Definition: A “Lump Sum Turn Key (LSTK) Contract” refers to bidding terms and conditions between the End User and an EPC which don’t allow any financial change for a given scope of work until the EPC is able the deliver the newly built plant in full operations to the End User.
Comment: The benefit of the (LSTK) contract for the End User is to know how much will cost the construction of his plant and how long it will take as the project execution lead time is normally directly connected to the cost. The game for the “EPC” is to deliver the facility ahead of time to benefit from contractual bonus (the opposite of penalties in case of delay) and to restore his margin in managing smartly his procurement.
