What is the linkage between Request for proposal and establishment of an EPC (Engineering, Procurement and construction) contract?

Request for proposal is a bidding process to receive the prices from vendors in the bidding package for a certain EPC area. 

After getting the prices, the contractor calculate the man hours, temporary assets etc required for the project and submit the bid to the client with a complete package. 

After submission client makes the technical & commercial bid evaluation and might asks the contractor for further review such as detailed engineering and renegotiate with the vendors. 

Client will review all the bids for the EPC and then they decides which one is the lowest and competitive bidder for the EPC Project and then make announcement of the winning contractor.

Also there are many schedules, ( will be the part of EPC Contract) such as quality, procurement, engineering. safety etc ,  which might be included in the main contract, that contractor must follow for execution of the project ( Contractor must had have estimated the amounts during bidding ). 

EPC contract is a form of contract where a buyer ( sponsor or client ) entrusts or authorizes a seller to provide a service complete with engineering, procurement & construction for a predetermined price. 

Request for proposal is a formal documentary process through which buyer wishes to establish contact with prospective seller or sellers.

RFP is pre contract activity which leads to both i.e. customer and contractor to be agreed upon proposal and EPC is post proposal acceptance activity to execute the project.

RFP – Initiation step taken by the customer for their requirements against which customer seeks proposal from various vendors or contractors or service providers etc .

RFP is a baseline document of any project over which proposal i.e. entire MAP/Solution/Architecture etc by contractor meeting customer need takes place.

Once proposal accepted by customer, contract issued thereafter Engineering, Procurement and Construction to complete the contract in line to proposal which already had been agreed by customer takes place. 

A request for proposal (RFP) is an open and written document made by an organisation to solicit for proposals or bids for the procurement a proposed EPC (Engineering, Procurement and Construction)  projects from qualified EPC Contractors.

 Why the use of RFP by Organisation? - The main reasons organisation use RFP to solicit for proposal for the procurement of EPC projects are:

·         Due to the inability of the organisation to define or state the full details or  scope of the project to be undertaking due to lack of expertise and knowledge, hence rely on the experience, knowledge, expertise  and creativity of the vendors/contractors

·         Where the content of the proposed project description prove too difficult for the organisation to draft.

·         Where the use of the conventional evaluation based solely on price analysis negotiation may prove inadequate for the award of an EPC project that requires a Cost based analysis negotiation.

·         It is also used in a situation where the organisation doesn’t want to define the scope of project upfront to a substantial of level, though they have the knowledge and expertise, so as to afford the vendors/contractors the opportunity to demonstrate their knowledge, expertise and their ability to execute the proposed projects.

The linkage between RFP and the establishment of EPC contract:  is that RFP triggers the process of selection of the most qualified, competent and appropriate vendor/EPC contractor to execute the proposed project to be undertaken.

Hence, contract is awarded by the procuring organisation or entity to the vendor/EPC contractor whose bid is adjudged to be the best.

 A credible RFP must state the followings:

·         The procuring organisation must use clear and well-thought-out specification to describe the proposed project.

·         State the anticipated terms and conditions of the contract.

·         Provide information that the respondents must include in their proposal

·         Identify each factors (Technical and Commercial) that the procuring organisation would  use to evaluate the proposals and award the contract,

·         Describe parameters on the bases for which the contract would be awarded to the vendor/EPC contractor. Such as technical and commercial (cost) information.

·         State the relative importance (weighted average) of each factors (Technical and Commercial) that would considered in making the final decision on which vendor/EPC contractor would be awarded the contract.  

·         State clearly that the contract would awarded, on the basis of price and other factors (Technical, Past Experience, Qualification/Experience of personnel, Quality of proposal, Safety content, Planned delivery schedule, Solvency of the organisation etc.), to the EPC contractor that presented the proposal  that is most suitable to the procuring organisation, after due consideration.  

When RFP is used in anticipation of cost negotiation with one or more vendors/EPC contractors, the procuring organisation or client should ask for the appropriate cost data of the proposal submitted by vendors/EPC contractors.

Cost negotiation: is a complex way of negotiation whereby each applicable cost element such as design engineering cost, tooling cost, direct materials /equipment cost, labour hour, labour rates, subcontracting, overhead cost, profit etc., are negotiated individually. This type of negotiation is adopted for high dollar value projects or procurement where negotiation by Price Analysis proves to be inadequate.  

Thanks for the invitation. I agree with the given answers.

engineering procurement and construction

RFP IS A BASIC ENGINEERING WHICH INVITES PROSPECTIVE BIDDERS TO QUOTE FOR THE INTENED PROJECT. ONCE THE BIDS ARE RECEIVED AGAINST THE RFP, BID EVELUATION IS DONE AND THE CONTRACTOR IS CHOSEN. SUBSEQUENT TO THIS, DETAIL ENGINEERING SHALL BEGIN. THIS WILL FURTHER LEAD TO PROCUREMENT OF ALL OTHER EQUIPMENT IN ALL DISCIPLINES. CONCURRENT PROGRESS OF ENGINEERING AND PROCUREMENT WILL LEAD TO CONSTRUCTION START OFF. THUS EPC WORK FLOWS PROGRESSIVELY