Explain turnkey contracts in power distribution. Make comparative statement of benefits of turnkey contracts vis-à-vis unit rate contracts.

Turnkey contract is an agreement under which a builder agrees to complete a facility so that it is ready for use when delivered to the other contracting party. A contractor may agree, for example, to build a fully equipped ad operational factory under the turkey contract. The responsibility of the contractor ends when he hands the completed installation over the client.

The conceptual difference between the unit rate contracts and turnkey contracts lies basically in sharing of associated risks. In turnkey mode of execution, the contractor has to assume more risks on her/his side. As such s/he has to be given adequate opportunity to study and examine the bidding documents as well as local conditions and also adequate time to interact with her/his back-up agencies in the market. Let us now make a point-wise comparison of the two.

• Different Bidders Price the Risks Differently: The bidders are expected to complete a project in time. Therefore, their assessment of site-specific risks and related costs vary. Specifying site visit conditions in the tender document and better understanding of site conditions and statutory regulations is likely to bring optimum cost proposals. Information on sources of material and services from local agencies and facilities to be provided by the Utility could minimize coverage of risks to be assumed by the contractors. All risks cannot be taken care of by insurance (in which a premium amount and deductible franchise is the only liability of the contractor). Greater clarity on these aspects would fetch better competitive price. Remember that the suppliers are used to supply items and get penalized for Liquidated Damages due to delay.

• Direct and Indirect Cost (Management Fee): Turnkey modality of execution is often brought under criticism for being costlier. The prices quoted against various items suggest so when compared by the employers with in-house database of unit rate execution _______ _____ _________ ____ ________ _________ ______ ___ _______.
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