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A turn-key or a turn-key project is a type of project that is constructed by a developer and sold or turned over to a buyer in a ready-to-use condition.

Contents

Common usage

Turn-key refers to something that is ready for immediate use, generally used in the sale or supply of goods or services. Turnkey is often used to describe a home built ready for the customer to move in. If a contractor builds a "turnkey home" they frame the structure and finish the interior. Everything is completed down to the cabinets and carpet. "Turnkey" is commonly used in the construction industry, for instance, in which it refers to the bundling of materials and labor by sub-contractors.

'Turnkey' is also commonly used in motorsports to describe a car being sold with drivetrain (engine, transmission, etc.) as a racer may prefer to keep the pieces to use in another vehicle to preserve a combination.

Similarly, this term may be used to advertise the sale of an established business, including all the equipment necessary to run it, or by a business-to-business supplier providing complete packages for business start-up. An example would be the creation of a "turnkey hospital" which would be building a complete medical center with installed high-tech medical equipment.

Use in business

In a turnkey business transaction [1] different entities are responsible for setting up a plant or a part of it. A complex project involving infrastructure facility, a chemical plant, or a refinery demands expertise which is not available with a single firm. The owner organizes the overall project with a turnkey firm and 'receives' the project on its completion and can then start to operate it. The 'agents' of the owner are: the principal engineering firm, the licensor (if any),service subcontractors (e.g. electrical contractor) and the suppliers. There may be several contracts drawn up by the principal engineering firm but they only identify the latter as the recipient of the services. The principal contract is the one that binds the owner and principal engineering firm.

A turnkey project could involve the following elements depending on its complexity:

  • Project administration
  • licensing-in of process
  • design and engineering services
  • subcontracting
  • management control
  • procurment and expediting of equipment;
  • materials control
  • inspection of equipment prior to delivery
  • shipment, transportation
  • control of schedule and quality
  • pre-commisioning and completion
  • performance-guarantee testing
  • inventorying spare-parts
  • training of owner's/plant[[sub-system}}operating and maintence personnel

A project-consultancy firm is often involved but it is required to stay independent of the turnkey enginneers and be responsible only to the owner - a watchdog so to speak. The project-consultancy firm has access to all sections of the infrastructure or plant (as applicable) but cannot direct the staff involved.

The turnkey-contractor furnishes a wide variety of warranties and guarantees and accepts several liabilities. These include :

  • (a) warranties for the timeliness of deliveries of equipment, of erection and of completion times of civil and mechanical works;
  • (b) warranties for workmanship in construction annd erection of the works,according to specifications, and warranties guarantees that proper standards will be used
  • (c) liability for property or equipment under the control of the engineering company who contracts out the agreement to the turnkey-company
  • (d) proper safety standards being implemented
  • (e}civil and mechanical engineering warranties; in the latter case the turnkey-contractor undertakes to asssure that mechanical performance will be maintained for a definite period
  • (f) training warranties of operating personnel in charge of specific operations, and
  • (g) the very important process warrranties and guarantees.

Turnkey projects can also be extended, known as 'turnkey plus', where there is perhaps a small equity interest by the engineering firm or the main suppliers to ensure allegiance during the initial operational phases. Once the turnkey phase is over and the engineering firm receives the 'completion certificate', (from the owner), the latter will work independently or with the licensor (if any).

  1. ^ Manual on Technology Negotiation,Unido.95.2.E ISBN 92-1-106302-7

Specific usage

A prison turnkey

The term turnkey is also often used in the technology industry, most commonly to describe pre-built computer "packages" in which everything needed to perform a certain type of task (e.g. audio editing) is put together by the supplier and sold as a bundle. This often includes a computer with pre-installed software, various types of hardware, and accessories. Such packages are commonly called appliances. Turnkey products are synonymous to "off-the-shelf" solutions - i.e. not bespoke.

In the United States, the precise definition of the types of allowable contractual features for government contracts are contained in the Federal Acquisition Regulations.

In real estate, turn-key is defined as delivering a location that is ready for occupation. The turn-key process includes all of the steps involved to open a location including the site selection, negotiations, space planning, construction coordination and complete installation.

Historically, the term once referred to jailers, as the holders of a prison's keys, as in Charles Dickens' 1840 novel, Barnaby Rudge.

See also

References








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