Definition: A contract type where the contractor agrees to deliver a complete project at a fixed price, assuming full responsibility for the design, procurement, and construction, and handing over a fully operational facility to the owner.
Synonyms: Fixed-Price Turnkey Contract, Lump Sum Contract
Key Components:
- Fixed Price: Total project cost is agreed upon upfront.
- Turnkey Delivery: Contractor delivers a ready-to-use facility.
- Single Point of Responsibility: Contractor manages all project aspects.
Use Cases/Industries:
- Industrial Plants: Chemical, pharmaceutical manufacturing facilities.
- Energy Projects: Power generation plants, refineries.
Advantages:
- Cost Certainty: Owner knows the total project cost from the outset.
- Simplified Management: Owner interacts primarily with one contractor.
Challenges:
- Limited Flexibility: Changes or additions can be costly once the contract is signed.
- Risk for Contractors: Contractor bears the risk of cost overruns and delays.
Related Terms: Engineering, Procurement, and Construction (EPC), Design-Build (DB), Fixed-Price Contract
Example: An oil company enters into an LSTK contract with a construction firm to build a new refinery, with the contractor responsible for delivering the completed facility at the agreed-upon price.
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Synonyms:
Fixed-Price Turnkey Contract, Lump Sum Contract
