What is a turnkey contract? Some related legalities

A turnkey contract is a form of EPC general contractor that carries out the entire process from establishing a construction investment project, surveying the current status, technical design, construction to handing over the completed project to the investor. This is a popular choice in the construction industry, subject to the Construction Law and regulations from the Ministry of Construction. In this article, Victorycons will help you understand what a turnkey is, what the legality of a turnkey contract is, what the rights and obligations of the parties are, and refer to a sample FIDIC standard general contractor contract.

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1. What is turnkey?

In English, “Turnkey” is called Turnkey Project, often used in the construction and construction investment industry. This is the method in which the main contractor is responsible for the entire process: from establishing the construction investment project, surveying the current status, consulting on basic design, constructing the rough part, completing the interior, organizing the purchase of technological equipment to installation and testing. After completion, the general contractor hands over the fully equipped project to the investor (Project Owner) for use, according to the EPC Contract quality standards and project operation requirements.

2. What is a turnkey contract?

According to Point h, Clause 1, Article 3 of Decree 37/2015/ND-CP, a turnkey contract is a construction contract in which the EPC general contractor is responsible for all work from project preparation, technical design, procurement of technological equipment to construction and trial operation of the construction investment project.

A Lump Sum Turnkey (LSTK) contract is a highly legally binding agreement in which the main contractor commits to performing from A to Z. This is a popular model in industrial, technical infrastructure, and high-end office construction projects.

Simply put, a turnkey contract (Lump Sum Turnkey – LSTK) is an agreement that the investor signs with the contractor to handle all stages from survey, design, equipment supply, construction, installation, to operational training. The contractor is responsible for completing the project from A to Z.

This form is mainly carried out by highly qualified international general contractors. The big advantage is that it reduces the management burden for the investor. According to international practice, this type of contract is also called Project Management Contractor (PMC).

PMC is one of four project management models, along with the outsourced project management unit (Project Management Unit – PMU) and the investor himself. The PMC contract has been recognized by Vietnamese law and is applied to state-funded projects.

However, the disadvantage is that foreign general contractors often retain technical know-how, making investors dependent on materials and technology. If domestic contractors are qualified, PMC contracts are still feasible for projects such as office buildings or agency headquarters, especially for investors who are not specialized in construction.

3. Legality of turnkey contract

According to Clause 3, Article 6 of Decree 37/2015/ND-CP, the legality of a turnkey contract is determined as follows:

The turnkey contract, when effective, is the highest legal basis forcing the contractor, the contractor and related parties to fully perform their committed obligations.

The Turnkey Contract, when in force, shall be the primary basis for resolving any disputes that may arise. If the contract does not specify otherwise, the dispute shall be resolved in accordance with applicable laws.

State management agencies, capital control agencies, lending agencies, inspection, examination, auditing agencies and relevant units must base on the legal contract content to perform their functions and duties. These agencies must not infringe upon the legitimate rights and interests of the parties to the contract.

4. Validity of turnkey contract

The person signing the contract must have full civil capacity according to the law.

The signing must comply with the principles stated in Article 4 of Decree 37/2015/ND-CP and Clause 3, Article 1 of Decree 50/2021/ND-CP.

The turnkey contract must be in writing and signed by an authorized representative as prescribed. If the contracting party is an organization, the signature and seal must be in accordance with the law.

Note: The contract is effective from the date of signing and stamping (if any) or according to the specific agreement in the construction contract. In addition, the validity also depends on the contractor receiving the contract performance guarantee from the contractor, if the contract requires a guarantee.

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5. Rights and obligations of the contractor and the contractor in a turnkey contract

In a turnkey contract, both the contractor and the contractor have clear rights and obligations to ensure the project is implemented on schedule, with quality and in compliance with the law. Below are the basic rights and obligations of each party:

Rights of the contracting party:

• Refuse to accept products that do not meet quality standards, are of incorrect type, origin, or violate intellectual property rights.
• Check work progress without disrupting the contractor’s operations.
• Suspend construction and require correction if violations of contract or law are detected.
• Request to hand over documents and files related to the product.
• Review and approve subcontractors as requested by the contractor.
• Exercise other rights as prescribed by law.

Obligations of the contracting party:

• Payment on schedule according to contract.
• Bachelor of Contract Management, written notice.
• Provide necessary information, documents and means (if agreed).
• Acceptance, appraisal and approval of designs in accordance with regulations.
• Apply for construction permits and hand over the site on schedule.
• Monitoring of labor safety, environment, fire prevention and fighting.
• Agreement on bidding documents for purchasing technology equipment (if any).
• Acceptance, payment and settlement on time.
• Ensure copyright for consulting products.
• Organize training for construction operations personnel.
• Project acceptance and appraisal in accordance with regulations.

Rights of the contractor:

• Require the contractor to provide necessary information, documents and means.
• Propose or refuse work arising outside the contract that has not been agreed upon.
• Organize and manage construction in accordance with the signed contract.
• Enjoy other rights as prescribed by law.

Obligations of the contractor:

• Ensure human resources, materials and equipment meet contract requirements.
• Manage and preserve assets provided by the contractor (if any).
• Promptly notify if any deficiencies in information, documents or means are detected.
• Keep contract-related information confidential.
• Construction ensures quality, safety and progress.
• Establish technical design and construction design according to legal regulations.
• Organize the purchase, manufacture and installation of technological equipment in accordance with the contract.
• Operational training and technology transfer upon agreement.
• Trial operation, acceptance and handover of completed works.
• Commitment to products that do not violate intellectual property rights.
• Hand over full documents and records according to the contract.
• Perform other obligations as prescribed by law.
• Establish construction investment projects, participate in protecting and completing projects according to the contractor’s requirements.

6. Turnkey general contractor contract template

Below is the latest 2025 turnkey general contract template, prepared according to FIDIC standards, suitable for large construction investment projects, technical infrastructure, industrial works or high-end housing. This EPC Contract template fully meets the requirements for delivery progress, quality commitment, construction warranty and copyright protection for design consulting products:

Turnkey contracts are the optimal solution to help investors control the progress, quality and budget of the project. However, to sign and implement effectively, it is necessary to clearly understand the legal principles, rights and obligations of the parties involved in the construction contract. If you have any questions or need detailed advice on EPC contracts, investment project management, or construction engineering design, please contact Victorycons immediately to have our team of experts answer and accompany you in every project.

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