2022-Ranked Generic Criteria For EPC Contractor Selection

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Ranked generic criteria for EPC contractor selection
Dissanayake, Nayana; Xia, Bo; Skitmore, Martin; Trigunarsyah, Bambang; Menadue,

Vanessa
Published in:
Engineering, Construction and Architectural Management
DOI:
10.1108/ECAM-10-2021-0874
Licence:
Other
Link to output in Bond University research repository.
Recommended citation(APA):
Dissanayake, N., Xia, B., Skitmore, M., Trigunarsyah, B., & Menadue, V. (2022). Ranked generic criteria for EPC
contractor selection. Engineering, Construction and Architectural Management. https://doi.org/10.1108/ECAM-
10-2021-0874
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Download date: 02 Nov 2023

1 Ranked generic criteria for EPC contractor selection
2 Abstract
3 Purpose – The purpose of this study was to prioritize the appropriate generic contractor selection
4 criteria for EPC projects in the construction industry
5 Design/methodology/approach – Proceeding from a review of previous studies and validation by a
6 small group of experts, a preliminary set of 16 criteria was first identified. This was followed by three
7 rounds of Delphi surveys: firstly, with 64 experienced participants confirming the relevance of the 16
8 criteria; secondly, with a reduced subgroup of 47 more experienced participants scoring the
9 importance of each; and finally, providing the opportunity for the 47 to revise their scores in the light
10 of knowing the aggregated results of the previous round
11 Findings – The results show the consensus view, of which the most important criteria are ranked as
12 past performance, project understanding, technical attributes, key personnel, and health and safety,
13 past experience, time, management, financial, contractual, and legal, quality, cost, relationships,
14 environmental and sustainability, organizational and industrial relations, and geographical location.
15 Originality/value – The findings are useful for both practitioners and academics in making a
16 significant contribution to the body of knowledge of the EPC process. This will assist in providing a
17 better understanding of criteria importance and pave the way to developing an EPC contractor
18 selection model involving the criteria most needed to objectively identify potential contractors and
19 evaluate tenders.
20 Keywords Contractor, tender, selection, criteria, EPC projects.
21 Paper type Research paper
22
23 1. Introduction
24 The construction industry is one of the most significant contributors to economies around the
25 world. Project delivery methods such as traditional design-bid-build, integrated design-build and
26 construction management are used for construction projects with varying degrees of success, depending
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27 on the project type and skills required (Forbes & Ahmed, 2010). Major projects in the oil and gas,
28 mining and infrastructure industries in particular regularly experience cost and schedule overruns, with
29 their size and complexity being the most significant contributors (e.g., Rui et al., 2017). Especially
30 suited to such projects that are driven by engineering designs instead of architectural designs is the
31 widely used Engineering-Procurement-Construction (EPC) contract (Forbes & Ahmed, 2010; Shen et
32 al., 2017). Also known as Lump Sum Turnkey (LSTK) (The Project Definition, 2013) and Engineering,
33 Procurement, Installation & Commissioning (EPIC) (Al-Bidaiwi et al., 2012), the EPC contract is
34 defined as “a complex transaction involving a set of products, services and construction works designed
35 specifically to complete a specific asset for a customer within a certain period of time; a building, a
36 turnkey factory, a power plant, a weapons system, or the like” (Cova & Hoskins, 1997). Examples
37 include the Turkmenistan Galkynysh Gas Field – one of the world’s largest EPC projects – which, at
38 30 billion m3/annum, supplies natural gas to approximately 1/6 of China’s gas consumption 1, and the
39 USD 33 billion Rovuma LNG Project in Mozambique – Africa’s largest ever private EPC project 2.
40 Others include the USD 2.5 billion Central Chile Copper Concentrator Plant involving 8 million m3 of
41 earthworks and 400,000 m3 of structural concrete 3, China State Construction Engineering Corporation’s
42 CNY 450 million Zhaoqing Bridge expansion 4, and Ghana’s USD 622 million 400-megawatt Bui Dam
43 hydroelectric project 5.
44 Involving one or more contractors and designers combining their efforts to deliver a full and
45 complete engineering project under a single point of responsibility for design and construction (Baram,
46 2005), the EPC delivery method is particularly useful for its innovation in design and construction,
47 initial cost and time certainty, guaranteed performance and reduced administration burden associated
48 with asset development (Forbes & Ahmed, 2010). At the same time, the delivery nature of EPC projects
1
See https://neftegazru.com/tech-library/oil-gas-field/552159-galkynysh-gas-field/
2
See https://www.thenationalnews.com/business/energy/exxon-to-invest-in-africa-s-biggest-lng-project-in-
mozambique-1.919713
3
See https://www.ennomotive.com/transportation-of-big-equipment-in-difficult-access-areas/
4
See https://www.marketscreener.com/quote/stock/CHINA-STATE-CONSTRUCTION-6500392/news/China-
State-Const-Eng-CSCEC-Wins-EPC-Project-for-Expansion-of-Zhaoqing-Bridge-22161339/
5
See https://en.wikipedia.org/wiki/Bui_Dam

3
49 is also changing from traditional engineering success to the delivery of more sustainable and economic
50 outcomes (Australian Constructors Association (ACA), 2015).
51 However, such projects depend on a limited/small number of international/domestic
52 subcontractors/contractors undertaking these projects, and with difficult-to-manage complex supplies
53 as occur with petrochemical projects for instance (Siddiqui, 2020). Unexpected additional costs can
54 also arise in the form of change orders as the project design and construction evolves (Habibi et al.,
55 2019), the owner has less design control and intervention opportunities (Dissanayake, 2017), and the
56 multi-disciplinary nature of engineering design within EPC creates projects with a high level of risk
57 and complexity (Said et al., 2020). As almost all project risks are allocated to the contractor, there are
58 increased risks of unrealistic designs, high costs and reduced quality (Kabirifar and Mojtahedi, 2019).
59 In short, the operation process, management mode, contractual obligations and risk allocations in EPC
60 are quite different from traditional delivery methods (Hui & Qin, 2011).
61 Selecting an appropriate contractor − one of the most important decisions at the early stage of any
62 project (e.g., Holt, 1998) − poses particularly significant challenges for EPC project owners, involving
63 a complex decision-making process with diverse criteria, multiple decision makers and various
64 available options (Alzahrani & Emsley, 2013). It is a decision-making process where various criteria
65 need to be considered other than price, making the identification of the most appropriate criteria for the
66 assessment of contractors a critical activity in the pre-tender stage. Despite their unique nature,
67 however, determination of the important criteria for EPC contractor selection has scarcely been
68 investigated to date.
69 This study seeks to rectify this situation by identifying the most important generic contractor
70 selection criteria appropriate for EPC projects. This is done by, firstly, extracting a preliminary set of
71 criteria from the literature followed by three Rounds of Delphi survey with experts in the EPC industry
72 to obtain a consensus set of criteria ranked according to their importance. The measurement of the
73 evaluation criteria and ways to trust the information supplied by EPC contractor is considered to be
74 outside the scope of this research.
75 The next section of this paper comprises a review of the main literature concerning the relationship
76 between EPC and other similar project delivery methods, previous research into contractor selection

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77 criteria and the use of Delphi surveys in construction management and contractor selection research.
78 This is followed by a description of the method used to obtain and rank the criteria, and the results thus
79 obtained. The final section provides a summary of the work, the potential implications involved and
80 prospects for future research.
81 2. Literature review
82 A number of project delivery methods have been developed for the process of designing and
83 constructing facilities, the commonly used of which include (CMAA, 2012; Forbes & Ahmed, 2010;
84 Molenaar et al., 2010): Design-BidBuild (DBB), Design-Build (DB) or Design and Construct (D&C),
85 Construction Manager at Risk (CM at Risk), Engineering-Procurement-Construction (EPC), Design-
86 CM (Construction Management), Fast-Track Construction, Partnering, Turnkey and Build-Operate-
87 Transfer (BOT). These different project delivery methods are distinguished by the structural variations
88 between the owner, the designer, and the constructor, financing methods and operational variations
89 within the parties (Touran et al., 2011; Oyegoke et al., 2009).
90 Four main project delivery categories are widely accepted in the construction industry: namely,
91 traditional procurement, integrated procurement, management procurement and collaborative (or
92 relational) procurement. EPC is categorized as an integrated procurement method (Dissanayake, 2017).
93 It is noted that DB and EPC are distinguished as two different project delivery methods even
94 though they share critical similarities. The typical DB and EPC structures in Figs 1 and 2, respectively,
95 clearly show the structural variations of both delivery methods, which are determined by the roles of
96 the main parties involved.
97 Selection (or evaluation) criteria are the measures that have been used for many years in many
98 countries by decision makers for prequalifying contractors or selecting the most appropriate contractor
99 in response to an invitation to offer (request for proposal) – especially by public sector owners – and
100 involve many different types (Hatush, 1996). However, although the criteria for construction contractor
101 selection in general have been the subject of many studies (e.g., El-Sayegh et al., 2019 Gurgun et al.,
102 2020;; Hunt et al., 1966; Khoso & Yusof, 2020; Merna & Smith, 1990; Moselhi and Martinelli, 1990;
103 Palaneeswaran and Kumaraswamy, 2000), very few specifically identify the contractor selection

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104 criteria for EPC projects and their relative importance. Niayeshnia et al.’s (2020) study of the
105 classification, prioritization, efficiency, and change management of EPC projects, for instance, while
106 identifying the (mainly negative) influences on productivity, does not focus specifically on contractor
107 selection. Only Amiri et al. (2021) have determined a weighted set of criteria. This is as part of their
108 EPC contractor selection model with selection criteria (based on Holt et al.’s (1994b) general
109 construction criteria) for an individual project by interviewing seven experts who are “members of
110 evaluation team of employers”, to be subsequently rated for importance by the members of the
111 commissioning team of the employer. What has yet to be undertaken is a larger study aimed at providing
112 a basic generic set of criteria for the EPC industry.
113 Increasingly used in construction management research, the Delphi method is a structured
114 communication technique originally developed as a systematic, interactive forecasting method that
115 relies on a panel of experts answering questionnaires in consecutive Rounds until convergence, with
116 the facilitator providing a summary of their judgments to the group in the form of the mean or median
117 response in each Round: as uncertainties arise from the judgments of decision makers, this method
118 accounts for interpersonal uncertainty and variability in one’s opinion (Martin & Ramjarrie, 2021). Of
119 particular relevance here is the increasing use of the Delphi method in such construction management
120 research as graduate education (Pathuri et al., 2020), company performance (Mansour et al., 2020) and
121 contract administration (Gunduz & Elsherbeny, 2020), as well as contractor selection (Mahdi et al.,
122 2002), in terms of performance criteria (Gunasekara et al., 2021), safety criteria (Gharedaghi &
123 Omidvari, 2019), public contract criteria (Hajek et al., 2017), effectiveness factors (criteria) (Lajimi et
124 al., 2018), construction supply chain pre-qualification and selection criteria (Mahamadu et al., 2017),
125 and project source criteria (Faraji et al., 2020).
126 3. Method
127 As described below, 16 potential EPC contractor selection criteria were first identified by a
128 comprehensive literature review from the Transmar Consult Inc.’s (2003) original list of 18. These
129 were then adjusted for comprehensiveness and appropriateness by a validation study with four different
130 experienced industry professionals, followed by the main study involving an initial group of 64

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131 experienced industry practitioners from public and private organizations in the Australian construction
132 industry to identify and weight the most important generic criteria. Following several previous
133 construction management studies as reviewed in the previous section, the Delphi method was used for
134 its ability to account for the expected interpersonal uncertainty and variability in the opinions of the
135 experts involved.
136 3.1 Preliminary identification of criteria
137 Generic EPC contractor selection criteria have rarely been investigated and the literature on the
138 topic is very limited. Apart from Amiri et al’s (2021) project specific criteria, the only relevant work
139 available is Transmar Consult Inc.’s (2003) series of five industry studies with participants from North
140 America, Europe and Asia from 1995 to 2005. Table 1 shows the resulting 18 Transmar criteria
141 identified and their respective ranking from the owners’ perspective.
142 The lack of other EPC contractor selection criteria studies made it necessary to initially identify
143 criteria from the non-EPC contractor selection literature, in which studies have extensively investigated
144 (and continue to identify) appropriate contractor selection criteria. Despite the increasingly rapid
145 changes in project procurement laws and increased complexity of projects and client needs, the criteria
146 have not changed greatly over the years, with tender price, contractor past performance and
147 performance potential always present (Acheamfour et al., 2020). All the reviewed literature was
148 published in the period from 1994, including Hatush and Skitmore (1997a), who identified the criteria
149 for the tender evaluation of prequalified contractors as including quality assurance, existing workload,
150 experience on projects, experience of working with the owner, financial stability, local knowledge, and
151 responsible attitude towards the work. As Walraven and de Vries (2009) point out, the criteria
152 contribute in different degrees to the project success factors of cost, time, and quality: contractor
153 selection needs to be unbiased, with owners having to consider what is ‘valuable’, not just ‘important’
154 or ‘required’ (Abdelrahman et al., 2008). While, unsurprisingly, cost is historically the most important
155 factor considered by clients (e.g., Hatush & Skitmore, 1997b), time, qualification performance, quality
156 and design alternatives have also been shown to be primary criteria (Abdelrahman et al., 2008). Watt

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157 et al. (2010), on the other hand, maintain that no individual criterion or group of criteria is constantly
158 considered as more important than others and often vary according to the purchasing situation.
159 As Table 2 shows, this has resulted in a multitude of criteria in diverse project environments in
160 terms of procurement method (mostly traditional or design and build (DB)), experience and
161 geographical location. To facilitate the contractor selection process, limiting the number of criteria
162 assists in making a well-founded decision – a typical arrangement for multicriteria analysis being from
163 six to twenty (Dodgson et al., 2009). Given the large number of criteria identified, it is helpful to group
164 them into a series of themes that relate to separate and distinguishable components of the overall
165 objectives for the decision. The main reasons for grouping criteria are:
166 (1) To help check whether the set of criteria selected is appropriate to the problem.
167 (2) To ease the process of calculating criteria weights in multi-attribute applications.
168 (3) To facilitate the emergence of higher-level views of the issues (e.g., trade-offs between key
169 objectives) (Dodgson et al., 2009).
170 This involved the Table 2 criteria being subjectively grouped into 18 general criteria, the
171 frequency of which is shown in Table 3 against 20 publications. From the 18 criteria, a final preliminary
172 list of 16 criteria was identified by rephrasing ‘Legal status’, which gained least number of citations
173 (<15%), as ‘Contract and legal’; ‘Experience of company’ was considered as ‘Past experience of the
174 contractor’; ‘Experience of personnel’ was included under ‘Key personnel’ as well as ‘Qualifications’;
175 and ‘Capacity’ was included under ‘Organizational’.
176 3.2 Validation
177 Before finalizing the criteria, the provisional set of 16 criteria were validated against a range of
178 qualities in interviews with four different experienced industry professionals from different
179 organizations, mostly from the oil and gas sector, to ensure:
180 a) Completeness: all the criteria that are necessary to compare the contractors’ performance have
181 been included and they can capture all the key aspects involved.
182 b) Redundancy: the criteria that are relatively unimportant or any duplicates have been removed.

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183 c) Operationality: each contractor can be judged against each criterion on a common scale of
184 measurement, reflecting an objective assessment as well the subjective assessment of an expert.
185 d) Mutual independence of preferences: preference scores could be assigned for the contractors on
186 one criterion without knowing what the contractors’ preference scores are for any other criteria.
187 Then, to model the mutually interdependent criteria by combining two criteria into a single
188 criterion provided the new criterion is independent of the remaining criteria.
189 e) Double counting: To check double counting because double-counted effects are likely to give
190 more weight in the final overall decision than they deserve.
191 f) Size: the list is no longer than needed, as an excessive number of criteria can lead to extra
192 analytical effort in assessing input data and can make their analysis more difficult.
193 This resulted in the correction of some wording and some rephrasing, leaving a total of 16 criteria:
194 management (demonstrates a business management system that includes project management system,
195 risk carrying ability and willingness, management personnel, and management accountabilities);
196 financial (provides details of financial capability in terms of financial statements); past experience
197 (provides details of the scale and type of past projects, and demonstrates experience in similar projects
198 in the region, and familiarity with relevant project delivery methods); past performance (demonstrates
199 the performance of recently completed projects in terms of cost, time, quality and cooperative
200 behavior); technical attributes (demonstrates technical capability and capacity that include technical
201 solutions, alternative designs, expertise, specialization, technical qualifications, staffing levels,
202 technology and equipment resources, engineering systems, creativity and innovation, and availability
203 for operation, maintenance, repair and training needs); health and safety (outlines accountabilities for
204 Occupational Health and Safety with plans and systems and demonstrates performance with OHS
205 records); quality (outlines quality control and quality assurance systems, and compliance with
206 specifications and quality standards); Cost (includes tendered price and assessment of capital cost, life
207 cycle cost, etc.); organizational (provides details of company size, company image, age of business,
208 organizational structure, policies, memberships, current workload and resources); relationships
209 (provides details of subcontractors/suppliers that include the length of relationship time, labor

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210 employment agreements, and maintenance of workers’ compensation liabilities); project understanding
211 (responds to Requests for Proposals and demonstrates project-specific criteria); key personnel (provides
212 details of key personnel to be employed, proposed roles, their experience and skills, academic and
213 professional qualification, years with the company and their training); time (provides a program
214 indicating start and finish dates, and adherence to the dates/duration given in tender documents);
215 geographic location (outlines familiarity with the local environment and proximity to project);
216 contractual and legal (demonstrates a disputes and resolution strategy, attitude towards claims,
217 acceptance of contract terms and conditions and compliance with the codes); and environment and
218 sustainability (outlines an Environmental Management Plan and commitment to sustainability).
219
220 3.3 Main study
221 The questionnaire for Round 1 of the Delphi survey (available from the lead author) was developed
222 incorporating the 16 criteria identified. It comprised two sections. Section 1 contained questions
223 concerning the participants’ background including, crucially, questions aimed at establishing their
224 ability to meet at least one of the following eligibility requirements to help ensure they are
225 knowledgeable enough to provide sufficiently informed and reliable responses to Section 2.
226 1. Professional registration in an engineering or project management body (e.g., Engineers Australia).
227 2. Known participation in engineering or construction project management activities, particularly
228 within EPC projects (e.g., personal contacts, networking, LinkedIn members).
229 3. Known participation in similar research activities.
230 4. A faculty member of the construction project management discipline at an institute for higher
231 education (i.e., university).
232 The questionnaire was initially distributed to 272 potential participants identified using multistage
233 sampling (extension of cluster sampling) and referral sampling (snowball sampling) methods from
234 publicly available data bases, social networking platforms like LinkedIn and researcher’s personal
235 contacts.. Delphi study panels, in general, vary from as low as 3 panel members to as high as 80, with
236 the most important facet being their level of expertise (Hallowell & Gambatese, 2010). Therefore, a

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237 relatively large unbiased sample of 64 participants were selected from those who are knowledgeable,
238 have relevant experience and can commit to multiple rounds of the Delphi Survey. The majority
239 (75.4%) were from private sector organizations, followed by those from public sectors (20%). The
240 participants were from various locations in Australia, with 52% from Queensland, followed by New
241 South Wales (12%) and Western Australia (10%). These three are the leading states for engineering
242 construction, which are predominantly delivered by the EPC method. Some participants were from
243 national or even international companies, which have their businesses at several locations across
244 Australia. This geographical diversity was important to ensure the participants have encountered
245 location-specific challenges when assessing EPC contractor performance requirements.
246 28 were from consultant organizations, followed by principals (21) and contractors (10). They
247 worked in various construction sectors, such as transport, utilities, telecom, mining, heavy industrial
248 construction (e.g., oil & gas, chemical and processing plants), pipelines and buildings, representing
249 most EPC industries in Australia. The majority were from the mining, heavy industrial construction
250 and pipeline industries combined (37%), with 23% from the transport construction sector: the most
251 recent growth in the EPC industry was mainly from infrastructure projects – in particular, transport
252 projects. A significant number (34.5%) had worked or had been working on AUD billion EPC projects
253 and almost 14% had work experience with very large projects costing over AUD 5 billion.
254 23 were project managers and 20 held other managerial positions, which implies that most held
255 decision-making authority within their roles and were directly involved in contractor selection. Most
256 were also well-experienced, with over 22 having over 20 years of construction industry experience, and
257 15 and 14 having between 10-20 years and 5-10 years, respectively. Only a very small proportion (<2%)
258 were unaware of the project cost. Therefore, most were familiar with challenges of large and complex
259 projects.
260 In Section 2 of the questionnaire, the participants were asked to select the criteria from the list of
261 16 list that they considered important for EPC contractor selection. 31 participants suggested new
262 criteria. To analyze these, firstly, all the criteria were given an individual node. Cluster Analysis (CA),
263 an advanced statistical method still uncommon but increasingly used to identify groups or patterns in a
264 dataset and to examine group differences (Crowther et al., 2021), was then used to cluster the nodes by

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265 word similarity (see Fig. S3). After a critical review of the CA results, the child nodes were identified,
266 which represent the criteria suggested by each individual and the parent nodes (representing the most
267 appropriate new criteria to which the child nodes could be mapped − as such, a parent node denotes a
268 single suggested criterion derived from the suggestions).
269 The next step was to match the suggested criteria with the existing criteria manually.
270 A well-rounded questionnaire (available from the lead author on request) was developed for Round
271 2 using the results of Round 1, containing all the 16 criteria of questionnaire 1 refined using the Round
272 1 feedback for each criterion in addition to the new criterion of ‘Industrial relations’ (see Table 4). Each
273 criterion was scrutinized to ensure completeness and appropriateness, so the participants could
274 confidently rate them on an integer scale of 1 (low importance) to 7 (high importance) (see Table 4).
275 The least experienced (0-5 years construction experience) participants (13) were excluded in this
276 Round, resulting in a total of 47 active participants.
277 Finally, a Round 3 questionnaire was distributed to the Round 2 participants, inviting them to
278 change their criteria importance ratings in the light of the aggregated results from Round 2.
279 4. Results
280 4.1 Delphi survey Round 1
281 Table 5 shows the frequency of participant responses for each criterion, indicating that more than
282 50% considered all 16 criteria to be important. Past performance, technical attributes, key personnel,
283 past experience, health and safety, financial, cost and time were identified as the most important criteria
284 with a response rate over 90%. Environment and sustainability was ranked only 13th, even though it
285 was broadly discussed in the local and global arena.
286 Past performance (100%) was the dominant criteria for both sectors. However, environment and
287 sustainability had a contrasting response, as 92% public sector participants identified it as an important
288 criterion compared to 69% of private sector participants.
289 The most experienced (over 20 years of EPC/DC project experience) participants identified the
290 most important criteria as financial capability, past performance, health and safety and key personnel.

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291 In matching the suggested criteria with the existing criteria, it was found that many of the suggested
292 criteria fit with the content of an existing criterion (see Table 6). Items 37 and 38 refer to non-
293 conforming tenders that were excluded in the response rate calculations, given that a non-conforming
294 tender cannot be considered as a criterion. Those not matched with any existing criteria were considered
295 as new criteria. Finally, the response frequencies were calculated as a percentage of the total 64
296 participants.
297 Despite the large number of criteria suggested by the participants, most had been already
298 considered within the existing criteria descriptions. ‘Industrial relations’ was included as a new criterion
299 as it had the maximum response rate (5%) but could not be incorporated into any existing criteria.
300 The participants’ comments on each existing criterion were critically reviewed, and the criteria
301 descriptions rephrased to make them more meaningful. Some suggestions were also useful to be
302 considered when selecting EPC contractors, including having an appropriate number of tenderers and
303 an appropriate weighting of the various criteria. Also emphasized was the importance of the owners’
304 understanding and commitment for successful project delivery.
306 Table 7 shows the results of the Round 2 survey. With a mean score above 6 on a 1–7-point scale,
307 the four most important criteria were ‘past performance’, ‘technical attributes’, ‘project understanding
308 and health and safety’, followed by ‘industrial relations’, ‘organizational’ and ‘geographical location’
309 with mean values below 5. As the data were not normally distributed, non-parametric statistical
310 techniques were used for further analysis.
311 Cronbach’s alpha is 0.914, which, being greater than 0.7, indicated a high consistency of responses.
312 Kendall’s coefficient of concordance W – a measure that applies ranks to establish an agreement among
313 raters who are evaluating a given set of n objects (Kendall & Babington-Smith, 1939) – which is
314 significant at 0.225 (p=0.000), indicating a considerable degree of consensus amongst the participants.

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316 A total of 36 participants responded to the Round 3 questionnaire. Table 7 shows the outcome,
317 with past performance, project understanding, technical attributes and health and safety still with mean
318 values above 6, but now with the addition of ‘key personnel’.
319 Cronbach’s alpha was 0.819, indicating stronger consistency of responses in Round 3. Kendall’s
320 coefficient of concordance W was 0.285 (p=.000) − the increased consensus from Round 2 indicating
321 greater agreement and increased consensus.
322 4.4 Comparison of Round 2 and 3 results
323 Past performance, technical attributes, project understanding, key personnel and health and safety
324 maintained their ranks within the top 5 in both Round 2 and 3 of Delphi survey. As a measure of
325 stability, Cronbach’s alpha values of well above 0.7 reflected a particularly good consistency in the
326 criteria scores in both Rounds. The increased Kendall’s W statistic in Round 3 indicated that a stronger
327 agreement was reached by the experts on the importance of the EPC contractor selection criteria.
328 ‘Geographical location’ – the least important criterion in Round 3, with a mean value less than 5
329 (4.63) – was excluded, leaving the remaining sixteen criteria identified for EPC contractor selection.
330 5. Discussion
331 This relatively large Delphi study identifies 16 ranked generic criteria for EPC contractor selection,
332 of which ‘past performance’, ‘project understanding’, ‘technical’, ‘key personnel’, and ‘health and
333 safety’ are the top criteria rated at ‘very important’ for EPC tender evaluation. The remaining 11 criteria
334 of ‘past experience’, ‘time’, ‘management’, ‘financial’, ‘contractual and legal’, ‘quality’, ‘cost’,
335 ‘relationships’, ‘environmental and sustainability’, ‘organisational’, and ‘industrial relations’ are rated
336 as ‘important’ and also need to be included.
337 These results contrast with the only two known similar studies by Transmar Consult Inc. and
338 (2003) and Amiri et al. (2021). In the case of the former’s 2005 list reproduced in Table 1, the top ten
339 criteria in each are roughly matched with ‘past performance’, ‘technical’, ‘key personnel’, ‘past
340 experience’, ‘management’, and ‘quality’. Of the remainder, our study’s inclusion of ‘health and safety’
341 clearly represents the more prominent concern with this aspect in recent years, as does ‘contractual and

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342 legal’ as the number and size of EPC projects continues to increase globally. ‘Project understanding’,
343 though clearly an essential factor, seems to denote a more conceptual proponent than Transmar’s
344 technical approach, while ‘time’ and ‘financial’ are basic criteria seemingly overlooked in the earlier
345 study. A particularly notable feature here is Transmar’s highly rated “experience with the same
346 geographical area” now being totally rejected in its significance in the present study, which clearly
347 reflects the international nature now of all the leading EPC contractors.
348 Amiri’s (2021) list is more similar to our results, with ‘financial resources’, ‘management and
349 technical ability’, ‘time performance’, ‘experience’, ‘personnel’, ‘quality’, and ‘health and safety’ being
350 a close match. However, our two main criteria of ‘past performance’ and ‘project understanding’ are
351 missing, with the accent instead being on ‘historical non-performance’. Similarly, they have no mention
352 of ‘contractual and legal’ understanding except ‘claims and litigation’ under their ‘historical non-
353 performance’ criterion. Their ‘current workload’, however, is absent from our list and may well need
354 to be included in future work.
355
356 6. Summary and conclusion
357 This study addressed the ongoing need to establish the most important generic criteria for
358 contractor selection of EPC projects. Following a summary of the literature relating to construction
359 contractor selection criteria generally and use of the Delphi method, three Rounds of Delphi survey
360 were used with a substantial number of experienced and reliable experts to help identify 16 validated
361 key selection criteria and obtain their importance weightings. The findings indicate past performance
362 to be the most important, followed by project understanding, technical attributes, key personnel, health
363 and safety, past experience, time, management, financial, contractual and legal, quality, cost,
364 relationships, environmental and sustainability, organizational and industrial relations, with
365 geographical location the least important.
366 The findings are useful for both practitioners and academics in making a significant contribution
367 to the body of knowledge of the EPC process. This will assist in providing a better understanding of

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368 criteria importance and pave the way to developing a generic EPC contractor selection model involving
369 the criteria most needed to objectively identify potential contractors and evaluate tenders.
370 A limitation of the study is that the participants were from various construction industries (e.g.,
371 infrastructure, oil, and gas) and public/private sectors in Australia and, therefore, the criteria are not
372 project-, industry- or sector-specific, and some may not be applicable to certain industries/sectors or
373 specific EPC projects in other countries. The next level of research, therefore, would be to ascertain the
374 extent of these differences. Moreover, the criteria considered are at quite a broad-brush level: further
375 research is needed to examine them at a finer level of detail, such as in distinguishing between first cost
376 or tender value, and lifecycle cost or the contractor’s fee, for example. Similarly, such highly specific
377 EPC criteria as ‘willingness to joint venture’ and ‘understanding the client organization values provided
378 by the participants’ that were subsumed within ‘relationships’ or ‘organizational’ may need to be teased
379 out in future. In addition, it was outside the scope of the study to compare these EPC criteria with non-
380 EPC criteria and how they have changed over time, which will be another task for future research.
381 Finally, it is noted that the associated aspects of the measurement of the evaluation criteria and ways to
382 trust the information supplied by EPC contractor are issues for further consideration.
383 Conflict of interests

384 There are no conflicts of interests.
385 Note
386 This work is based on a PhD thesis by the first author. The other authors are either the supervisors
387 or provided technical help in authoring the paper.
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560

22
561 Figure captions

562 Fig. 1. Typical design-build structure
563 Fig. 2. Typical EPC structure
564 Fig. 3. Round 1 Questionnaire: Cluster Analysis using NVivo on ‘other criteria’
565
566 Tables and Figures

567
568 Table 1. EPC contractor selection criteria importance – owners’ perspective (Transmar Consult Inc., 2003)
Ranking
# Criterion 2005 2003 2001 1997 1995
1 Quality of key personnel 1 3 1 1 1
2 Project management capability 2 1 2 2 2
3 Construction capability 3 6 8 5 7
4 Detailed engineering capability 4 5 8 10 5
5 Contractor’s price 5 2 3 3 6
6 Experience with similar work 6 7 5 7 8
7 Project control systems 7 4 4 8 3
8 Experience with same geographic area 8 8 7 9 10
9 Procurement capability 9 15 14 12 11
10 Quality of proposal 10 12 9 13 12
11 Responsiveness and flexibility 11 9 10 6 4
12 Size and location of office 12 11 13 11 13
13 Ability to do work in one office 13 10 12 14 14
14 Total man-hour estimates 14 14 17 17 16
15 Conceptual engineering capability 15 17 16 16 14
16 Capability of sales representatives 16 16 15 16 15
17 Start-up, training capability 17 18 18 18 16
18 Quality of senior management 18 13 11 4 9
569

23
Table 2. General contractor selection criteria

# Author Criteria Delivery method
1 Abdelrahman Capital cost and life cycle cost; time; qualification and Traditional
et al. (2008) performance; design alternatives; technical proposal contractor selection
responsiveness; environmental considerations.
2 Ahola et al. Price; experience with previous projects; investments in Traditional
(2008) product development; people involved by the supplier; subcontractor selection
suppliers used by the supplier; financial situation; client’s
preferences; risk carrying ability and willingness; strategic
factors.
3 Alzahrani & Financial; management; technical; past experience; past DB contractor
Emsley (2013) performance; organization; environmental; health and safety; selection
quality; resources.
4 Darvish et al. Work experience; technology and equipment; management; DB contractor
(2009) operation team’s experience and knowledge; financial selection
stability; quality; familiarity with the area (e.g., domestic);
reputation; creativity and innovation.
5 Enshassi et al. Financial; completeness of bid document; past performance DB contractor
(2013) in similar projects; staff skills and experience; contractor’s selection
reputation/image; quality of work; contractor site
management/execution; bid understanding; plant and
equipment resources; health and safety performance.
6 Fong & Choi Tender price; financial capability; past performance; past Traditional
(2000) experience; resources; current workload; past relationship; contractor selection
safety performance.
7 Gransberg & Price; technical; qualifications; schedule; project DB contractor
Barton (2007) management. selection
8 Hatush & Financial soundness; technical ability; management Traditional
Skitmore capability; health and safety; reputation; past failures; length contractor selection
(1997a) of time in business; past owner/contractor relationship; other
relationships.
9 Holt et al. Organizational; financial stability; management; past Traditional
(1994a) experience; past performance; project-specific; other-specific; contractor selection
current workload; prior relationship; office location.
10 Holt et al. Contractor’s organization; financial consideration; Traditional
(1994b) management resource; past experience; past performance contractor selection
11 Holt (2010) Contractor’s organization; financial considerations; DB contractor
management resources; past experience; past performance selection
12 Mahdi et al. Current capabilities (Contractor capacity, DB contractor
(2002) management/adaptability/co-ordination, current selection
resources/workloads); work strategy; plans and method
statements (cash flow, manpower schedule, procurement
schedule, equipment schedule, quality assurance and control
plan, safety plan, organizational structure/qualifications of the
staff, type of work subcontracted.
13 Oltean- Price; experience; technical approach; management approach; DB contractor
Dumbrava et qualification; schedule; past performance; financial stability; selection
al. (2014) responsiveness to the request for proposal (RFP); legal status.
14 Palaneeswaran Finance; human resources; organization and management; DB contractor
& project-specific requirements; past experience; past selection
Kumaraswamy performance; technology; quality system; health and safety
system; equipment.
(2000)

24
15 Plebankiewicz Experience; financial situation; personnel available; Traditional

(2012) equipment reputation. contractor selection
16 San Cristóbal Cost; completion time; safety (as a measure of company DB contractor
(2012) reputation); technical capability (project-specific); selection
management capability (project-specific); experience in
similar jobs (level of expertise); financial status.
17 Singh & Tiong Tender price; past performance (financial soundness); DB contractor
(2005) managerial capability (resources, current workloads); quality selection
(technical competence, past experience, project-specific
criteria); health and safety aspects.
18 Waara & Quality; cost; technical; environmental impact; operation, Traditional
Bröchner maintenance, technical support services; project duration; contractor selection
(2006) contractor capability & skills, past experience, past
performance; construction methods; financial capacity; health
and safety; conformity with bidding documents.
19 Watt et al. Workload/capacity; financial position; health safety DB contractor
(2009) environment; key personnel; location; project management selection
expertise; organizational experience; past project
performance; company standing (reputation); tendered price;
proposal; quality control; client-supplier relationships;
technical expertise; method/technical solution.
20 Watt et al. Relevant experience; track record (previous projects); quality; DB contractor
(2010) expertise; capability; cost; safety record; capacity; tender selection
sum.

25
Table 3. Criteria usage frequency
Palaneeswaran & Kumaraswamy

R
Oltean-Dumbrava et al. (2014)
Waara and Bröchner (2006)

Alzahrani & Emsley (2013)
Hatush & Skitmore (1997a)

Gransberg & Barton (2007)
Abdelrahman et al. (2008)
an
% (out of 20 citations)
Singh & Tiong (2005)
Fong and Choi (2000)
Plebankiewicz (2012)
Enshassi et al. (2013)
San Cristóbal (2012)

Darvish et al. (2009)
Mahdi et al. (2002)

Ahola et al. (2008)
k
Holt et al. (1994b)

Holt et al. (1994a)
Watt, et al. (2009)
Watt et al. (2010)

ba
Holt (2010)
(2000)
se
d
on cit
% ati
of on
1. Management capability                  85 1
2. Financial stability                 80 2=
3. Experience of company                 80 2=
4. Performance               70 4=
5. Technical attributes              70 4=
6. Health & safety
              70 6
environment
7. Quality             60 7
8. Cost           55 8
9. Resources           50 9
10. Organizational          45 10=
11. Relationships          45 10=
12. Qualifications        40 12=
13. Project understanding         40 12=
14. Experience of personnel        35 14=
15. Capacity        35 14=
16. Time      25 16
17. Location    15 17
26
18. Legal status   10 18

Table 4. Final 17 criteria used in Rounds 2 and 3
Criterion
Past performance: Demonstrates the performance of recently completed projects with records of
project cost, completion time and quality, contract claims and variation history, cooperative behavior
(conflicts/disputes), penalties, etc.
Technical attributes: Demonstrates technical capability and capacity that includes sound
engineering solutions, safety in design, creativity and innovation, constructability, engineering and
technical expertise, technology and equipment resources, engineering systems, etc. Demonstrates
technical support for commissioning, operation readiness, handover, maintenance, repair, and training
needs.
Key personnel: Provides the details of key project personnel, which include proposed roles,
experience and skills, academic and professional qualification, years with the company and
professional development plan. Demonstrates project team ability to work collaboratively and as a
part of diverse teams, and availability for backup resources.
Past experience: Provides details of scale, complexity, and type of past projects, and demonstrates
project experience of similar type(s) in a similar environment.
Health and safety: Outlines accountabilities for Occupational Health and Safety (OHS) providing
samples of site-specific management plans, corporate systems and procedures that identify and
control OHS risks. Provides documentary evidence of corporate OHS performance including OHS
records from recent projects.
Financial: Demonstrates contractor financial viability and financial performance over a defined
period and provides financial statements, which include balance sheet, profit and loss statement, etc.
Cost: Includes tendered price, life-cycle costing, etc.
Time: Provides a project schedule with milestones, activities and deliverables with intended start and
finish dates, or complies with the time constraints given in tender documents.
Quality: Outlines quality control and quality assurance systems and complies with specifications and
quality standards.
Project understanding: Demonstrates understanding of Request for Proposal (RFP), local context,
project risks, unique owner standards and requirements, how the project can be executed to meet
client expectations, explains exceptions from RFP and outlines expected degree of owner
involvement, approvals, etc.
Management: Demonstrates Construction Project Management (CPM) capability (risk management
strategy, procurement strategy, stakeholder management plan, logistic and supply chain management,
preferred suppliers/subcontractors, and key trade packages, etc.).
Organizational: Outlines business values and corporate commitment and provides the details of
company size, company image, age of business, organizational structure, policies, memberships,
current and potential future work commitments, resource optimization (people, plant, equipment), in-
house systems, etc.
Environment and sustainability: Takes the stakeholders’ expectations, which include
environmental requirements, social acceptances (e.g., local resources, local economy, Indigenous
participation, etc.) and sustainability approach (products and processes), into account.
Contract and legal: Accepts Contract Terms and Conditions or provides clear, concise exclusions
or conditional acceptances. Indicates compliance with all relevant codes and regulations.
Relationships: Demonstrates ability to develop strong and long-term partnerships with clients,
vendors, and suppliers by providing client/subcontractor/supplier referees, including information
regarding the duration of the relationship, etc.
Geographic location: Outlines familiarity of local environment, and proximity to project (i.e.,
proposed work locale) and/or demonstrates work locations worldwide that can work together.
Industrial relations: Demonstrates employee and industrial relations plan/policy and maintenance
of project agreements, multi-employer agreements, workers’ compensation liabilities, etc., and
provides recent industrial relations record.

permission of the publisher.
28
Table 5. Criteria importance results from Round 1

Criterion Response rate Rank
(as a percentage)
Past performance 100.0% 1
Technical attributes 96.88% 2=
Key personnel 96.88% 2=
Past experience 95.31% 4
Health and safety 93.75% 5
Financial 92.19% 6=
Cost 92.19% 6=
Time 90.63% 8
Quality 89.06% 9
Project understanding 87.50% 10
Management 82.81% 11
Organizational 79.69% 12
Environment and sustainability 75.00% 13=
Contractual and legal 75.00% 13=
Relationships 73.44% 15
Geographic location 56.25% 16
29
Table 6. Mapping of Participants’ Suggestions with Existing Criteria

# Participants’ suggestions Existing criteria Potential new criteria
Industrial relations
Logistic & Supply

Past performance
Sustainability &
Organizational
Key personnel
Collaboration
commitments
Relationships
Management
Environment
Procurement
Geographic
Contractual
Innovation
Comm. &
Technical
reporting
location
Present
Legal
chain
EHS
1 Ability to collaborate   
2 Aboriginal participation 
3 Alignment with delivery methodology 
4 Availability of back up resources  
5 Client, stakeholder, and team relationship management 
6 Commissioning management and readiness  
7 Communication and reporting 
8 Community consultation 
9 Community relationship management 
10 Compliance to government procurement code 
11 Compliance with contract terms and conditions 
12 Condition and Exclusion 
13 Construction management 
14 Cost control strategy and tools 
15 Cultural fit (organizationally)  
16 Current and future workload
17 Dealing with service authorities and councils  
18 Demonstrated knowledge of contractor company 
values and incorporation them in day-to-day business
19 Design (internal/external) management  
20 Fabrication capability 
21 History of disputes 
22 Indigenous participation 
23 Industrial relations 
24 Information management and reporting 
25 Innovation 
26 IT 
27 Job share flexibility  
28 Key personnel availability   
30
29 Key personnel dedicated time to project   

30 KPI 
31 Legal compliance and governance 
32 Local and global economic situations 
33 Local content 
34 Local resources and contribution to the local economy 
35 Location-specific EHS Management plan 
36 Logistics 
37 Non-conforming tender
38 Optional analysis in contractor’s proposals and
alternative tenders
39 Organization 
40 Performance guarantees 
41 Performance history 
42 Plant and Equipment 
43 Procurement management and tools 
44 Project controls (cost, schedule, change), systems and 
tools
45 Project management qualification 
46 Project team 
47 Resource allocation considering present commitments  
to other projects
48 Risk Management 
49 Safety in Design 
50 Stakeholder management 
51 Stakeholder relations 
52 Strategy for Engineering, Procurement and  
Construction
53 Team experience working together   
54 Team relationship 
55 Understanding of client organization values 
56 Understanding the team 
57 Understanding WHS 
58 Willingness to JV  
59 Working remote areas   
Response % 5% 6% 3% 2% 5% 5% 3% 2%
31
Table 7. Summary of Rounds 2 and 3 survey results

Round 2 (N=47) Round 3 (N=36)
Criterion Mean Rank Mean Rank
Past performance 6.28 1 6.39 1
Project understanding 6.17 3 6.33 2
Technical attributes 6.21 2 6.31 3
Key personnel 5.85 5 6.19 4
Health and safety 6.04 4 6.03 5
Time 5.57 11 5.97 6
Financial 5.72 8 5.92 7=
Contractual and legal 5.79 6= 5.92 7=
Past experience 5.79 6= 5.89 9=
Management 5.64 10 5.89 9=
Cost 5.66 9 5.75 11
Quality 5.47 12 5.72 12
Relationships 5.21 13 5.56 13
Industrial relations 4.98 15 5.28 14
Environment and sustainability 5.00 14 5.25 15
Organizational 4.85 16 5.03 16
Geographic location 4.57 17 4.69 17
Kendall’s W 0.225 0.285
Cronbach’s Alpha (α) 0.914 0.819
Fig. 1. Typical design-build structure
FEED Contractor Principal (Project Owner) Owner

en g ineerin g team
Specialist EPC Contractor Design and

consultants Engineering teams
Vendors Subcontractors
Fig. 2. Typical EPC Structure

Fig. 3. Round 1 Questionnaire: Cluster Analysis using NVivo on ‘other criteria’

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Bond University

Ranked generic criteria for EPC contractor selection

Dissanayake, Nayana; Xia, Bo; Skitmore, Martin; Trigunarsyah, Bambang; Menadue,

Link to output in Bond University research repository.

Download date: 02 Nov 2023

4 criteria for EPC projects in the construction industry

5 Design/methodology/approach – Proceeding from a review of previous studies and validation by a

10 of knowing the aggregated results of the previous round

20 Keywords Contractor, tender, selection, criteria, EPC projects.

21 Paper type Research paper

© Emerald Publishing Limited.

© Emerald Publishing Limited.

50 outcomes (Australian Constructors Association (ACA), 2015).

51 However, such projects depend on a limited/small number of international/domestic

52 subcontractors/contractors undertaking these projects, and with difficult-to-manage complex supplies

74 outside the scope of this research.

© Emerald Publishing Limited.

80 prospects for future research.

85 Construction Manager at Risk (CM at Risk), Engineering-Procurement-Construction (EPC), Design-

86 CM (Construction Management), Fast-Track Construction, Partnering, Turnkey and Build-Operate-

89 within the parties (Touran et al., 2011; Oyegoke et al., 2009).

91 traditional procurement, integrated procurement, management procurement and collaborative (or

92 relational) procurement. EPC is categorized as an integrated procurement method (Dissanayake, 2017).

96 the main parties involved.

© Emerald Publishing Limited.

112 a basic generic set of criteria for the EPC industry.

125 and project source criteria (Faraji et al., 2020).

© Emerald Publishing Limited.

135 experts involved.

136 3.1 Preliminary identification of criteria

© Emerald Publishing Limited.

169 objectives) (Dodgson et al., 2009).

175 and ‘Capacity’ was included under ‘Organizational’.

176 3.2 Validation

© Emerald Publishing Limited.

© Emerald Publishing Limited.

218 sustainability (outlines an Environmental Management Plan and commitment to sustainability).

220 3.3 Main study

227 2. Known participation in engineering or construction project management activities, particularly

229 3. Known participation in similar research activities.

231 education (i.e., university).

© Emerald Publishing Limited.

245 location-specific challenges when assessing EPC contractor performance requirements.

© Emerald Publishing Limited.

268 single suggested criterion derived from the suggestions).

276 Round, resulting in a total of 47 active participants.

280 4.1 Delphi survey Round 1

285 was broadly discussed in the local and global arena.

288 criterion compared to 69% of private sector participants.

© Emerald Publishing Limited.

304 understanding and commitment for successful project delivery.

305 4.2 Delphi survey Round 2

310 techniques were used for further analysis.

© Emerald Publishing Limited.

315 4.3 Delphi survey Round 3

321 greater agreement and increased consensus.

322 4.4 Comparison of Round 2 and 3 results

336 as ‘important’ and also need to be included.

© Emerald Publishing Limited.