Definition:
A turnkey contract where a single entity is responsible for designing, procuring materials, and constructing the project, delivering a fully operational facility.
Key Components:
- Single-Point Accountability: One contractor oversees all aspects of execution.
- Fixed Completion Timeline: Contract stipulates milestones and delivery dates.
- Performance Guarantees: Often includes penalties for delays or performance shortfalls.
Use Cases/Industries:
- Oil & Gas Facilities: LNG terminals, refineries.
- Renewable Energy Plants: Solar farms, offshore wind projects.
Advantages:
- Minimized Owner Risk: The EPC contractor assumes cost and schedule risks.
- Streamlined Execution: Integrated approach reduces coordination complexities.
Challenges:
- Higher Cost Premium: EPC contracts may include risk contingencies in pricing.
- Limited Owner Control: Design and construction decisions are primarily contractor-driven.
Related Terms:
Lump Sum Turnkey (LSTK), Design-Build (DB) Contract
Example:
A solar power plant is developed under an EPC contract, with the contractor delivering a fully operational facility within two years and ensuring performance guarantees.
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Synonyms:
Turnkey Contract, Design-Build-Finance-Operate (DBFO)
