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subsurface geotechnical problems, or start-up problems.
Mr. Moody states that those risks could have been alleviated by
hiring an overseer of the entire process who would be in charge
of delivering a completed, operating facility. He refers to that
risk of delivering a completed, operating facility as the
“turnkey risk”, and he states that contractors who take on a
turnkey risk charge a premium, which is typically 15 percent.
If THP bore a turnkey risk in connection with construction
of the facility, then the addition of a turnkey premium in
determining the value of the bill of sale assets is appropriate.
See Miami Valley Broadcasting Corp. v. Commissioner, 204 Ct. Cl.
582, 499 F.2d 677, 680 (1974) (turnkey premium appropriate in
valuing a fully operational plant received on dissolution of a
corporation). We have found that none of the construction
contracts entitled AWP (or its successor by assignment, THP) to a
complete and working hydroelectric generating facility. AWP and
then its assignee, THP, bore the ultimate risk that the facility
would not function when completed. Notwithstanding respondent’s
argument to the contrary, we are persuaded that THP bore a
turnkey risk in connection with the construction of the facility,
and we so find. We must determine whether the inclusion of the
15-percent turnkey premium in Mr. Moody’s valuation of the bill
of sale assets was appropriate.
In determining an appropriate turnkey fee, Mr. Moody
consulted employees of Stone & Webster Engineering Corp.
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