TURNKEY

Turnkey

Turnkey

Turnkey Contract System

A turnkey contract refers to a business contract in which the contractor is bound to complete the required construction in a full and final state. It does not include the owner's specifications and ideas in the stages of the project. It focuses on the strategy that the developer is bound to conclude the whole project without any help from the owner. The constructor is directed to carry out his construction works without taking any consent from the owner and turn over the project to the owner only after it has been completed. The name 'turnkey' derives from the fact that the builder is completing the project on his own and then 'turning the key' over to the original owner of that project (Gruneberg & Hughes, 2004, pp. 65-74).

This contracting type has been historically used for the construction of oil refineries. It is very different from the traditional lump-sum contract in which the owner sets out his specifications to the builder and the builder is forced to comply with that. The lump-sum contract allows the owner to change the specifications severely at any time of the construction process and make decisions accordingly. The turnkey contract does not offer such facilities to the owner and he is specifically left out from all the decision-making process during the construction. All the decisions regarding the construction process are handled by the builder himself.

Turnkey projects are very popular with clients and it is generally regarded that majority of the construction projects are carried out under this contract system. Although this contract system is very famous and efficient, this can't be used every where and depends on the requirements (Huse, 2002, pp. 5-7).

Advantages

The advantages of turnkey contracts over traditional ones are very notorious. As the builder owns the construction site until it has been completed, it forces him to complete the construction work as rapidly as possible considering the efficiency of the work too. This is very much supported by the financial motivation that the builder has with his work. It also provides the owner of the construction site with an excessive time to seek sponsors and finances before he is asked to pay for the construction work.

Some of the owners are very immature and inexperienced and does not have enough knowledge regarding the complex construction decisions. Turnkey contract systems assist them by putting all the burden of the complex and difficult construction decisions in the court of the builder. The owner transacts and deals with a single supplier of the services as all the design and execution is done by that particular builder. This whole thing simplifies the whole management process and protects the owner from all this complexity.

Right at the beginning of the process, the owner is presented with different ideas and innovation techniques and solutions by the builder that he could cater which further increases the options of the owner which he was initially unaware of. It also increases the possibility of the work being according to the requirement of ...