IMPROVING THE PERFORMANCE OF CHINESE CONSTRUCTION FIRMS ON EPC PROJECTS IN CHINA

Abstract

An engineering, procurement, and construction (EPC) project is considered to be a variant of the project delivery method of design and build. According to the EPC contract, the EPC contractor shall be responsible for project design, procurement of the necessary materials and equipment, construction, installation, and commissioning. Given China¿s rapid economic growth since the 1990s, the Chinese construction industry has also been expanding. In 2001, China became a member of the World Trade Organization (WTO), moving the country towards being an open construction industry. In addition, as Chinese construction firms become more prominent in the international construction market, the EPC project delivery method has been introduced and developed in the Chinese construction market. However, EPC projects are still in their infancy in China.

The aim of this research is to investigate the EPC project performance, critical success factors and problems encountered by Chinese construction firms in China. This research investigates the performance of EPC projects operated by Chinese construction firms in Beijing, Tianjin, Chongqing and Sichuan province. Data are collected using a structured questionnaire especially designed for this study. The questionnaires were sent to 82 EPC participants in China¿s construction industry of China; 42 completed questionnaires were received and analyzed, representing an overall response rate of 51.2%. Participants included contractors, design institutes and project management firms engaged in EPC projects related to the petrochemical, chemical, electronic, metallurgy and building sectors.

The results indicate that Chinese construction firms need to adopt specific approaches to improve their cost performance. In addition, based on the analysis of the factors affecting working relationships among team members, the effectiveness of project management action positively impacts on the EPC project¿s performance whereas the economic environment has a negative effect. In addition, problems related to client, human resource, and financial capability have significant impacts on the EPC project implementation. Using factor analysis, a series of 6 problems are extracted from the 40 primary problems: financial capability, external environment, design, uncertainties, project management system, and relationships. Chinese construction firms can improve EPC project implementation by mitigating these problems. Thus, Chinese construction firms should enhance their financial capability and design capacity; In addition, they should build a good system for training integrated talent.