Rehabilitation and EPC philosophy, are they

compatible?
Introduction
“Can we apply the EPC philosophy on rehabilitation projects of, for example,
power plants?”

Consistency check on Rehabilitation & EPC

It is very difficult to apply the EPC philosophy on a rehabilitation project for the
following reasons:

 On rehabilitation projects, the existing configuration/situation has always to be

taken into account. During the bidding stage, the Employer usually informs the
bidders about the existing situation. He does this by providing the as built drawings
and a condition assessment report. Each bidder cannot collect that information
himself. This would suppose stopping the equipment, dismantling certain parts and
even go beyond a visible inspection. Thus, the Employer has to take the
responsibility for the large quantity of information he has provided. We are not in a
situation of a limited quantity of “reliance data”.
 The Employer/Owner has operated the project for many years. The Employer’s
operators and maintenance staff have quite precise ideas of what they expect
from the rehabilitated project. They transform their expectations in a detailed
specification included in the RfQ. We do not have a case of merely functional
specifications.
 The Tender needs to have a clear scope of works for a competitive bidding
process. Invariably, during the execution of a rehabilitation project, new
issues arise. Let us look at the example of the rehabilitation of a power plant. The
shaft of the rotating machine was expected to be in good conditions. But, after
dismantling and ultrasonic examination, cracks are observed and the shaft needs to
be replaced. Expecting that Contractors will rehabilitate unforeseen equipment
without any compensation is a recipe for a failed project. It will lead to dispute,
quality shortcuts etc. with a partially dismantled power plant… The loss of
production will be much more than the rehabilitation contract.
 Presence of hazardous materials / health & safety risks: the Employer – the
project Owner – sometimes tries to transfer all responsibility for hazardous
materials, such as asbestos, to a general Contractor. But this situation is very
complicated. As a project owner, the Employer has a duty to take care of, or
otherwise indemnify, persons exposed to hazardous materials in his property. He
can however engage specialist contractors to remove the asbestos. He should do
this in a very intentional and conscious way.

Rehabilitation financed by Multilateral Development Bank

Sometimes, public utilities still want to have an “all inclusive solution”, whatever
happens during the project execution. Often, Multilateral Development Banks
(MDBs) finance such projects. The Head of Procurement of the World Bank, Enzo
de Laurentiis encourages bidders to raise such subjects to the Borrower (the
Employer) with a copy to the WB’s Project Manager.

Public utilities can engage a specialist subcontractor upfront of the main

rehabilitation contract(s) to identify, assess and remove hazardous materials. The
MDBs can also finance this upfront activity and will appreciate the pro-activeness
of the borrower. In spite of the additional step, this will be beneficial for the
planning; the project will not be suspended until resolution of the responsibility
concerning the hazardous materials.

Exception of a ” Rehabilitation EPC “

The only exception, where the EPC philosophy can probably be implemented on a
rehabilitation project, is when, for example on a hydro power plant, the entire
electro-mechanical equipment has to be replaced. A clear scope split (“all EM
equipment to be replaced”) is then possible. The specifications can be of
the functional type with corresponding guarantees. There should be no detailed
specifications and the Contractor should have the freedom to find optimized
solutions.

Conclusion
Unless for some very exceptional cases, the EPC philosophy is not suitable for
rehabilitation projects.