Defining Mitigation Strategies for Recurring EPC Contract Risks

Engineering, procurement and construction (EPC) contracts are commonly used for the construction of oil and gas production facilities. These projects are subjected to many uncertainties. EPC contractors often assume most of the project risks. Several studies have focused on the identification and analysis of EPC project risks. However, they generally fail to define appropriate and effective risk management strategies. The objective of this study is to define efficient risk mitigation strategies that can be utilized in EPC oil and gas projects. A comprehensive review of literature was conducted to identify the risks in EPC projects. Experts' opinion were used to analyze and categorize these risks. A novel category of risks, called "recurring risks" was introduced. This category includes the risks that are inherent in the nature of EPC projects as well as the risks stemmed from external issues. The recurring risks were classified in eight groups. For each risk group, appropriate risk management strategies were defined and effectiveness of each strategy was evaluated using survey. Among them "implementing FEED before bid," "providing comprehensive project definition package through RFP," "adding contractual provision for coverage of unpredictable fluctuations by the owner," and "right selecting of contractor" are the most prominent.