Further the partners join the leader in all meeting with the owner and are thus able to put forth to the owner (in the presence of the leader), their views on matters that relate to their respective scope. Unlike in a subcontractor – Contractor relationship, the consortium partners accept all the main contract terms. The contractors forming the Consortium (partners), sign amongst themselves, a consortium agreement (owner is not a party to this agreement but receives with the bid an undertaking signed by all partners confirming the consortium formation and nominating the leader) wherein they set out their respective scope, share of the contract price, indemnities etc so that amongst the consortium partners, each is only liable for its own non performance. Consortium agreements are project specific and are closed as soon as the project is completed and the contract with the owner is closed out. Most clients accept this arrangement as they too could benefit from a lower risk provision in the contract price. The Leader is a single point contact with whom the owner signs the contract and interacts on all matters related to the contract.

The owner is thus able to exercise rights on any of the partners for damages/ non performance without the need to check/establish which partner is responsible etc. The partners to the consortium accept “joint and several liability” towards the owner as though each of them has signed the EPC contract. They nominate one amongst them as leader to provide single point accountability to the client. Two or more companies jointly undertake a large contract, as a consortium towards with the owner. Consortium contracts provide a way forward in such situations. Even major EPC companies are hesitant to undertake large contracts all by themselves on account of the high risk exposure. Thus while project owners have single point accountability, the EPC contractor is burdened with substantial risks. Many of the sub contractors do not accept all the terms of the main EPC contract. The EPC contractor is thus liable to the project owners for non performance of his sub contractors. Since such turnkey projects require a wide variety of skills, equipments etc, the EPC contractor has to sub contract several portions of the work. Most project owners and investors prefer a single (techno commercially capable & experienced) contractor to execute their entire project on a turnkey EPC basis so as to have clear single point accountability for performance, project cost and risks. The market situation however generally does not support full provision for all evaluated risks in the financial calculations.

Most Engineering Procurement Construction (EPC) turnkey projects are exposed to a number of uncertainties/risks.

Engineering Procurement Construction (EPC) Turnkey Projects

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