Turnkey project

Turnkey project is a project involving a contract for constructing operating facilities, such as a power plant, a paper-and-pulp plant, and so forth, which are to be transferred to the foreign owner when the project is ready to commence operations. The contractor is obliged to provide services such as management and worker training after the construction is complete, to prepare the owner to operate the facilities. Turnkey project comprises of many elements like project administration, licensing, material control, inspection before delivery and various other formal procedures.

The size and comprehensive nature of these projects set this type of business apart from most other forms of participation. The majority of these projects are “mega” projects involving hundreds of millions of dollars. Due to the hug financial commitments involved, this kind of business activity id limited to a handful of large firms. More and more frequently, machinery, equipment, technology, and know-how to handle the same technology are sold as a package in the form of complete industrial plants and factories. Sales to emerging markets with limited local construction and engineering capabilities are very often of this form.

Developing countries prefer such turnkey projects to direct investment and joint ventures with Western firms for several reasons. Feelings of distrust and dissatisfaction with Western Firms have made economic nationalism a major issue during the past few decades. Turnkey project delivery has the characteristics of design-build, but adds to the design-builder’s responsibilities, the operation and/or maintenance of the completed project.

Turnkey delivery further reduces oversight demands on the owner, so the contractor “turns over the keys” when the project is complete. Turnkey delivery, through this transfer of responsibility and risk, has the potential for bringing a new project on line more quickly. These projects have nowadays found applicability in commercial and retail construction as well apart from cogeneration projects, refineries and power plant construction. Turnkey projects thus involve the production of a standardized item and its sale.

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