Research On Influencing Factors And Cost Control Of Material Cost Of International EPC Project

The project itself has the characteristics of complexity and high cost.In view of the high risk of international projects and the advantages of low risk,low total cost and few disputes,EPC model is preferred by the owner and widely adopted in the world.But there are advantages and disadvantages.From the point of view of contract,the project adopting EPC mode is different from general project in that it tends to be fixed-price contract.The difficulty of general contract and late-stage claim makes international EPC project more risky for contractor.In recent years,Chinese construction enterprises have been more involved in international projects,and their pace of going out has quickened.However,the cost management ability,project construction technology and profitability of large-scale projects still lag behind those of international counterparts.There is still room for improvement of cost control,especially material cost,for EPC general contractor to participate in international project.In the cost of EPC engineering project,the risk of loss of the project is greater for the contractor,while the material cost is characterized by large consumption of main material,long purchasing period,need to plan ahead to purchase,transport and storage,which usually accounts for 30%-50% of the total cost of the project.How to manage material cost well is a problem that enterprises must deal with to improve profitability when going out.This paper studies and analyses the international EPC project in which Chinese enterprises participate from the angle of contractor,identifies the influencing factors of material cost and carries out material cost control analysis.The purpose is to analyze the differences between international EPC project and general project from the angle of contractor,identify the influencing factors in the whole process from project tender to project delivery,reduce the risk of material cost through cost control research and improve the management level of contractor to project cost.Firstly,based on the analysis of the current research status at home and abroad,starting from the material cost of EPC project,this paper obtains 26 Level 2influencing factors of material cost of EPC project by referring to literature,expert interview,questionnaire survey and case analysis.Secondly,237 valid questionnaires were designed,distributed and recovered according to the level 7 Likert scale.Thirdly,SPSS analysis software is used to conduct factor analysis on the questionnaire data.The analysis results are summarized into five main factors: material price,owner,procurement management,logistics transportation and storage.The weight ranking of five factors,26 influencing factors and their weight ranking are calculated.After the weight ranking results are obtained,the five main factors are described,The weight ranking results are tabulated and analyzed.Finally,the Cambodian case mentioned in this paper is used for cost control research,and the deviation analysis and earned value analysis are used to analyze the project cost and construction schedule,in order to help the contractor make a scientific prediction and judgment on the actual situation and future development trend of the project cost.This paper draws the following conclusions:(1)among the five main factors,the first is the material price,indicating that the price is the primary influencing factor of the material cost,while the owner factor ranks second over other remaining factors,indicating that the influence from the owner in the international EPC project is different from that of ordinary projects,and its influence is more prominent,and the contractor should respond in time or foresee in advance.(2)Earned value analysis also verified that the main influencing factors such as material price and owner in material cost are one of the reasons for the failure of cost control of international EPC project.The conclusion of this paper shows the correctness of the factor analysis and also proves to the contractor that the material cost does account for a high proportion and has a great impact in the cost control of international EPC projects,but the reason is not only the material cost factors such as material price,material quantity and material procurement,but also the owner’s factors,and the owner’s factors rank second.In order to improve the material cost management of international EPC project,relevant suggestions are as follows:From the perspective of material cost influencing factors,the Contractor shall first consider the material price and the owner,and at least have a thorough understanding of the market conditions and the owner before bidding.For example,look for supplier details in the market and include the risk in the bid quotation;Compare the difference between the contract standard preferred by the owner and its own standard,such as material change,claim,etc.Compare the contract law and procurement law used by the owner.Blind bidding and participation in projects are prohibited if market conditions and owners are not known in advance on the basis of sufficient information.Secondly,procurement management factors should be considered in a timely manner.For example,to prepare adequate material procurement period,avoid confusion in material procurement,avoid errors in material procurement information,and standardize the behavior of purchasing personnel.Finally,effective measures to avoid material damage and ensure transportation are to strengthen logistics transportation and warehousing management,such as standardizing personnel management awareness.From the point of view of material cost control,the Contractor shall study and judge the conditions of the actual market before entering the international market instead of deciding whether to enter through experience.Besides the basic cost and other criteria,the internal and external influencing factors should be considered in the judgment criteria,such as not only the material price but also the influencing factors of the contracting unit in the international market.In addition,earned value analysis is an effective cost control method to forecast the cost progress in the implementation stage of a project.Different cost control methods can be used in stages to better achieve the purpose of cost control.