The Rise of EPC in New Zealand Infrastructure

EPC contracts are becoming more common in New Zealand infrastructure projects, especially in energy, utilities, and complex industrial developments. Under an Engineering, Procurement and Construction (EPC) contract, one contractor is responsible for delivering a fully operational project, usually for a fixed price and with strict performance obligations. This model offers owners greater cost certainty and a single point of accountability, but it also creates higher risk and liability for contractors.

Engineering, Procurement, and Construction (EPC) contracting is gaining traction in New Zealand as infrastructure investment accelerates and project owners look for greater certainty around cost, timing, and performance. While EPC has long been common in international energy and industrial markets, it is still relatively new in the local context, where traditional construction contracts and design-and-build models have historically dominated. Its use is now increasing, particularly on large renewable energy projects, major utilities infrastructure, and complex industrial developments.

What is an EPC contract?

At its core, an EPC contract places responsibility for design, procurement, and construction with a single contractor, who delivers a fully operational facility to the owner on a turnkey basis. This model typically involves a fixed or lump-sum price and strict performance obligations. The contractor assumes substantial risk for delivering the project on time, within budget, and in accordance with specified performance standards. In return, the owner benefits from having a single point of accountability rather than managing multiple contracting interfaces.

What are the key features of an EPC contract?

One distinctive feature of the New Zealand market is the absence of a widely accepted standard form EPC contract. Unlike traditional construction procurement, which often relies on the NZS suite contracts such as 3910 (build only) and 3916 (design and build), EPC arrangements are usually bespoke. Many projects draw heavily from international templates such as the FIDIC Silver Book, though these are commonly amended to reflect NZ laws, market expectations, and project-specific risks. This lack of standardisation tends to increase negotiation complexity, legal costs, and variability in how risks are allocated between the parties.

EPC contracts in New Zealand typically include features such as fixed pricing with limited variation mechanisms, extensive performance testing requirements, and strong liquidated damages regimes covering both delay and operational underperformance. Contractors are usually responsible for design liability, supply chain management, consenting risks to varying degrees, and coordination across all project components. Owners often require significant security, such as performance bonds, parent company guarantees, and step-in rights.

How do EPC contracts differ from design and build contracts?

When compared with design-and-build (D&B) contracting, EPC represents a more comprehensive and risk-transfer-focused delivery model. Under a D&B arrangement, the contractor is responsible for both design and construction, but the owner usually retains greater involvement in procurement decisions, project risk sharing, and scope development. D&B contracts in New Zealand often allow more flexibility, including greater scope for variations and collaborative problem-solving during delivery. By contrast, EPC contracts aim to minimise owner involvement during execution and place a much higher level of certainty and risk on the contractor. This typically results in more stringent performance guarantees and fewer opportunities to adjust project scope once the contract is executed.

What are the benefits of EPC contracting?

The benefits of EPC contracting largely stem from its clarity and risk allocation structure, particularity for complex infrastructure projects, where the developer needs to rely more on the contractor’s expertise. Developers gain price certainty, reduced interface risk, and simplified project management through a single contractual counterparty. The model can also support faster project delivery because design, procurement, and construction activities are tightly integrated under one entity. These features make EPC particularly attractive for large, technically complex projects where performance outcomes are critical.

What are the risks and challenges of EPC contracts?

The model also presents challenges. Contractors tend to price in significant risk premiums, making EPC projects more expensive upfront than alternative procurement methods. The rigidity of the contract structure can limit flexibility if project conditions change. Negotiations are often lengthy due to the bespoke nature of the contracts, and contractors must undertake extensive due diligence before committing to the level of risk typically required. From the contractor’s perspective, the financial exposure and liability profile are substantially higher than under most D&B arrangements.

When is EPC the right model for an infrastructure project?

Overall, EPC contracting in New Zealand is best understood as an emerging but increasingly important delivery method, particularly suited to large-scale, complex infrastructure and energy projects. Its continued growth is likely to be driven by the desire for cost certainty, clearer accountability, and alignment with international project delivery practices, although its widespread adoption may remain tempered by its higher cost and risk intensity compared with more traditional procurement models.

If you would like further or more specific advice on construction related issues, get in touch with Rebecca Richter, our construction law expert.

FAQ about EPC Contracting:

1. How is an EPC contract different from design and build?

An EPC contract generally transfers more risk to the contractor and gives the owner a single point of responsibility for design, procurement, and construction. Design-and-build contracts also combine design and construction, but usually allow more owner involvement, more flexibility, and a different allocation of project risk.

The main benefits of an EPC contract include greater price certainty, reduced interface risk, simplified project management, and clearer accountability through a single contractor.

EPC contracts can involve higher upfront pricing, more complex negotiations, reduced flexibility during delivery, and greater liability exposure for contractors.

There is no widely accepted standard form EPC contract in New Zealand. Instead, EPC contracts are usually bespoke, although they may draw on international templates such as the FIDIC Silver Book and then be amended to reflect New Zealand law and project-specific risks.

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