Utah Contractor Practice Exam

What best describes a turnkey contract's purpose?

1. To provide design services only

2. For the contractor to maintain a project budget

3. To ensure project is ready to produce cash flow upon completion

4. For long-term financing arrangements

The correct answer is: To ensure project is ready to produce cash flow upon completion

A turnkey contract is specifically structured to ensure that a project is completely finished and operational upon handover to the client. The primary purpose of a turnkey contract is to allow the client to receive a fully functional facility or system without needing to be involved in the construction process. This means that once the contractor fulfills their obligations under the contract, the client can immediately start using the project, which is essentially ready to produce cash flow. This type of arrangement is advantageous for owners because it streamlines the process and minimizes the need for ongoing management and oversight during construction. The responsibility for all phases of the project, from design and construction to the initial setup, lies with the contractor. As a result, when the project is completed, it should be in a ready-to-operate condition, ensuring that the owner can begin generating revenue or utilizing the facility without additional delays or obstacles. Other options do touch upon relevant aspects of construction and financing but don’t capture the essence of a turnkey contract’s primary objective, which is the immediate usability of the completed project.