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How to do internal EPC project management audit?

Date: 2019-06-11
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In the past two years, the country has launched a new round of large-scale construction in response to the financial crisis, effectively stimulating domestic demand and ensuring the smooth operation of the national economy. These projects are characterized by complex technology, large investment amount, long construction period and large risk management, such as key construction projects such as south-to-north water diversion project, beijing-shanghai high-speed railway and west-to-east gas transmission project. Such a huge project needs a professional team to manage, and project owners are often affected by their own personnel structure, which makes it difficult to organize effective management. EPC mode is produced in accordance with this development trend, that is, the owner entrusts the design, procurement and construction work to a general contractor, who is responsible for the management of the whole project. The owner does not need to have the management ability and experience of the project implementation stage, and the work is greatly simplified. This approach helps to simplify the management process, shorten the construction period, promote quality control, and control the amount of investment.


EPC mode has been successfully operated abroad, but it is still in its infancy in China. We don't know much about the impact and problems of this mode in practice, but we can only explore and practice at the same time. Our country has introduced a series of policies to promote the development of this model. Recently, the author was sorting out the audit draft of a key pipeline construction project in the country. It was the first time that I came into contact with the concept of EPC, and carefully read the relevant content. We found many problems in the process of audit, such as construction management, land acquisition and demolition, bidding and fund use. These problems also bring some risks to our audit work. This paper tries to summarize some outstanding problems existing in EPC management mode in China and discuss the prospect of future development from the perspective of auditing.


一、Some prominent problems existing in EPC mode in China


(1)EPC general contracting mode is not fully in line with the international standards and fails to give full play to its advantages.


EPC management mode is the most common management mode adopted in international engineering. The original intention of introducing this mode in China is to strengthen management, entrust professional teams to complete engineering design, procurement, construction and other work, ensure the smooth connection of all links, and speed up the progress of the project. However, in the actual operation process, some project owners still have the past 'paternalistic' style, no matter big or small, everything should be managed, acting as EPC general contractor, purchasing major equipment and materials by themselves, directly organizing project bidding and determining construction subcontractors, making EPC general contractor virtually invisible.


     The loss of options and decision-making rights of EPC general contractor to construction subcontractors and material suppliers can easily cause disconnection between engineering construction and material procurement, delay the progress of the project and reduce work efficiency. At the same time, equipment procurement and engineering construction account for a large proportion of the cost in the whole project, which greatly reduces the enthusiasm of EPC general contractor and makes EPC lose its original significance.


     (2)EPC general contractor has poor control over project investment and quality management.


The loss of the right of speech of EPC general contractor in the selection of construction subcontractor and material supplier makes it difficult for EPC general contractor to organize effective management in practical operation, and makes the basic working procedure become a mere formality, all of which is just to follow the instructions of the owner. This often leads to insufficient control of project investment by EPC general contractors, resulting in loss and waste. EPC general contractor's autonomy is not enough to reasonably control investment under the premise of budget estimate, and the study of contract terms will be insufficient. In terms of engineering investment control, oversettlement and repeated expenditure and measurement will often occur, resulting in an increase in engineering investment.


In terms of quality management, the EPC general contractor cannot effectively control the major construction subcontractors and material suppliers as they are directly selected by the owner. The EPC general contractor fails to give full play to its due functions in terms of project quality control, which results in safety risks in some projects. Some bid sections arbitrarily subcontract projects in violation of regulations, which increases the number of links in EPC management, resulting in out-of-control quality.



     二、Discussion on audit control


In view of several prominent problems existing in EPC general contract management in China, this paper proposes Suggestions from the perspective of auditing to strengthen project control:


(一)Do follow-up audit and promote audit control.


Premier wen jiabao put forward in his 2009 government work report that 'where administrative power is exercised, supervision will be implemented; where fiscal funds are used, auditing will be followed up.' National key projects are related to the national economy and people's livelihood, and each step affects the attention of the Chinese people. Therefore, it is more necessary to strengthen the investment audit, so that where the construction of the project is carried out, our audit will follow up. At present, the development of the social situation has put forward higher requirements for our audit work, requiring us to do in advance, in the event, after the audit to ensure the quality of audit. This is a good development direction and overcomes the shortcomings of 'post mortem' in the past. But at present our audit work in this aspect is not perfect, in advance of the audit is not enough. The current audit are usually in accordance with the unified national plan, time is concentrated, often be audit projects to a certain amount of time we audit to step in, it is easy to cause problems at the early stage of the construction process has been done, and then fill up the cost is too big or cannot make up for, caused huge losses to waste.


  In recent years, auditor general liu jiayi has repeatedly mentioned the need to give full play to the immune function of the audit system, so as to make the audit play a role of prevention, disclosure and defense, and ensure the safe operation of the economy and society. The audit process mainly focuses on the supervision of the economic operation and power operation. By revealing the abnormal phenomena in the economic operation and power operation, it can prevent local problems from turning into overall problems and small problems from turning into big problems. Through the system, the system, the mechanism aspect question disclosure, promotes the deepening reform, the consummation system, eliminates the question occurrence root cause. As a new engineering management mode, EPC mode is not widely used in China, so there will be various problems. Auditing, as the immune system of a country, is obliged to promote the perfection of this model. By revealing the system defects and management loopholes of EPC management mode, promoting the establishment of the system and mechanism conducive to scientific development, so that this management mode can be truly established in China. In the early stage of EPC project, audit should be timely followed up, through the review of design, budget estimate and bidding process, check various rules and regulations, pay attention to the implementation of policies, find the signs of problems as early as possible, and put forward targeted and constructive Suggestions in time, so as to ensure the smooth progress of the project and give play to the early-warning function of audit. In addition, the budgeting and bidding process is often a stage of high incidence of corruption. Timely pre-audit can also supervise the operation of power and promote the integrity and transparency of engineering projects. In the interim audit stage, we can mainly supervise the quality and financial operation of the project, and supervise the performance of all parties. After the audit may focus on the project settlement. This can lengthen and expand the time and space distance of audit supervision, promote the democracy and scientificity of investment decision-making, and improve the efficiency of audit supervision.


     (二)strengthen internal cooperation and timely communication and coordination.


     EPC projects involve a wide range and a large amount of investment, often involving many aspects such as project management, quality, environmental protection, land expropriation and demolition, and cultural relic protection. In order to improve audit quality, the audit team often needs to be divided into several groups to complete tasks separately. Due to different majors and work experience, each person may see things from different angles. Sometimes some good audit clues may be missed. Therefore, it is necessary to strengthen the communication and coordination within the audit team. Each group should reflect some problems in the group meeting in time, and carefully consider the correlation between each other, so that the audit will develop to a deeper level.

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