EPC vs Design-Build: Which is Right for Your Solar Project?
Sharon Lee • Published February 28, 2023 • Updated on March 8, 2023 • [rt_reading_time postfix=”minute”] read
EPC vs. PMC Contracts: Understanding the Differences
If you’re interested in investing in a commercial solar system, the first thing you need to determine is the type of solar provider you want to work with.
Companies in the solar industry can be categorized by their project delivery method, or the roles, responsibilities, relationships, and overall approach a contractor takes when designing and delivering your solar project.
Three of the mainstream delivery methods are EPC, design-build and design-bid-build. Naturally, there are pros and cons to each method, so how do you know which strategy is right for your commercial solar installation?
This article is a good place to start. Below, you’ll find a comparison of EPC contracts and design-build contracts (we’ll cover design-bid-build in a separate post). The right contract structure is key to managing project risks. While you’ll find these types of contracts across the construction industry, beware not all contracts are equal.
Table of Contents
Engineer Procure Construct
EPC stands for Engineering Procurement and Construction, and this has been the prevailing business model for the commercial solar energy industry over the last decade.
The EPC approach makes solar easy for you as the customer because it’s turnkey. When you hire an EPC, that company alone is responsible for developing and installing your entire solar system, from the design to final construction. When you hire an EPC, you don’t get just the contractor, you’re signing on to an entire engineer procure construct methodology that uses production efficiency to deliver a turnkey facility.
A hands-off approach: For better or for worse
After some initial exploratory conversations with you, the EPC’s engineers will set out to design the system. The solar owner is not actively involved in this process and the engineers make all the decisions necessary to meet the scope of work in the contract.
EPC contractors are responsible for contracting with and managing any vendors, suppliers, and sub-contractors. This is one of the benefits of this method – you have a single point of contact with your EPC contractor and they’re responsible for the rest.
Efficient, but not flexible
The scope of work is laid out in the initial EPC contract, as is the lump sum cost of the project. The contract price includes everything that’s needed to install your turnkey system.
EPC solar companies employing the EPC method usually offer every customer the same set of services that includes a simple design and the construction of your solar system. With EPC, you can’t get just a piece of the package, you have to take it all. On the positive side it can be a fast track to a completed project.
An EPC project requires little hands-on time from the business owner, but because of that there’s a risk that the solar EPC provider could misinterpret your needs and deliver a system that’s not quite what you were looking for. Thoroughly understanding the performance requirements of a system before engineering procurement and construction of a project is key to longterm success.
Design-Build Project Delivery Method
The design-build project delivery system is gaining momentum among leading solar providers. Both design-build and engineer-procure-construct offer a single point of contact for the solar owner; you enter into an agreement with a single company that’s in charge of all aspects of your solar project, from designing and engineering to the procurement and installation the system.
The difference is that, unlike engineer procure construct where you turn over control to the solar company, design-build is a much more collaborative process between all parties involved. It’s ideal for complex projects. As such, it does require more time investment from you than the EPC method does.
A team that works with you
Your design-build team includes engineering, design, construction, software, energy storage and solar system optimization experts. They’ll guide you through similar design processes and conduct thorough interviews with you to learn about your energy needs and your goals for the project.
With companies like Velo Solar, these folks are all in house and are used to working together as a team.
One of the biggest upsides to the design-build method is that because the process is so collaborative, the end product will be a solar system that’s tailored to meet your needs today and into the future. You can also count on receiving clear communication and unified recommendations from your design-build team. This collaboration isn’t typically available with an EPC provider.
The Design-Build method is streamlined and flexible
With design-build, you don’t have to manage separate contracts for each provider; like EPC, it’s 100% turnkey so you’ll always know exactly who to call with your questions or concerns. But, design-build is significantly more flexible than the EPC approach because you’re not required purchase an entire package of services – you select which services you want to buy and when you want to buy them.
If you want to immediately move forward with the entire solar system design and installation, costs will be presented as a lump sum. Just like you have a single point of contact, you’ll have a single point of payment – the contractor.
If you decide to break the solar process into stages, your design-build team can meet you where you are with the services you need – and you’ll still have just one contract to manage and one company to pay.
All of the inherent collaboration and communication found with design-build projects saves you time and helps with cost management.
Other Types of Solar Construction Contracts
There are two other types of solar providers you should know about.
EPCM
EPCM, or Engineering Procurement and Construction Management, is a project delivery method related to EPC, but with some significant differences.
When you partner with an EPCM, you’re essentially hiring a consultant and project manager that assists you in the procurement of solar materials and services. This type of provider may have an engineering and design team in house, but they don’t offer construction services.
Unlike an EPC, EPCMs do not enter into contracts with vendors on your behalf. They help find vendors and suppliers, but it’s your signature on the dotted line. With this type of contract, you assume responsibility as the general contractor for your project and you retain complete control over the solar construction project.
That control means EPCM is more flexible than EPC, especially when it comes to making changes to the design, materials, or the project schedule. Of course that also means you’ll need to invest a lot of time on the project; unlike with an EPC contract, you’ll be involved at all stages.
Plus, because you’re signing contracts with both the EPCM and each of the vendors, you bear more risk; this approach could lead to frustrations should there be issues with the vendors during or after the construction phase is complete.
Design-Assist
Not to be confused with design-build, design-assist arrangements do not have a single point of contact. Instead, you contract with a design firm and a construction services firm and those two companies work together during the design phase to develop your solar installation.
In the end, design-assist accomplishes the same thing as design-build, but it’s a much more time consuming and complicated process since you’re managing the work (and contracts) of no less than two separate entities.
EPC vs. Design-Build
At Velo Solar, we believe that when you look at the pros and cons of both the EPC and design-build project delivery methods, you’ll agree that the flexibility of the design-build approach delivers the best possible solar system. We strongly believe that collaboration is the key to any successful solar installation and look forward to showing you why.
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