Joint ventures (JVs) provide contractors of all sizes with greater chances to participate in a more extensive range of significant infrastructure projects in a market as big and diversified as Australia.
Australia has a robust, remarkable pipeline of construction “megaprojects” in the works, with differing degrees of contract conditions necessitating a diverse collection of skillsets. Some purchasing bodies, such as New South Wales (NSW), now specifically mention foreign project experience and key employees in their procurement papers.
There is no “one-size-fits-all” strategy for successful joint ventures. A JV works only when each party understands what they are doing and what the duties of the other parties are, and when each party delivers on what it pledged at the start of the partnership. A JV is a long-term commitment, and disagreements are unavoidable – but open communication, solid connections, and shared culture will all contribute to the partnership’s eventual success.
Why joint venture?
There are many reasons why construction contractors may seek to enter into a JV, including:
– to gain access to resources, access to facilities or market demand;
– to access expertise in a particular discipline;
– to gain access to new technologies;
– to share the risk and maintain control; and
– to win the project.
Australia offers an enormous variety of projects, which means a contractor with local knowledge, a group of key personnel, and an established reputation can enter into a JV and still understand the local market and stand out from the crowd.
It is also a way for contractors to gain a foothold in the local market, where a contractor of scale can be created over time. In Australia, there is a rush for contractors to learn about the local market and develop relationships with key clients during the current round of projects.
When is the right time to enter into a joint venture?
The question of when to enter into a JV is critical to its ultimate success. While motivations to do so may be strong, the strategic timing of setting up a JV must be considered carefully.
If your intention is to win projects, then joint venturing with a local firm is not a prerequisite. An Australian company will allow you to learn about the local market, but your reputation and performance on other projects locally or abroad will be more critical.
However, if you intend to build a business in Australia or win projects that are not open to a foreign contractor, then a JV can be a great way to access a new market quickly. Again, the strategic timing of setting up a JV is critical.
Conclusion
A JV can be risky, and a lot of planning is needed to work effectively. A long project lifecycle, changing government regulations, and managing two different sets of resources and skills can all present difficulties. A JV can also result in one or both partners losing control of the project delivery process and increased risks for the delivery team.
To avoid these consequences, contractors should work closely with their local partners to plan the JV in detail before setting up the contract. This way, the best possible outcome can be achieved.
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