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Turn-key contract

Short answer

A turnkey contract is a single contract where the contractor handles design, procurement, construction, and commissioning, delivering a complete facility at a fixed lump-sum price and date. The client simply turns the key; the contractor bears most risks, providing price and time certainty with less client control.

Explain the Turn-key contract.

A turnkey contract is one in which a single contractor is responsible for the entire project (design, procurement of materials and equipment, construction, testing and commissioning) and hands over the complete, ready-to-use facility to the client on a fixed date, at a fixed lump sum price. The client only has to "turn the key" to start using it.

 Client -- needs & performance specs -->
   Contractor: Design -> Procure -> Build -> Test
                              -> Hand over (ready)

Features

  • One point of responsibility for design and construction.
  • Lump sum price; the client gives the performance requirements.
  • The contractor takes most of the risk (design, delay, cost).

Merits

Single contract and responsibility; faster delivery through overlapping design and construction; price and time certainty; less management work for the client.

Demerits

The client has less control over design and quality; the scope is difficult to change; the contractor may cut quality to save money; the price includes a high contingency; a clear performance specification is needed; fewer bidders are capable.

Use

Industrial plants, hydropower electro-mechanical works, hospitals, hotels, and large buildings where the client lacks technical staff.

✓ Answer checked by Claude Opus 5.5 (high effort)

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