Lump sum turnkey

Lump sum turnkey (LSTK) is a

combination of the business-contract
concepts of lump sum and turnkey. Lump
sum is a noun which means a complete
payment consisting of a single sum of
money while turnkey is an adjective of a
product or service which means product or
service will be ready to use upon delivery.

In the construction industry, LSTK

combines two concepts. The LS (lump
sum) part refers to the payment of a fixed
sum for the delivery under e.g. an EPC
contract. The financial risk lies with the
contractor. TK (turn key) specifies that the
scope of work includes start-up of the
facility to a level of operational status.
Ultimately the scope of work will define
just exactly what is needed.[1]
Progressive LSTK
Very large projects may be split into
phases where a fixed price (lump sum) is
agreed at the start of each phase. This
reduces the overall project risk taken on by
the contractor at the start of the project,
and increases flexibility on the part of the
project owner to adapt the project to
changing circumstances.

References
 1. Hosie, Jonathan (November 2007).
"Turnkey contracting under the FIDIC
Silver Book:What do owners want?
What do they get?" (PDF). Mayer
Brown. Retrieved 2009-06-06.

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