Turnkey is essentially a fixed price contract. It means that the General Contractor/ Construction firm is officially obliged to conduct the entire operation from Design to Close-out – including subcontractors, materials, machinery and equipment – from within that fixed price. The profit sum is also included in that price. For a client/owner it means – you hand the project to these professionals for the construction period and ‘turn the key’ for the finished product.
On an industry level, there is a common understanding with turnkey:
If you have the expertise and the knowledge to undertake a particular project, a Turnkey contract can be more profitable
The design prerequisites are already established and signed off by all of the project stakeholders, allowing less flexibility to deviate and minimizing potential for major change orders
It is a common understanding that most commercial – office interiors, retail outlets, etc – projects are a result of Turnkey projects
For the right contractors with a strong efficient team, a Turnkey contract can be a win-win for both the contracting firm and the client. Client gets his desired space in the fixed price, without as many hassles. The Contractor gets his space and efficiency to function with limited change orders in the foreseeable future
As for the stage of construction turnkey projects, here is a brief –
Design Stage: Involvement of the clients, designing professional team and the contractor team is high where they establish all of the prerequisites. There is a brief cost and budget layout during this phase to ascertain the final fixed price. Value engineering can and must be performed at this stage before handing it over entirely to the contractors. A lot of contract signing and meetings take place here to finalize the intent and the design of the building/ space. This phase also more efficacious when it involves a brand and a certain typology to follow. For example; interior construction for a call centre of a reputed mobile service company – since the model essentially works on duplication of design (modular design).
Pre-construction Stage: The handing over of the ‘turnkey’ contract occurs at this stage. The contractor takes up the responsibility for breaking down the cost estimates and delineate the project schedule. Early bid packages, order of long lead items, expediting the permitting process, etc occurs here as well. The Pre construction phase ends with the job-site ready for mobilization.
Construction Stage: This is the most crucial stage of the contract. Maintaining the site, worker efficiency and adhering to the design keep the Turnkey contract intact. This is where the real skill of the Project Manager comes in play: Display the designs and execute them to the best of their efficiency, thereby cutting down on unnecessary material wastes, unproductive labor hours and unplanned cost overruns. Timing is everything in this stage and parallel activities have to be well crafted to conduct an efficient job-site.
Project Close-Out and Delivery: This involves the winding up of the job-site at the end of the construction phase. This is where the utilities are signed off on and the preparation for documentation (close-out documents) happens. The delivery ends with handing over the key to the client along with the bills and other important documents such as fire exit routes, warranty certificates and design documents for future use.
It is essential to be strategic and more importantly well-experienced enough to take up a Turnkey project as it involves a high risk from not attaining any profits to taking money out of your own pocket to meet the contract clauses.