Hybrid EPC Contracting: An Innovative Approach to Completing Projects More Quickly with Less Risk

We know what you’re probably thinking – contracting? Snoozefest. We’ll admit it seems a little tedious at first glance, and the “legalese” of a contract is undoubtedly confusing. However, the contracting method a client uses is vital to a project’s success. While contracts can appear complex due to legal jargon, the method a client chooses significantly impacts the outcome. At Ross Group, we blend traditional contracting approaches with innovative strategies to achieve faster project completion, minimize change orders, and stay within budget, all while reducing risk for both clients and project teams.

Streamlined Project Delivery

In the world of architecture, engineering, and construction (A/E/C), various factors influence project success. Among these, the project delivery method stands out as a critical differentiator. At Ross Group, we advocate for various approaches like design-build and construction manager at risk (CMAR) contracting. These methods streamline projects, benefiting everyone involved—from clients and design teams to contractors and end users. Now, let’s explore how our in-house team at Ross Group Industrial (RGI) takes these popular delivery methods to the next level, incorporating energy, vibro-acoustic testing, aerospace, and heavy industrial expertise.

RGI is intentionally structured to deliver projects via integrated in-house engineering, procurement, and construction (EPC) contracting. By providing comprehensive turnkey services, RGI has been able to construct projects even more efficiently, substantially decreasing project timelines in comparison to the traditional design-bid-build method.

Andrew Royce, the operations manager for Ross Group Industrial (RGI) and Ross Engineering, spoke to us about the details of EPC and explained that these project types are developed and executed through a “stage gate” process, starting with an initial target estimate. Our team then proceeds through “eating the elephant” one bite at a time, as portions of the work are Issued For Construction (IFC) and subcontractor/vendor pricing was worked against the target numbers and open-book reviewed with the client. This allows the project stakeholders, such as the owner, designer, and contractor, to make real-time decisions on how the project budget is used.

Following this process allows for speed to the field by establishing design parameters for the design team. It also provides the client and contractor a chance to review subcontractor/vendor proposals, allowing them to make the right choice for the project regarding cost and schedule.  “With the constant and collaborative communication between the design, procurement, construction management, and field teams, we fast track portions of each project to mitigate the effects of variables beyond our control, such as changes in scope, unforeseen conditions, or supply chain issues,” Andrew said. “RGI also self-performs certain lynchpin scopes – like mechanical pipe fabrication and structural steel installation – to help maintain the critical path schedule. All of this leads to streamlined project delivery and a symbiotic relationship between client and contractor.”

An example of RGI’s success with EPC projects is our multi-million-dollar liquids facility for a regional oil and natural gas company. Andrew relates “This EPC project marks the second collaboration with this client and was significantly expedited - nearly 50% faster than a conventional project. The key to this accelerated timeline was a phased design focused on accelerating construction flow and optimizing the design-build balance.” A few other EPC project examples include our completed 154,000 sq. ft. multi-purpose facility for a refining customer, duel-site dehydration units for a midstream O&G client, as well as a church for an existing customer.”

These are just a few examples of the many projects RGI has completed where the EPC delivery method saved our client time and minimized constructability issues. Andrew related that, “We estimate that, on average, RGI’s integrated EPC approach shaves approximately 30% of time on a typical project schedule, which is obviously a huge advantage for our clients.”

Tailored Project Pricing for Risk Mitigation

A second vital differentiator in contracting is the method used to price the project; the two most popular contract billing types in the industry are lump sum (fixed price) contracting and time and materials contracting. There are certainly pros and cons to both types, and Ross Group regularly completes projects via both methods. Nevertheless, RGI is also at the forefront of the industry in this area, working with clients to tailor a project’s billing procedures to evenly distribute the risks inherent in construction.

“Hybrid contracting is something I’ve been thinking about for – oh, 25 or 30 years,” said Mike Smith, COO of RGI and Ross Engineering and the mastermind behind RGI’s unique hybrid contracting methods. “With traditional lump sum or time and materials contracting, the perceived risk associated with the project cost is rarely allocated equally between the client and EPC contractor. While the specific stipulations we make in our hybrid contracts are proprietary, the general idea behind them is to spread the risk and craft a fair contract solution that offers incentives to the EPC contractor for keeping project costs down.”

Parallels Between Hybrid Contracting and EPC 

RGI’s hybrid contract billing shares similarities with EPC contracting. Unlike a rigid separation between design and construction teams, EPC contracts seamlessly integrate both. This avoids abrupt transitions between completed designs and newly engaged contractors, ultimately reducing project timelines and enhancing constructability from the project’s inception. Similarly, our hybrid contracting approach combines traditional lump sum contracts for in-house controllable aspects, like fixed engineering fees with time and materials contracts for elements beyond our direct control, such as steel prices during procurement.

“Honestly, that’s just the tip of the iceberg when it comes to hybrid contracting,” Mike said. “There are countless variations we’ve used that fit along a ‘hybrid contract continuum,’ and each project benefits from a different mix of costs, incentives, and penalties. However, the advantage of the method goes beyond the project’s bottom line – it allows us to foster a more open relationship with our clients, establishing honest communication from the outset of the project and eliminating many of the typical ‘your money/my money’ issues.”

RGI’s combination of integrated EPC delivery with hybrid contracting is proven, with countless happy customers across the nation. One of those is the owner of the aforementioned liquids facilities constructed in the past few years. In addition to being completed more quickly than a traditional design-bid-build project, RGI’s expertise and attention to detail were instrumental to the success of these projects. The result was world-class facilities, constructed on time, within budget, and without any lost time safety accidents.

To learn more about how RGI can help you tailor your next industrial venture for optimal project delivery, reach out to us at 405.264.2208 or mike.smith@withrossgroup.com.