Traditional vs. Turnkey Project Management: Which is Better?

July 9, 2024 - Author: Rajiv Shah - Manager, Project Management

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Turnkey project management methods

Deciding Between Project Management Methods Can Impact Trajectory

Choosing between traditional and turnkey project management can significantly impact a project’s trajectory and outcomes. Understanding the nuances of these project management methods is crucial for making informed choices that align with your project’s goals, organizational capabilities, and can influence overall project budget control.

Project Management Methods: Features of Turnkey vs. Traditional

In traditional project management, the project owner has the overarching responsibility for the entire project. They separately manage multiple entities for design, procurement, and construction. This approach creates distinct silos, with the client actively coordinating between them.

Turnkey project management, often executed through Engineering, Procurement, Construction (EPC) methods, gives overarching project responsibility to a single external company. The external entity oversees the entire project lifecycle, from design and procurement to construction, integration, and commissioning. Turnkey solutions consolidate the management of all vendors and subcontractors under the project management company. The client provides project requirements, often refined through collaboration with the turnkey provider. While the client remains the ultimate decision-maker, the turnkey provider is responsible for the execution.

This shift in responsibility leads to two hallmarks that distinguish the project management methods: simplified communication through a single point of contact and a transfer of control and risk to the external organization.

Communication: The Backbone of Project Success

In turnkey project management, communication is streamlined through a single point of contact, fostering seamless integration from the client’s perspective. A weekly meeting is the communication bedrock, where the turnkey provider shares detailed project updates, consolidating information from various sources into a unified picture. Communication is often also fostered through direct, level-matched interactions between the turnkey provider and client teams.

Turnkey communication channels encourage proactive problem-solving and transparent communication. This approach contrasts with traditional project management, where siloed responsibilities cause communication lags and narrow focus on individual scopes.

Project Budget Control and Change Management

A third hallmark separating turnkey projects from traditional project management is pricing. Turnkey projects operate at fixed prices, typically with a negotiated Guaranteed Maximum Price (GMP) in the contract.

Because a fixed-price contract pushes the financial risk to the turnkey provider, negotiation of a suitable GMP requires a clear project scope. If scope details are vague or incomplete, turnkey providers may add a premium to the GMP to cover uncertainties. A well-defined scope benefits both parties by controlling costs and mitigating risks.

Ideally, the project scope is developed collaboratively, with input from both the client and the turnkey provider. At ACS, we use our Front End Planning (FEP) process to facilitate this discussion. This process allows for the development of a preliminary design, typically around 10 percent complete, which provides sufficient detail.

Fixed price contracts heighten the importance of effective change management. Thorough documentation is crucial, as it provides a clear reference for the mutually understood scope. This helps prevent deviations that could lead to additional costs beyond the GMP.

While minor changes might be accommodated within the existing agreement, significant alterations usually require addendum negotiations. This underscores the importance of comprehensive initial planning to minimize disruptive changes and maintain project budget control throughout the lifecycle.

Turnkey Risk and Reward

The turnkey approach shifts significant control and decision-making to the provider, which can be advantageous for clients. However, this increased dependence amplifies the importance of selecting the right turnkey partner. While the provider assumes much of the project risk, the client is ultimately responsible for project success.

Clients can mitigate this risk by ensuring the project has well-defined performance criteria and success metrics. This allows clients to maintain strategic control while leveraging the turnkey provider’s expertise. ACS project managers use the FEP process to help clients establish these metrics. Ultimately, the turnkey model’s success hinges on thorough provider vetting and establishing a robust and trust-based partnership. The streamlined communication, reduced client risk, and potential for cost savings make turnkey project management an increasingly attractive option for complex industrial construction projects.