Privately-owned general construction company Epik International Inc. began its operations in 2012 and is based in Arlington, Virginia. It is unique in that the head office is in the U.S., but the work performed is across the globe. Most of the company’s workers are Turkish as that country provides a deep pool of resources. Work is less costly when compared with its U.S. counterparts, and this keeps Epik very competitive. We spoke with its Vice President of U.S. Operations, Bozkurt Yurdakul to find out more.
Although founded in the year 2012, Epik’s roots go back to 2000, when the owners of Epik International founded a joint venture company called Epik in Turkey. “The joint venture was established by four companies, and each letter stands for one. However, even before the joint venture was established they served as a subcontractor to BL Harbert for the U.S. Embassy Projects in Asia in late 1990s,” says Bozkurt.
Epik frequently works as a general contractor for the US Department of State Bureau of Overseas Building Operations (OBO). The bureau is based in Rosslyn, Virginia and is charged with constructing, purchasing and maintaining U.S. government buildings and real estate in other countries.
This first embassy job was done on a cost-plus contract, and the founders of Epik proved to be successful subcontractors.
The joint venture survived for another three to four years, working in places like Kosovo, Albania as well as the Kurdistan region of Northern Iraq.
In 2004, Epik was approached by an American company called Framaco International Inc. which is currently one of the OBO contractors. Epik, Framaco and another Turkish company called Metis established FEM JV, worked on the U.S. Baghdad Interim Embassy project. This was the first OBO contract Epik has entered into with the State Department, and it has opened the door for continued collaboration. Since that time, Epik has worked closely with the State Department on twenty contracts worth approximately $600 million.
Epik is known for working in some unique and challenging countries. The present scope of its work includes projects in Shenyang, China; Dhaka, Bangladesh; Freetown, Sierra Leone; Kabul, Afghanistan and Karachi, Pakistan. “These are the five different countries we work in, and it is very different from working in the U.S. based on changing rules and regulations, dissimilar weather requirements and working permits we have to deal with,” says Bozkurt.
Epik must establish companies in every country in which it works. It also needs lawyers and accountants as there are different tax returns in each country. Its strategy was to go after work wherever U.S. forces go, such as Iraq or Afghanistan, because there will be requirements for building bases or converting existing buildings into embassies or consulates. This was the original business plan, but now Epik is following another path.
“We are working wherever we can and looking at projects in South America, Australia and islands in the Pacific Ocean,” says Bozkurt. Epik has never worked on projects in the U.S., but last year, management decided it was time for a change. It is looking into partnerships with two companies: JTA and ECT.
Other ventures into the U.S. market include projects in Maryland, D.C. and Virginia. Despite Epik’s offices being in Virginia, it has always been interested primarily in international work, but that business plan is being adjusted.
More work means more staff, and presently Epik boasts eight hundred people around the world. It is limited by working with OBO and the State Department which require quality management with twenty years of experience, and this makes it very difficult to get new staff.
“Our human resources department in Turkey will get in touch with U.S.-based Human Resources firms, and they also have a network of people to contact and see if there are any good project managers or quality control people,” says Bozkurt.
For second-level staff, like site managers or deputy project managers, Epik prefers to use Turkish workers and engineers, supervisors and superintendents. Epik has engineers and architects as well as cost controllers and planners in Turkey, decreasing the overhead of the company and making it very competitive. For third- and fourth-level staff, Epik will hire local people.
Right now, the company is also working in Dhaka, and there are certain regulations for bringing in Turkish or other international workers. There always must be a certain number of local workers or foreman from Bangladesh. Epik hires mainly Turkish workers because of the costs.
“We are very cost conscious, and there is really hard competition in the OBO market, and you have to minimize the cost. Turkish engineers, when compared to counterparts in the U.S., have much lower salaries,” says Bozkurt. A civil engineer in the U.S. with similar experience to one in Turkey would have a salary three to four times higher.
In the 1950s, Turkey invested in colleges and universities for civil, electrical and mechanical engineering. This has given Turkey a resource of high-quality engineers at a low cost. If working in remote sites, the company wants at least five to ten years of similar experience with international work.
The percentage of Turkish workers brought in depends on the country in which Epik works. Two years ago, it worked in Bangkok, Thailand where the requirement was ten Thai nationals for every third-party national. In Dhaka, it is four to one, and in China, it is only one for every two.
A challenge Epik must overcome in its international work is dealing with local regulations, laws and permits. During work in Bangkok, there was a change in these regulations. Originally, Epik could bring in any number of staff from Turkey, but a year after starting the contract, the laws were reversed, and the number was limited.
“This was a huge detriment because that increased our costs. We couldn’t take this to the State Department, as the contract stated that we had to deal with it,” says Bozkurt.
Epik partnered with Gilford working in China, and they face a problem with fitting out office space in one of the existing buildings. The State Department asked Gilford and Epik to comply with U.S. standards for fire alarm and suppression systems, but the building administrator requires the company to work within Chinese regulations. This brings up a unique problem in dealing with international work; there are very site-specific issues.
Work for Epik is less costly when compared to the U.S. because of the Turkish workers and the work of its procurement team. “The other thing to consider is the materials and equipment. Not everything has to come from the U.S., and we find materials from all over the world. Our procurement and logistics team really do a stellar job that the State Department or U.S. government is going to approve. The cost is going to be much less compared to U.S. market prices here, and this also helps us a lot in being competitive,” says Bozkurt.
A major issue for Epik is bonding on an international level. Underwriters or surety companies are not keen on providing bonds for international work because they are not aware of the risks. Also, OBO is not a very profitable agency in the eyes of surety companies.
To provide a bond to the government, Epik issues an irrevocable bank letter of guarantee from Turkey to a bank in the U.S. The U.S. Bank then issues another letter of guarantee to Epik’s bonding agent as a collateral, but this inevitably increases costs. “On top of the letter of guarantee that acts as a collateral, they also add another percentage for their services, and that brings the cost up to five or six times higher than our U.S. competitors,” says Bozkurt.
It is very easy for U.S. companies to get a bond if they have been working for the State Department for five to ten years. Bozkurt has been talking to two bonding agents, trying to understand how Epik can enhance its bonding capacity, and the answer is to have some assets in the U.S. to allay some fears. Buying a property in the U.S. or getting a domestic project and completing would also move things forward, and that is why Epik is looking into local work now.
Aside from working domestically, the future for Epik includes looking into other markets. “We want to work for the U.S. Navy, the World Bank and enter into some private projects on an international scale. We are trying to diversify our project markets,” says Bozkurt.