The industrial construction business is facing unprecedented challenges. In residential and public construction, the trend has been toward collaborative project implementation models for some time. However, industrial construction has kept traditional lump sum EPC as the primary choice. There’s a new paradigm now growing stronger in the market. Turmoil in the supply and construction markets created by a war in Europe and radical moves in the energy market have forced investors and contractors to look for more collaborative ways to take projects to financial close.
Securing the availability of materials, equipment and contractors has not been this difficult for decades. De-risking the investment with a lump sum EPC in this environment leads to contractors applying risk contingencies far greater than ever before, leading to a loss in feasibility. Projects won’t fly. Traditionally, the project risk should always be carried by the party with a better ability to control it – meaning that technology providers must take the performance risk associated with their technology. Typically, contractors carry the construction risk, and the investor is left with risks associated with financing, feedstock, offtake, and force majeure events.
As Europe is facing a double challenge – going green for the climate and going away from the Russian fossils, there’s a real influx of projects in the development pipelines looking for ways to make it. As contractors are either not available or reluctant on lump sums, project developers have had to develop new ways to manage and share risks between the parties. This means increasing risk exposure, especially for the investors as they are left to carry their part of the construction risk.
Time is another factor. There’s rarely time for a traditional waterfall in this environment. We see more phased NTPs and concurrent requirements definition, engineering, and construction being done. This calls for more collaborative ways to develop and implement industrial projects.
PROHOC’S TAKE ON THE DEVELOPMENT
At Prohoc, we see this development as an interesting opportunity. Investors and owners taking more responsibility in the project and construction management opens opportunities for technology and engineering independent project services providers. We are grasping this opportunity. There’s an increasing amount of work in the market and maybe the traditional EPCMs have their hands full as well.
We also see more projects where the EPCM has been replaced with separate engineering and project management contracts. Prohoc is partnering with investors to help them manage this increased risk and their project work, either with a project consultancy contract or a project management contract.Investors are given a fresh approach.
“We see customers looking for more freedom to choose partners, including construction management and engineering, to get the best fit for the job“, says Iiro Wesslin, Prohoc’s Chief Business Development Officer.
“We want to help our customers manage the risk and build the best setup for projects by providing our project and construction management services.“
Prohoc is also looking to share some of the risks with a project management contract that incentivizes both parties to aim for a successful project.
PROJECT MANIACS AT HEART
Prohoc has been growing steadily in the industrial projects business area. We are now a team of 300 industry professionals and a strong network of partners. The solutions are built around three services: Project and Construction Management, Project Resourcing, and PMC Tools & Data Services.
The recruitment market of engineers and other project professionals is tightening. According to Deloitte, open positions in the engineering and construction industry have doubled within a year but new hires have increased only 10 %. There is a heavy shortage of competence within the industry. Still, Prohoc has been able to keep adding more experts to the fleet with more than a double growth rate compared to the market average.
Providing excellent employee experience and challenging projects for professionals is at the core of Prohoc’s mission.
“I’m glad to see that our message resonates so well with customers, suppliers, and also with potential new hires. People want to work with us and that’s a good foundation to build on!” Wesslin says.
The diversity of projects that Prohoc experts have been working on has another advantage too. Since the industry is incorporating more digital technologies to further enhance productivity, efficiency, and safety at work, the pressure for competence development is higher than ever.
“A project consultant works for several customers, markets, and technologies, which makes our people more adaptive to changes and helps learning new things.”
TOWARDS A CONSTRUCTION INDUSTRY ECOSYSTEM
If you want to go fast – go alone, but if you want to go far – go together. Creating an ecosystem of suppliers and partners is in the focus right now.
“Investors and contractors need the best team for their projects and sometimes partnering is the way to go”, points Wesslin.
Especially for large capital-intensive projects, Prohoc can partner with like-minded companies to create the best team, even for mega projects.
“The number of new projects and interesting new discussions we have been able to have with different stakeholders has been eye-opening to us. It is imminent that the investors seek new ways to have the projects materialized and delivered successfully.
That’s what we do!