Turnkey

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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 on the developers land with the developers financing 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.) to contrast with a vehicle sold without one so that other components may be re-used.

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, a packing line 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 business is a business that includes everything you need to immediately start running the business. A business that is being sold as a turnkey business would include tangibles such as inventory and equipment through intangibles such as a previously established reputation and goodwill. The most common type of business sold as a turnkey business is a franchise. In the case of franchises, a turnkey business often includes a building that has been constructed to the franchise's specifications, and an exclusive territory.

Entrepreneurs considering buying a turnkey business should always do their due diligence and be sure they know exactly what a particular turnkey operation includes; not all turnkey businesses are created equal!

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
  • procurement and expediting of equipment;
  • materials control
  • inspection of equipment prior to delivery
  • shipment, transportation
  • control of schedule and quality
  • pre-commissioning and completion
  • performance-guarantee testing
  • inventorying spare-parts
  • training of owner's/plantsub-systemoperating and maintenance personnel
  • Advanced Loop Schemes (primary used in the Electric Utility Industry)

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