Very much in vogue, turnkey solutions bring together expertise, logistics and financing. With fifteen years of expertise in the field, Mathieu Glais, chair and co-founder of the consulting firm Prodevema SAS, tells us about the benefits and limitations.
Does the "turnkey solution" model provide an answer to Africa's problems?
Turnkey projects have the advantage of giving the client a holistic solution that covers all of the works needed to get a project up and running. They are often provided by a main contractor or a group of contractors (the contracting party). The approach generally involves a lump-sum package, at a fixed price over a defined implementation period, and a firm commitment in terms of the timescale for delivery. There are therefore numerous advantages for the client. Firstly, there is usually a single point of contact, especially when the turnkey contract includes the research and project management, which takes care of coordinating all of the trades and manages all liaison between the various entities involved. After that, a turnkey approach usually guarantees that the project is completed within the shortest possible time, as long as the main contractor or the group representative is experienced in project management. The client has a contractor's guarantee for the project cost and the deadlines for its completion. In many cases, the contractor also provides the majority of the financing, which may consist of export credit agencies and commercial banks, thus combining export credit and commercial credit, and even concessional loans, as the most important thing is to provide a solution that is adapted to the client's borrowing capacity. The client will still have to ensure that it obtains at least a minimum of transparency in terms of the cost factors, while agreeing to give the main contractor or the group representative an acceptable margin, in payment for its project management expertise and also for the financial risk it takes by accepting liability for costs and deadlines.
Indeed, the challenges for the contractor lie in coordinating communications and managing the value chain so that the project can be completed within the stipulated costs and deadlines. Managing a turnkey project requires a specific skillset and well drafted contracts with sub-contractors or between members of the group. You have to evaluate the risks, identify the mechanisms for reducing them, and define the responsibilities of each partner. If it...