LSTK
Encyclopedia
LSTK stands for Lump Sum Turn Key.
In the construction industry, LSTK combines two concepts. The LS (lump sum
) 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) 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.
) 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.
In the construction industry, LSTK combines two concepts. The LS (lump sum
Lump sum
A lump sum is a single payment of money, as opposed to a series of payments made over time .The United States Department of Housing and Urban Development distinguishes between "price analysis" and "cost analysis" by whether the decision maker compares lump sum amounts, or subjects contract prices...
) part refers to the payment of a fixed sum for the delivery under e.g. an EPC contract
EPC (contract)
EPC stands for Engineering, Procurement and Construction.It is a common form of contracting arrangement within the construction industry. Under an EPC contract, the contractor will design the installation, procure the necessary materials and construct it, either through own labour or by...
. The financial risk lies with the contractor. TK (turn key) 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 sumLump sum
A lump sum is a single payment of money, as opposed to a series of payments made over time .The United States Department of Housing and Urban Development distinguishes between "price analysis" and "cost analysis" by whether the decision maker compares lump sum amounts, or subjects contract prices...
) 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.