An often misunderstood, but critical part of successful project delivery is the appropriate selection and execution of delivery and commissioning contract strategies.

Although project delivery methods may differ from region and company, project and commissioning contracts are typically executed in one of the following forms:

• EPC/EPCM – Engineering, Procurement, Construction & Management
• D&C – Design & Construct
• BOO – Build, Own, Operate

It is common for both the client and contractor commissioning manager to be involved in the development of the appropriate commissioning contract, and is highly dependent on the scope, expertise, and level of responsibility of each party.

EPC/EPCM contracts generally offer turnkey solutions for clients and hand over a facility that is commissioned and operating at nameplate design parameters. From a client’s perspective, this type of contract is expensive, however, is lower risk, requires the least client oversight, reduced client organization, and allows for process guarantees before final payment. From a commissioning perspective, all activities from design, construction, and commissioning are handled by a single EPC entity, which often results in optimized start-up schedules and high-quality delivery, although strict adherence to agreed (fit for purpose) scope is often maintained.

Design and Construct contracts outsource the design and construction activities, however, rely on the owner company to energize and commission the processing facility themselves. This is appropriate when a processing facility is highly complex, and the required knowledge to start up and commission the facility remains within the operating company. This strategy may seem cheaper initially, however, the overall owner costs and risks associated with starting up the facility need to be accounted for. Many complex chemical industries such as Lithium Hydroxide, employ a D&C contractor to design, construct, and pre-commission their facility, whilst wet commissioning and start-up activities reside within the responsibility of the owner company. This requires the operator team to set up a sufficient commissioning organization with the correct knowledge, skill set, and budget to facilitate these activities.

Build, Own, and Operate contracts have gained popularity for low-capital operators who lack the funds to develop opportunities under their control. Under a BOO contract, the owner company sets up a payment agreement with another company to build, own and operate an asset based on the opportunity available to the owner company. This results in the BOO company outlaying all capital costs required to design, construct, commission, and operate the facility, whilst the principal company pays an agreed lease over a long-term contract period such as 30 years. This is the most expensive contracting strategy, as the supplying company needs to include all costs associated with the risks and margins of developing the asset. From a commissioning perspective, the principal company has no input into the commissioning process and allows the BOO operator to facilitate all activities in the most economical manner.

Although not a contracting strategy, the concept of an “Integrated Commissioning Team” – ICT has become popular amongst most projects in recent times. This concept can be used with EPCM, D&C, and BOO contracting strategies, and allows the owner’s team to be heavily involved in commissioning activities. Depending on the contracting strategy, this may result in the operator team taking an assistance role (EPCM/BOO) or leading the commissioning effort (D&C). Whichever the strategy, utilizing the ICT approach tends to result in optimized commissioning and start-up schedules as the operator and delivery organizations can often complement each other, whilst also training operations personnel in the process. Caution should be taken to effectively manage any project or organizational politics to ensure no breach of contract occurs due to incorrect responsibility allocation.