The Project

In May 2018, a German think-tank has kicked off an innovation initiative to develop practical guidance for EPC contractors as well as for investors, owners and operators how to approach innovative business models for industrial projects and operations, from EPC to O&M.

The objective of this initiative is to describe concrete measures that have the potential to unleash the hidden potentials in our industry and to save up to 50 % of CAPEX along the entire value chain. This results of the project is aimed

  • to provide insights into the latest developments of the EPC sector
  • to provide a comprehensive overview into current initiatives working on innovative business models that may be of relevance for the EPC sector
  • to develop blueprints that describe practical guidelines for EPC companies as well as for investors, owners and operators how to approach innovative alternative business models for the value chain from EPC to O&M of industrial plants,
  • to support these with examples based on real cases / best practices, including cases from other industries
  • to provide references that indicate the potential economic impact.

The partners of this initiative are Tiba Managementberatung (the German project management pioneers and consultants of the automotive industry), maexpartners (consultants of the aviation industry and authors of the joint study about digitalization / Industry 4.0 with the German Association of Mechanical Engineers VDMA), M8International (a network of high profile industry leaders and contract management advisors), and d1g1tal AGENDA (the innovation manufacture for communication in the digital space). Leader of this initiative is ProjectTeam®, the Global Expert’s Network organization for the EPC industry.

May this initiative trigger further thoughts and discussions within this industry to unleash the hidden potential in the EPC sector.

The Executive Summary

Download "Extract of the Final Report May 2019"

„The traditional way of performing EPC business does not work any longer. The way of how we manage the Engineering, Procurement, and Construction (EPC) of industrial plants (and other businesses) today has not very much changed in the past 50 years. And the plants we build are technically not much different from the ones built a half century ago. The oil and gas industry is world champion – in avoiding digitalization. The EPC industry as a whole is spiritless in driving innovations, compared to automotive or even the IT sector. It is an open secret that productivity has not increased since 20 years. Consequently in the global competition for investments the EPC business is clearly the looser.

The starting point of our initiative is a comprehensive analysis of the performance of the EPC industry against other industries and the observed megatrends in EPC that require new responses. We take reference to a large amount of reports generated by the big names of global consulting firms such as McKinsey, PwC or BCG that were published within the last years and that all come to the same conclusions. We have discussed with other international initiatives in this field, as the ones driven by the European Construction Institute (ECI) in London, or the Construction Industry Institute (CII), US state of Texas, and found out that there is consensus among the experts about the potential levers to help this industry getting out of the downward spiral. Industry leaders and executives are careful not to harm their business with pessimistic statements, but if questioned anonymously, a majority does agree to the need for radical transformations.

The question to 80 EPC executives in India: “Are you in the comfort zone continuing the traditional way with continuous improvement or do you feel the need for radical transformation” was responded 0:80 for radical transformation.
EPC Industry Top Management Seminar by CEPM/ I2P2M in New Delhi on December 12, 2018

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The objective of our initiative was to challenge statements from prominent voices from investors, owners/operators as well as EPC companies to cut CAPEX by 40 to 50 %. Is this utopia, or is this a challenging but achievable goal? The hypothesis that we established as a starting point of our analysis was: If this industry would work as effective as the automotive or aviation industry we were able to save up to 50 % of CAPEX along the value chain. Our team was including experts with hand-on experience in the EPC industry as well as experts with a cross-industry perspective, willing to learn from best practices from other industries, and willing to understand what hinders us to apply these lessons to EPC.

What is the conclusion of our studies? Are we able to save up to 50 % of CAPEX along the value chain? The answer is - Solomon's judgment - principally yes, but…

First of all our business is complex, and every business, every project is special. There is no standard solution that fits all. The same solutions that may work in one business case will fail in the other, as ownership structures, regional aspects, technical conditions or the markets are completely different.

Second no individual player within the value chain will accomplish this target on his own. CAPEX is the total of capital expenditures, including financing, the costs of project development, the costs of engineering/procurement/construction, the cost of project management and project governance. Such radical reduction may only be feasible if developed along the entire value chain, and here the first link in the chain is the investor. The investor defines the strategies for the project development, and he decides between the traditional ‘LSTK’ approach or an innovative partnership approach that takes on board the experiences and competencies of all involved parties from the very first moment.

There are success factors and reasons for failure that follow a larger pattern, and the goal of our report was to capture and evaluate these factors, and to give structure to the overall pattern in a holistic approach. The model we used is a holistic model for business transformation developed by Till Balser covering four success-critical dimensions, ‘People’, ‘Organization’, ‘Processes & Methods’, and ‘Technology’. The basic principle of this model is the experience that any business transformation needs to happen balanced in all four dimensions. Initiatives that limit the effort in only one or two of these dimensions will fail, if the other dimensions are neglected.

Our recommendations are assembled in the format symbolized by a ‘temple’, with digitalization as the leading (and potentially disruptive) technology foundation. On this foundation we define four columns of organizational and process/methods related changes, covered by the roof of human behavioural changes – the people’s dimension and eventually the most challenging part of all.

Digitalization is the foundation. Ten years ago most experts would agree to the thesis that first we shall define the processes, and then we select and define the corresponding IT solutions. In the age of Industry 4.0 we recognize that IT is developing new solutions and new opportunities at a speed that our business processes hardly can follow. We are too slow in evoluting our business processes to give them the lead; digitalization is the driver that imposes changes, sometimes disruption to the traditional business models. In other industries this is already reality, and we shall not principally exclude the same for the future in the EPC of industrial plants. The title of our initiative ‘EPC 4.0’ is taking reference to Industry 4.0 as a ‘fourth’ industrial revolution driven by (software) ‘releases’.

We identified four major fields of action to address changes in organization and in processes and methods, which are all linked to each other:

Collaboration by Partnership is taking reference to the public infrastructure sector, suggesting specifically the investors/owners/operators to consider contractual models different to the traditional EPC LSTK (Lump-Sum-Turn-Key) approach, such as alliance contracts or Lean IPD (Integrated Project Delivery) models.

Flat supply chain is taking reference to examples of supply chain integration from the aviation and automotive industry, suggesting partnerships with strategic suppliers that go beyond the capital project horizon into the field of operation and maintenance.

Flexible organization is advocating standardization of project management, engineering, procurement and construction processes as well as standardization in qualifications to enable the EPC sector to adjust flexibly to the business cycles with organization structures scalable to the market needs.

Focus on core competencies finally is suggesting all participants to share work scope and associated risks to the party who is best capable and competent to manage these. This focus shall release resources for urgently required innovations: Innovations in plant technology, such as modularization, innovation in state-of-the-art information technology to increase productivity and reduce non-conformance and underperformance costs.

The Human Factor. All these changes will not be successful without the support of the people working in our industry. The magnitude of changes through Industry 4.0, in organizations, in processes and methods, requires a transformation program driving a cultural change in the behavior of our human resources. There are well-established tools and methods to guide organizations, companies, or project teams to work towards a change in attitude and mindset.

A reduction of up to 50 % of CAPEX? What on a first glance looks like utopia may not be so impossible if broken down into smaller pieces where we are wasting money in our capital projects today. Planned CAPEX and the as-built CAPEX in reality differ significantly — the cost overrun in megaprojects ranges between 30 to 50 % in average! But even when we analyze the planned CAPEX: The cost of lost productivity, transaction costs that do not add value, such as the costs of mark-up fees, the cost of duplicating project organizations for project governance, the cost of bidding, the cost of claiming and penalties, the cost of risk contingencies in CAPEX… All in all we come to the conclusion that up to 50 % of the money we spend in capital projects is avoidable and does not contribute to the value of the assets we build.

The holistic approach is not complete without continuation of these thoughts into OPEX. A minor additional investment in CAPEX can trigger significant savings in OPEX. Lifecycle asset management does not start with the handover from the EPC contractor to the operator, lifecycle asset management starts during the pre-development phase of the project.

We invite all concerned players along the value chain of EPC and O&M to discuss the thoughts expressed in this report with the authors. We invite investors/owners/operators to challenge us. We invite EPC companies, construction companies, companies of the supply chain to discuss our approach. We do not claim to have patent solutions. But we try to understand what works well in other industries and we have the imagination to adopt good practices to the specific requirements of our industry. We have access to the experts who have the best subject specific know-how in the fields of actions of this report. Now the turn is to the decision makers in the EPC industry who have the courage to simply do it. The ones who succeed will be the leaders of tomorrow in EPC business.

We have the choice: Take the lead, or run behind.

Get in touch and benefit from the insights of EPC 4.0

Investors and Owners/ Operators
will benefit from the massive cost savings in their combined CAPEX/ OPEX with a feasible potential to cut costs by up to 50%, determined by fundamental strategic decisions taken at the earliest stage of project development

EPC Contractors, Subcontractors and Suppliers
will benefit from a better balanced and more efficient use of resources, and from the innovation potential to improve their processes and products that arise through the opportunities of digitalization and through the access to operation and maintenance

All project partners
will benefit from the significant reduction in own risks in an approach where risks are allocated to the party that is best able to manage these

Consultants, Researchers and Regulators
will benefit from the (overdue) innovation move in the EPC business towards industry 4.0, not only in digitalization and innovative technologies, but also in the areas of human resources (competencies) and agile organizations, and in related processes and methods, such as new contracting models

Send us your contact details to and we’ll get in touch with you.

The Experts

Frank‐Peter Ritsche
(ProjectTeam, Düsseldorf)
Reinhard Wagner
(TIBA, Munich)
Patrik Schlemmer
(maexpartners, Düsseldorf)
Mark Steinkamp
(M8 International, Erlangen)
Dr. Bernhard D. Valnion
(Institute Innovation & Market Success)

Frank‐Peter Ritsche (ProjectTeam, Düsseldorf)

Frank‐Peter Ritsche

Frank-Peter Ritsche has 25 years of experience in EPC projects world-wide. He is certified PMP® since 2005 and holds a mechanical engineering degree from the Technical University of Braunschweig (Germany). He held both operational project management and strategic positions covering the engineering, procurement and construction of conventional and nuclear power plants as well as in the chemical industry, with globally operating companies such as SIEMENS, FRAMATOME, AREVA and THYSSENKRUPP. He gained his on-site experience with major projects in Taiwan, Spain, Slovakia, Japan, Singapore, Finland and Egypt. He is currently active as responsible project director for large chemical EPC projects. Mr. Ritsche is founder of the “ProjectTeam® Global Experts Network”, the editor of the “Project Management Handbook for EPC” and based in Duesseldorf.

Reinhard Wagner (TIBA, Munich)

Reinhard Wagner

Reinhard Wagner has been active for more than 30 years in the field of project- related leadership, in such diverse sectors as Air Defense, Automotive Engineering, and Machinery, as well as various not-for-profit organizations. As a Certified Projects Director (IPMA Level A), he has proven experience in managing projects, programmes and project portfolios in complex and dynamic contexts. For more than 15 years, he has been actively involved in the development of project, programme and portfolio management standards, for example as Convenor of the ISO 21500 “Guidance on Project Management” and the ISO 21503 “Guidance on Programme Management”. Reinhard Wagner is Past President of IPMA and Chairman of the Council, Honorary Chairman of GPM (the German Project Management Association), as well as Managing Director of Tiba Managementberatung GmbH.

Patrik Schlemmer (maexpartners, Düsseldorf)

Patrik Schlemmer

Patrik Schlemmer is an experienced manager with long-term industry experience in the aviation, automotive and electronics industry. He held senior positions as Quality Director Europe at an US based Automotive supplier, Sales & Marketing Manager of a leading global electronic component distributor as well as Managing Director of an aircraft cabin equipment manufacturer. His professional focus is on the global Aerospace Industry and Digital Transformation of its value chain. Besides this his consulting experience also includes the integration of management systems (IMS) within the EPC business.

Mark Steinkamp (M8 International, Erlangen)

Mark Steinkamp

Mark Steinkamp is a consultant, coach and conflict management specialist. Building on his early career experiences in large infrastructure projects, he has as CFO led a number of global businesses in power generation, transmission and in airport logistics. For nearly a decade he is consulting for EPC’s and other global players on good project management and leadership. He has extensive international and intercultural experience, especially in M&A and MBO projects, speaks English, German and French. Originally trained in Finance he holds a Coaching and Consulting for Change Masters from INSEAD, a Mediation certificate and a degree in Adjudication.

Dr. Bernhard D. Valnion (Institute Innovation & Market Success)

Dr. Bernhard D. Valnion

For 20 years, Bernhard D. Valnion, Ph.D. has been editor-in-chief with special interest magazines reporting on engineering IT and the digital transformation journey. He is the founder and president of Institute for Innovation and Market Success, which publishes d1g1tal AGENDA magazine and its special insert CAPITAL PROJECT, reporting exclusively on successful IT and project processing strategies for the large manufacturing plant industries. In 1998, Valnion finished his Ph.D. in experimental nuclear physics at the University of Munich, Germany

The Partners


ProjectTeam® is editor of the „Project Management Handbook for EPC“ and maintains a „Global Experts Network“ of cooperation- and licensing partners in the field of project management consulting and support for the EPC of industrial plants. ProjectTeam® in cooperation with its partners world-wide has started a training- and certification program for Project Managers in EPC, the „EPCP® - EPC Professional“.


The core competence of Tiba is the introduction and optimization of Project Management. Through its management, consulting and training services, Tiba has supported leading companies worldwide since 1989 whose business success largely depends on the quality of their Project Management. With its experts and partners, Tiba ranks among the top consulting firms for Project Management in Germany.


We are experienced consultants with industrial backgrounds as well as a large network of specialists. We support multinationals and small and medium-sized businesses worldwide. Services are holistic in approach: from process optimization to radical reductions in cycle times and turnaround to digitization and Industry 4.0. We also actively support implementation and assist your team with operational realization.


We are a project management consultancy, a team of crisis proven executives. We help leaders assess new and critical projects. We identify levers for action like critical path or interface management. We coach the implementation. We cover engineering, finance and legal aspects. We are psychologically informed and make the unconscious transparent. We help you reaching where you want to go.


d1g1tal AGENDA addresses the culture of (digital) entrepreneurship and thus promoting all types of engineering-driven innovation. In addition to a website and an app, a quarterly publication, educational services, (case) studies, and consulting in the form of communication project development around subjects of digitalization are offered.


EPC 4.0
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Bozener Str. 1
86316 Friedberg

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