This post will be brief and very practical. My intention is to share some recommendations you can adopt in your EPC (or “turnkey”) contracts, which are very common in the construction and commissioning of photovoltaic solar systems. I hope this information will be useful for you in moving your projects forward.

EPC contracts are one of the many forms that construction contracts have taken and have become popular in our sector due to the inherent needs of solar power generation projects (high complexity). I make this clarification because, ironically, contracts are only reviewed when problems arise, not when they are signed. And if a dispute arises between the parties, the judge or arbitrator will categorize it as an EPC contract in order to make a legal decision.

One characteristic to keep in mind in EPC contracts is that the project must be conceived as a whole. The contract should cover everything from the design of the system plans, the import and storage of equipment, its installation, commissioning, and testing of the plant. The contractor has overall responsibility for the project’s assembly, which brings me to the next point.

Since the contractor is considered to have a comprehensive responsibility, their compensation must be based on a “fixed lump sum” or “lump sum” arrangement; that is, the price should not change during the contract’s execution. The contractor cannot claim, “When we signed the contract, the price of steel or the dollar was such and such,” “We have to adjust because I had to hire more personnel,” or “I didn’t see that the roof needed reinforcement, and now we have to modify the contract price.”

Please expressly include in your agreements that the price is a “fixed lump sum”; do not leave it open to interpretation. We even have arbitral jurisprudence on this matter (Award TA-CCB-20040531, Santa Marta Paraguachón Concession vs. National Roads Institute).

Another point to consider is that I’ve often seen parties try to include the contractor’s operation and maintenance responsibilities in the EPC contract once the system is operational. My recommendation is that they sign a separate contract, since OM services are precisely that: services. And the appropriate contract to regulate these obligations is a service agreement, not a construction contract.

Finally: Can the EPC contract stipulate that the contractor handles all the paperwork with UPME (Mining and Energy Planning Unit) to obtain tax benefits? Well, it depends. Regarding tariff benefits, the contractor is responsible for them since they are the ones importing the goods. The other benefits (VAT exemption, accelerated depreciation, and income tax deduction) shouldn’t fall on the contractor; however, I recommend including a clause that obligates them to provide support throughout the entire process.