FIDIC EPC/Turnkey Contract, Understanding and its Implementation in Power Plant Projects in Indonesia
Universitas Mercu Buana
June 25, 2010
The understanding about various conditions of contract is required before deciding to use the FIDIC Standard Form of Conditions of Contract for the project.
There are many invitations to tender in the newspaper for EPC/Turnkey Contract and the ongoing power plant projects using EPC/Turnkey Contract, but in actual practice many problems raised during the execution due to the wrong understanding of the spirit of EPC/Turnkey Contract.
Most of Employers, in this case the government institution or state owned corporation in Indonesia, choose the EPC/Turnkey Contract with minimum understanding of the essence of the EPC/Turnkey Contract. Their reasons of choosing the EPC/Turnkey Contract was the “tied schedule” and the “higher certainty of cost” showing that there was not a well planning.
Discussions are included indicating that frequently the main factor causing claims to significantly affect the construction costs do not lie in the conditions of contract themselves but rather in the attitudes of the parties involved.
FIDIC EPC/Turnkey Contract based on the discussion in this paper is proven as one that fit the employer’s need but at the same time still give chance to the contractor to submit their claim (Clause 20) and even the price is fixed, payment could be made once the claim is accepted (Sub-Clause 17.4) means that additional to the contract price can be done. The contract flexibility is seen by allowing putting some agreements as part of the contract (Sub-Clause 14.1)
Keywords: EPC/Turnkey Contract, fixed price, claim, contract adjustment
Date posted: July 29, 2011