Dealing With Delays in EPC Projects

By Mujahid Akhtar posted 01-17-2020 04:42 AM


Being part of the project management community, most of us have a chance to manage engineering, procurement, and construction (EPC) projects either as contractors, clients or as part of a consultant’s team.

Regardless of your role, you may have noticed that most EPC projects experience delays with respect to the contractual project completion date. Project delays almost feel inevitable. However, they can be avoided if we understand and identify their causes before the start of the project—and try to mitigate the gaps during the project lifecycle.

An effective PM manages all aspects of an EPC project as it develops in order to identify and mitigate the causes of delays. When the project manager knows that there are problems, he or she must understand what the causes of these problems are while bringing the project back on track. When project performance information shows deviations from your baseline, you must first find creative ways to reduce or eliminate the variance.

Then, explore the options for bringing changes to commitments in the baseline. After approval, revise the baseline accordingly. As a result of these changes, there will be extensions of time (EOT) required that will further impact project budget and cost overrun depending on who caused the delay (e.g. contractor or client).

There are several causes for EPC project delays, and every delayed project will have its own problems and sources. Sometimes it’s a single trigger event that leads to delays, or it can be a combination of events that result in schedule and cost overrun.

Based on my 16 years of experience in the industry, here are some of the common reasons for EPC project delays:

1. Initiation Phase

  • Inherited bidding inaccuracies and estimation mistakes
  • Aggressive, unrealistic schedule
  • Project complexity
  • Delay in the bank guarantees/performance bond and advance payment

2. Planning Phase

  • Changes in data/information
  • Client-side delays (e.g., approval of deliverables)
  • Weak or poor project planning
  • Delay in obtaining NOC or permits from statutory authorities
  • Team competency gaps
  • Delay in selection and mobilization of the project management team
  • Inadequate and inefficient project management consultant team
  • No consideration of previous project’s lessons learned

3. Implementation Phase

  • Delay in engineering queries and resolution
  • Engineering/design issues and changes
  • Ineffective leadership and poor decision-making
  • Inadequate and inefficient contractor and client management team
  • Inadequate and inefficient labor
  • Inadequate construction equipment and machinery
  • Cultural differences within team
  • Delay in materials ordering
  • Delay in manufacturing and delivery of materials
  • Defective materials and supplies
  • Poor preservation of materials and equipment
  • Budget inaccuracies and poor cash flow
  • Serious HSE violations and accidents
  • Unavoidable environmental/weather events
  • Unavailability of labor, material or equipment
  • Labor/material cost escalation
  • Delay in sub-contracting and mobilization
  • Construction implementation failures
  • Geopolitical and economic conditions
  • Lack of effective communication
  • Construction works quality issues and reworks
  • Change in government regulations and laws
  • Delay in the permit to work (PTW) issuance and compliance

4. Monitoring & Controlling Phase

  • Poor project monitoring and control
  • Scope changes and variations
  • Poor interface management
  • Poor or no project risk identification, analysis, and mitigation
  • Idle labor and equipment cost

5. Closeout Phase

  • Lack in provisions for feedstock for commissioning and start-up activities
  • Early demobilization of the project management team
  • Delay in punch list clearance
  • Improper or deficient project closeout report
  • Delay in provisional acceptance certificate issuance

Some of the above causes are critical, while others are not. A critical delay cause is one responsible for impacting project schedule and cost without regard to baseline, while a non-critical delay cause may not impact the schedule or cost of the project. However, non-critical delays may influence intermediate project milestones/activities when completed late than the scheduled completion date.

As a project manager, remember that a delay where the contractor is entitled to an extension of time (EOT) or cost compensation (or both) under the standard terms and conditions of the agreement is an excusable delay. In that case, contractors usually don’t have any control over the activities getting delayed beyond the baseline.

Examples of excusable delays include:

  • Force measure clause
  • Natural catastrophes (e.g., storms, flooding, earthquake, etc.)
  • Political/social turmoil
  • Terrorism-related incidents
  • Delay from the client (e.g., approvals, decisions, etc.)

If the contractors are entirely responsible for the activities being delayed, resulting in EOT (critical delays), this is a non-excusable delay. In that case, the contractors must bear the costly consequences. Examples of non-excusable delays include:

  • Delayed mobilization of manpower and equipment
  • Delayed procurement and material deliveries
  • Delayed submission of deliverables
  • Poor planning and monitoring/controlling

A project manager’s awareness about the causes of delays gives them more options. It also improves capabilities in problem-solving and mitigation throughout the project lifecycle. As a project management professional, we always need to remind ourselves that “one day's delay is another day's lack of progress.”