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Engineering, Procurement and Construction (EPC) contracts are the most common form of contract used to undertake construction works by the private sector on large scale and complex infrastructure projects. Under an EPC contract a contractor is obliged to deliver a complete facility to a developer who need only "turn a key" to start operating the facility, hence EPC contracts are sometimes called "turnkey construction contracts." In addition to delivering a complete facility, the contractor must deliver that facility for a guaranteed price by a guaranteed date and it must perform to the specified level. Failure to comply with any requirements will usually result in the contractor incurring monetary liabilities.

It is timely to examine EPC contracts and their use on infrastructure projects given the bad publicity they have received, particularly in contracting circles. A number of contractors have suffered heavy losses and, as a result, a number of contractors now refuse to enter into EPC contracts in certain jurisdictions. This problem has been exacerbated by a substantial tightening in the insurance market. Construction insurance has become more expensive due to significant losses suffered on many projects.

However, because of their flexibility, the value and the certainty sponsors and lenders derive from EPC contracts, and the growing popularity of PFI projects, the authors believe EPC contracts will continue to be the predominant form of construction contract used on large scale infrastructure projects in most jurisdictions.

This paper will only focus on the use of EPC contracts in the wind power sector. However, the majority of the issues raised are applicable to EPC contracts used in all sectors.

Prior to examining power project EPC contracts in detail, it is useful explore the basic features of a wind farm project.

Download the full paper using the PDF icon.

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