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Lump sum turnkey (LSTK) is a combination of the business-contract concepts of
lump sum A lump sum is a single payment of money, as opposed to a series of payments made over time (such as an annuity). The United States Department of Housing and Urban Development distinguishes between "price analysis" and " cost analysis" by whether ...
and
turnkey A turnkey, a turnkey project, or a turnkey operation (also spelled turn-key) is a type of project that is constructed so that it can be sold to any buyer as a completed product. This is contrasted with build to order, where the constructor builds ...
. 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 A lump sum is a single payment of money, as opposed to a series of payments made over time (such as an annuity). The United States Department of Housing and Urban Development distinguishes between "price analysis" and " cost analysis" by whether ...
) 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 A turnkey, a turnkey project, or a turnkey operation (also spelled turn-key) is a type of project that is constructed so that it can be sold to any buyer as a completed product. This is contrasted with build to order, where the constructor builds ...
) 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.


Progressive LSTK

Very large projects may be split into phases where a fixed price (
lump sum A lump sum is a single payment of money, as opposed to a series of payments made over time (such as an annuity). The United States Department of Housing and Urban Development distinguishes between "price analysis" and " cost analysis" by whether ...
) 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

Business terms Facilities engineering {{business-term-stub