the Advantages and Disadvantages of Turnkey Projects: A turnkey project is a delivery process in which a single entity, a contractor, operates with a project owner under a single contract to finish all project phases, from the detail engineering through construction.
Turnkey projects eliminate inconveniences. As this method places duties on the contractor rather than the owner in a typical design-bid-build (DBB) delivery, turnkey projects avoid difficulties for the project owner.
Turnkey delivery techniques combine elements of project design, financing, procurement, subcontracts, and construction into a single, integrated explanation with a single point of accountability, in contrast to the DBB approach. Use turnkey delivery techniques for various capital projects in energy, terminal and logistics, and chemicals.
Before signing a contract, assessing the benefits and drawbacks is crucial, just like with any project delivery approach. Let’s examine the advantages and disadvantages of turnkey projects.
Consider various factors before determining whether a turnkey project delivery technique is appropriate. Cost, timeframe, risk, and quality are a few of these. Here is a closer look at the advantages and disadvantages of Turnkey projects to think about:
1. Advantages and Disadvantages of Turnkey Projects | Cost and Timeline Advantages
- Price certainty: Compared to the traditional DBB methodology, Turnkey methods remove financial unknowns and allow project owners to precisely calculate return on investment (ROI). The cost of the entire project is less ambiguous.
- Reduced change management challenges: With the DBB method, there is no interaction between the business that plans and engineers a project and the business that builds it. The engineering illustrations and the project owner’s actual needs may need to match up, which could result in many change orders and price increases throughout the project. If not detected until construction, poorly designed projects can lead to substantial cost overruns. With turnkey techniques, this challenge is greatly diminished.
- Reduced cost overruns: The owners are only liable for the predetermined lump sum if the turnkey project is offered at a fixed cost. As a result, cost increases like those associated with materials are already anticipated and covered by the contractor. Cost overruns are lessened, compared to DBB methods, if reimbursable, due to the team’s continuity from engineering to construction. It is also helpful to involve construction team members during the design phase because it prevents project delays that could result in unwanted expenses.
- Condensed project timelines: Because a turnkey project uses a single design and construction firm, many stages may overlap. And will result in a shorter timetable and fewer delays throughout the process because materials and subcontractors may be acquired as final drawings are created.
2. Advantages and Disadvantages of Turnkey Projects | Additional Advantages
- Collaborative approach: The turnkey technique is a collaborative paradigm that eliminates the occasionally existent adversarial nature of the DBB model by having the designer and builder work together as a team with shared goals.
- Risk transference: Since the contractor is in charge of and accountable for the project’s schedule, cost, and performance, a large portion of the project’s risk and responsibility is transmitted to the contractor instead of the project owner.
- Reduced management efforts: Turnkey projects lessen the requirement for the project owner to oversee and manage the whole undertaking. The owner can concentrate only on the project itself without managing several contracts.
- Consistent quality: A contractor might establish quality criteria to guarantee uniformity between the design, fabrication, and construction teams.
3. Advantages and Disadvantages of Turnkey Projects | Disadvantages
- Requires firm scope definition: Before beginning a turnkey project’s engineering and design phase, one must completely specify the scope. In other words, revisions and extra components shouldn’t be made after the project’s scope has been established. Must limit engineering modifications by any already-started construction, procurement, and planning activities.
- Dependent on trust: The project owner’s confidence in the contractor is crucial to the turnkey approach. Finding the correct contractor who comprehends the project owner’s vision, budget, and engineering and construction needs is necessary, even though having a single point of responsibility is advantageous.
- Cost: Project budgets are frequently approximated to accommodate unforeseen changes in budget requirements, such as cost increases brought on by inflation and final design material takeoffs and labour, and are typically offered before design finalisation. Price certainty is more important because it enables project owners to quantify the project’s ROI and meet investment requirements precisely.
Weighing Advantages and Disadvantages of Turnkey Projects
Weighing the advantages and disadvantages of turnkey projects is crucial before signing a contract. Utilizing a turnkey contractor can produce better results than DBB approaches in terms of project timing and engineering and construction quality, although there are several dangers to watch out for. Because of an inherent pricing certainty, cost overruns are less likely with turnkey projects.
As you may already know, the Advantages and disadvantages of Turnkey Projects. Small or large, turnkey approaches to capital projects offer a comprehensive, compelling solution for project implementation. To deliver high-quality engineering and construction services that suit your project vision and budget, you must select a contractor with the knowledge and capability to handle every aspect of the project internally.