A strategic approach to joint ventures

A strategic approach to joint ventures

08.04.2019

What are the benefits of joint ventures in the construction industry and how can implementing the correct delivery strategy result in a successful outcome for all parties involved?

By nature, joint ventures involve bringing together different organisational cultures which often presents challenges to the day-to-day running of the project. Despite this fact, joint ventures continue to rise in popularity and have become integral in encouraging innovation, productivity and economic growth throughout the industry.

Crucially, joint ventures allow organisations to achieve above their individual means and deliver projects beyond their own capacity. Through combining the distinctive competencies and complementary skills of the participating companies, those involved benefit from a unique opportunity to achieve goals which were previously out of reach.

Although there is risk when embarking on joint ventures, a successful outcome will result in great reward. As the number of joint venture projects continues to increase, it is imperative that we seek effective delivery strategies which encourage trust, honesty and communication to capitalise on the rewards. One way to achieve this is through appointing a third-party Employer’s Agent to help steer the project and keep all parties on track.

Common barriers to success

On any project, contractual obligations and the communication needs of individual stakeholders are different. With joint venture projects, these are magnified through involvement of multiple parties, contract documentation, contractual obligations and the administration of a newly established governance.

One of the main hurdles when undertaking a joint venture is structure within decision making. Without an organised governance and an effective and accepted management system, joint ventures will quickly run into issues as there will be no strong foundation to the partnership. If a structured management system is not solidified initially and clear boundaries are not drawn up, then a project can quickly move in different directions and completely break down as a result.

Another common obstacle is the procurement process. It is important for all parties to share, or at least have knowledge of, the full scope of works and who is responsible for each element. Without this, suspicion can quickly grow.

Both of these potential hurdles come from a lack of transparency from all parties. Not only will inefficient communication lead to distrust, it will result in overall failure as the project will not be correctly monitored. If there is a lack of trust between parties and a lack of strong, effective leadership, ventures are likely to fail.

Overcoming the obstacles

A strategic and collaborative approach is vital to achieve successful end-to-end projects that are on time and on budget. As such, it is the responsibility of the Employer’s Agent to offer an independence to the varying cultures of the joint venture partners to define a strategy satisfactory to all parties involved; this must then take on the form of a realistic, workable approach.

Creating a common culture across the partnership as soon as possible will be key to the successful delivery of the project. By understanding each party’s decision-making process, the governance, decision making and project team approach can be tailored to achieve greater results through cooperation.

Each joint venture is entirely different and there is no ‘one size fits all’ method – each stakeholder will have different needs and agendas. As such, it is important to take a hands-on approach to gain a detailed understanding of all aspects of the project, the client and the services required to deliver it.
At calfordseaden, our experienced team works strategically to set up bespoke tools from the outset to keep the project on track from its inception through to completion. Doing so from the time that the joint venture is established will ensure a strong foundation for the project moving forward.

Firstly, it is integral to outline each individual parties’ objectives. To ensure a project has the best chance at success, Employer’s Agents should encourage all parties to be clear, specific and honest about their individual goals and limitations. Facilitating open conversations from the very start will ensure all parties begin on the same page and prevent project breakdown further down the line.

Furthermore, successful joint ventures will also benefit from an equal allocation of roles across all of the parties involved, making the procurement process as transparent as possible. It is crucial at this stage to define how the value generated by the venture will be distributed, ensuring an equitable risk-to-benefit ratio. This should be achieved in the initial project management stage to shape agreed roles and responsibilities right from the offset.

When undertaking a joint venture, it is advisable to employ a third-party Employer’s Agent who will have a vested interest in delivering the project from inception to completion. Our team at calfordseaden works collaboratively with all parties to carefully plan each project, formulating and proactively implementing the most effective delivery strategy to provide outstanding results.