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EPC vs. PMC Contracts: Understanding the Differences

Sharon Lee • Updated on April 20, 2023 • [rt_reading_time postfix=”minute”] read

In previous articles, we’ve talked extensively about the different types of project management contracts commonly used by the construction industry. In this article, we’ll take a look at how project management consultancies (PMCs) are used in conjunction with EPC contracts.

Table of Contents

EPC

EPC, or Engineering, Procurement, Construction, is how most general construction projects are managed and it’s a popular business model in the commercial solar energy industry. But there are some differences in how the solar world approaches EPC as compared to general construction.

The EPC approach to solar is typically turnkey – you hire a single company to manage the entire solar installation process. That company assumes full responsibility for everything from the design and engineering of your solar system to procuring the materials needed, and ultimately constructing the solar system at your location.

If you have a question or there’s an issue while your solar PV plant is being installed, you know immediately who to call because you have a single point of contact – and they’re responsible for resolving the issue, not you.

This is a slightly different approach from what you’ll find in the general construction world. For example, if you’re building a new manufacturing facility, you can hire one EPC contractor to handle the mechanical, electrical, and plumbing (MEP) aspects, another to handle the civil engineering, and yet another to manage the commissioning.

In a case like that, you’ll also need someone to manage all those moving parts, and that’s where a project management consultancy comes into play.

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PMC

Project management consultancies (PMCs) are hired when a project owner wants or needs to split the responsibility for project engineering and project management between two different providers. As the name implies, a PMC provides project management services for your construction project.

Essentially, the PMC acts as the owner’s representative from the inception of the project to its completion, including everything from the design phase to budgeting, scheduling, risk management, on-site construction management and final commissioning. They ensure each of the EPC contractors are compliant with the project specifications outlined in the scope of work.

If there are issues that arise at any point in the project, it’s the PMC’s job to solve them.

Construction Management

As in our example above, PMC service providers are commonly used in the design-bid-build approach to construction projects.

Rather than acting as your own general contractor, you can sign a PMC contract with a provider that would manage the other partners and subcontractors you engage with.

Detailed engineering and specialized projects

PMCs are also used for specialized construction projects. There are cases where an EPC contractor may be the best choice to provide the detailed engineering your highly specialized factory requires, but they may not have the necessary in-house project management capabilities.

In this case, signing a project management contract with a separate firm allows each party to focus on what they do best.

PMCs and Solar

PMC contracts are not commonly used in the solar world, primarily because solar providers that use an EPC approach typically include project management services as a part of their turnkey solution.

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EPCM

This discussion wouldn’t be complete without a mention of EPCM, or Engineering Procurement and Construction Management. This sounds like it might be similar to the services provided by a PMC, but there are some significant differences.

When you partner with an EPCM contractor, you’re essentially hiring a consultant 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.

But here’s the big difference: an EPCM contractor does not manage the entire construction project like a PMC would. Under an EPCM contract, you assume responsibility as the general contractor for your project so you’ll be involved at all stages of the project, which can be time consuming.

A PMC contractor, on the other hand, would manage the whole project for you, acting as a conduit between you and your EPC providers.

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EPC 2.0

There are some downsides to working with an EPC contractor on your solar installation – the biggest of which is the inflexibility of the approach. EPC solar companies usually offer every client the same set of services that includes a simple design and the construction of your solar system. With an EPC contract, 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.

Fortunately, EPC 2.0, also known as the design-build approach, is gaining momentum among leading solar providers. EPC 2.0 takes the best parts of the EPC model but builds in flexibility.

EPC and EPC 2.0 both offer a single point of contact for the solar client; the difference is that, unlike EPC where you have to buy an entire solar package all at once, the EPC 2.0 model allows you to 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, an EPC 2.0 solar provider, like Velo Solar, can do that. If you decide to break the solar process into stages, your solar team can meet you where you are with the services you need.

At Velo Solar, we believe that when you look at the pros and cons of the various construction delivery methods, you’ll agree that the flexibility of the EPC 2.0 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.