Definition of turnkey contract

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Turnkey Contract

Turnkey contract is typically a construction contract under which a contractor is employed to plan, design and build a project or an infrastructure and do any other necessary development to make it functional or ‘ready to use’ at an agreed price and by a fixed date.

In trunkey contracts, most of the time employer provides the primary design. The contractor must follow the primary design provided by the employer.

The concept is contractor shall hand over the project fully in the operational state.

The employer just needs to ‘turn the key’.

The most important clauses of a turnkey contract are:

  • Design of the facility or project
  • Completion time
  • Price
  • Payment terms & conditions
  • Performance guarantee and
  • Defect liability period etc.

The term turnkey is more or less synonymous with ‘design and build’, ‘package contact’ and ‘design contractor’. These are the most popular type of contract management system in the large scale construction industry.

It is interchangeably used with the term EPC contract, sometimes a little change in the design part.

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