How do turnkey projects work? Part 1: The Proposal Stage

24 Nov 2021

As an innovative supplier of waste-to-energy technology, we are constantly working on a range of worldwide projects, including turnkey projects. Over the course of several blog posts, we'd like to provide some insight into how these turnkey projects work. In this blog post, of course, we'll start at step 1: the Proposal. You'll find out all about what happens before a waste-to-energy project sees the light of day and what we, as a technology supplier, do to land the project. To conclude, we'll zoom in on how such a project is transferred to the project manager.

Stage 1: Project Development

The preparation for a waste-to-energy project is a giant puzzle, whose pieces need to fit together at exactly the right time.

This process is helmed by one or more consultants for the client. That client could be a government body such as a city, a city-state, a province, or a public waste processing company. It could also be a public-private partnership or a private company. Covanta, Veolia, Viridor, and Suez are some famous examples.

What are the most important pieces of the puzzle in the contract?

First, you need a waste contract and an energy buyer. The first contract ensures the waste-to-energy plant is constantly supplied with household waste to be converted into energy. The second contract ensures that the power generated is actually purchased.

Secondly, location is key. A plant like this must take into account town and country planning. Eventually, this process leads to an approved building permit that takes into account the environmental impact. Among other things, an environmental impact assessment is carried out.

In addition, the customer must secure solid financing for the project. For waste-to-energy projects, costs can quickly run into the hundreds of millions or even billions of euros. That means finding financing is no mean feat.
From the Keppel Seghers side, our Business Development Managers are actively present in the market during this stage in order to keep abreast of the development status and chances of success of new waste-to-energy projects. We seek out or are contacted by local partners who complement us with regard to knowledge, technology, or activities. That's when we talk about how we'll collaborate: do we bid as a joint venture, or do we engage in a contractor-subcontractor relationship? Several aspects are at play, of course, such as liability, delivery size, project location, project structure, and so on.

Stage 2: The specifications and our proposal

There's a waste-to-energy project waiting to be developed! What happens now?
During this second phase, the customer will draw up specificationson which we will base our proposal. As mentioned before, we may submit a proposal directly, through a partner as a subcontractor, or together with one or more as part of a consortium.

As of that point in time, one of our proposal managers is in charge of this specific proposal. They coordinate the entire process, draw up a timeline, and come up with a technically and commercially competitive offer. Obviously, the proposal manager is supported by many colleagues: process engineers take care of the process calculations and dimensions. Other disciplines, such as mechanical, electrical, instrumentation, piping, automation, and others all pitch in to come up with a proposal design for the waste-to-energy installation and its components. Our engineers are involved in the projects from start to finish. In this case, the start is helping to come up with the proposal and the finish is the final handover of the project to the customer.

What do those specifications look like?

In most cases, you're looking at a file of a few thousand pages. To give you an idea: the main specifications of the Waste-to-Energy Power Island project we are now carrying out in Hong Kong ran to about five large binders.
First, there is the commercial contract. You could compare it to a property deed. This contract goes into matters such as liability, commercial terms and conditions, and force majeure: a clear description of the circumstances which are (or aren't) taken into account in case of delays, downtime, etc. during the project. Moreover, the commercial contract also describes insurance and financing obligations.

Secondly, the selection criteria and the selection process are described accurately in the specifications, with the corresponding evaluation percentages. These could be about reference projects, process guarantees, costs, approach, and environmental impact.

Last but not least, you have the contract's technical specifications. What are the requirements for the technological solution? What minimum return and results must a supplier be able to a guarantee?

Proposal submitted! What happens now?

Stage 3: Negotiation and award

The last stages in the proposal process are the negotiations and the final award of the contract. Based on the proposals submitted, the client will make an assessment. Then, they start negotiating with the most promising potential supplier, the so-called preferred bidder. At this stage, negotiation and fine-tuning continue on the technical, commercial, and contractual levels.

If negotiations are successful, the client will try to achieve financial close. That's when everything comes together and the project can officially begin.

The project is now transferred to a project manager who will be responsible for the next stages and the delivery of the project.