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The construction process is a highly evolved system of joint ventures. From investors to financial institutions, architects to engineers and subcontractors to suppliers, multiple parties come together to contribute to the success of a project. Strategic joint ventures, in effect, are a much larger adaptation of this dynamic. Strategic joint ventures involve the development of relationships with other construction firms that bring to the table the opportunity to access a greater variety of projects.

Access to New Geographical Regions

The world has become much smaller. Access to information is at our fingertips, relationships across lands and seas are forged overnight, and mobilization is instantly coordinated from central command posts.  As a result, businesses are expanding to new geographic regions at a record pace. To serve customer demands, construction companies must mobilize and capitalize on the opportunities and be willing to reach out into new markets and regions—or be left out.

“Clients of the A/E/C industry are finding themselves required to react to a dynamically changing world. The construction industry itself must react in kind. [Experts have] recognized the emergence of flexible A/E/C industry firms that can react to the changing needs of their clients. Further, emerging foreign markets create opportunity for U.S. firms to export their strengths overseas through venturing with local partners.”- David N. Sillars, Ph.D, Oregon State University
The approach must take into account a wide range of variables such as unfamiliar cultural and political environments and geo-centric challenges such as earthquakes or hurricanes, just to name a few. It is imperative that management perform the necessary due diligence to ensure it has selected the right joint venture partner. Expertise and qualifications, financial strength and stability, political and client connections, trustworthiness and reputation are some of the key criteria that should be thoroughly investigated prior to signing on with a joint venture partner.

Access to Larger Projects

Project sizes have dramatically increased, testing the upper limits of surety capacity. Further, project owners are looking to contract with a single responsible party. However these endeavors test both construction company’s capacity of the access to capital and its surety bonds limits.

As with most businesses, the construction industry operates in an environment that is focused on limiting and mitigating risks. Investor, bank and bond company confidence is derived from its previous successes but is ultimately limited by the size of its previous projects. Joint venturing allows the construction company to add larger projects to its resume and increase the confidence of its financial partners through its successes with strategic partners.

Access to Public Projects

An estimated two-thirds of all construction projected are in the public sector, most of which are in general building, public works and transportation. These government contracts provide a lot of opportunity, but they often require that minority firms perform a predetermined portion of the project. This environment not only provides an opportunity for the non-minority and minority-owned business to joint venture for a project, but for each to form a bond that can be leveraged to new projects over and over.

Access to Specialized Knowledge

Joint ventures offer an excellent opportunity for the construction company to expand its core competencies. Alternatively, organically developing new competencies can be costly, and success is far from guaranteed.  Hiring specialized personnel, investing in research and equipment, and time-to-market factors have a considerable investment and opportunity cost. Joint venturing with a company that possesses the right knowledge and experience provides an accelerated and less costly path to obtaining the tools needed to compete in the targeted fields.

Expansion into new markets, new products and new technical areas of construction comes with significant risk—but also with potential financial rewards. As businesses continue to expand, the construction industry must react in kind by finding ways to grow with their clients or face losing them to competition. Forming strategic joint ventures that expand the reach and capabilities of a company may not just be a choice; it may very well be a necessity to maintain clientele and survive in the ensuing decades.

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