By: Jeff Blaesing, Senior Project Manager
As Senior Project Managers, Scott Sherry and myself have been involved in many successful joint ventures. Under a joint venture agreement, construction companies can share and mitigate project risk while focusing on their areas of expertise. Joint venturing can be especially useful if one construction partner possesses the relationship and local connections, while the other has the specific experience in the project type. We have had successful joint ventures on projects ranging from large, complex projects to fast-track projects. Finding the right company to joint venture with is the first challenge. The firms should have similar financial structures and ethics.
Selecting the right joint venture partner is just the beginning though. A successful joint venture requires extreme collaboration, communication, and mutual respect. Over our past 90 years of working with fellow construction companies, we have compiled a list of the top ten ways to make joint venturing a success for all parties involved.
- Always refer to the team as a joint venture. All correspondence should come from the joint venture to avoid confusion with other building partners such as subcontractors and architects. Ideally the group develops joint logo, letterhead, documents, and more.
- Open communication and decisions cannot be made in a vaccuum. Remember to be a team player and always get the appropriate buy-in from both partners.
- We recommend that one firm function as the managing partner, but both parties have a sense of ownership. Both parties should be empowered with meaningful responsibilities.
- An early-adopted and agreed upon joint venture agreement should be created that defines financials and project responsibilities/staff. This contract will be the guide for the duration of the project to be sure that everyone is on the same page.
- Having a previous relationship makes the process go much smoother. But even if you are joint venturing with a company you haven’t worked with before, ideally both companies should have similar cultures and business philosophies.
- Both companies need so have a strong financial position. If one company takes on a lot more risk, the partnership can feel one-sided.
- Whenever possible, leverage each partner’s specific skill set. Avoid duplicating efforts by letting each firm bring their strengths to the table. Don’t replicate construction efforts – divide and conquer. Everyone wants to use their team for specific construction functions (i.e. estimating, building information modeling, technology), but let each firm bring a set of skills and own the related tasks. Dividing up these tasks creates additional efficiencies and reduces duplication.
- Related to the previous point, leverage relationships the same way. If one party has a local presence with a client relationship, the other party should utilize its relationship with trade partners and design team.
- Make sure both parties are using the same systems for financials, operations, and daily tracking. The systems have to speak to one another to make this a successful operation.
- Wherever possible, try to have a similar presence in numbers on the job from both parties. This helps add to the balance of the partnership.
If you are able to follow these top 10 suggestions, you should be well on the way to a successful joint venture partnership with a fellow construction company.