis, the author realized that the engineer, the manager and the lawyer held a different understanding, which is normal and acceptable, on the EPCM model. In international construction practice, generally speaking, the EPCM form recognizes that a general contractor undertakes all engineering, construction and procurement with project management in the same period – which means EPC+M.

In this particular project, however, the whole package of EPCM was divided into two different parts, separately. The owner decided to employ one contractor to undertake construction works of the project and to seek another management company to undertake project engineering, equipment procurement and construction management. As a result, the EPCM model in this project was not the traditional one any more. In such a scenario, the applicable form would be turned into C+EP+CM, in which the latter CM means Construction Management.

WANG JIHONG is a partner and LI LIN is a lawyer at Zhong Lun Law Firm