There will also be additional costs in the site set up. If the parties fail to agree on operating systems and practices it can lead to disruptive and inefficient working of the site team. Possible pitfalls of joint venture agreements Challenging the normal working methods should assist the parties to evolve and become more efficient. When the two organisations integrate there will be a natural element of critical analysis of working methods and protocol. A well-resourced and experienced site team is essential in the success of any project. It is already apparent that there is a lack of experienced professionals available to resource the increasing number of projects being undertaken. Shared experience and expertise of personnel will be an increasing reason to form a joint venture in the near future. The will also be more familiar with the risks associated with the works. The experienced partner may know the most efficient manner to carry out the work. This can be in the type of construction, sector, region or when a particular system is specified by the contract. Traditionally a joint venture partner may be chosen based on experience. But a contractor could find themselves liable should delays, cost overruns or disputes occur. The extent of the liability will depend on the way the structure of the joint venture. Where a project is not a financial success, the loss is shared between the parties involved. In addition to the benefits of split funding and sharing expertise, comes the split risks. This can allow a smaller contractor to increase the size and the scope of the projects in its portfolio. These lower costs it may give a party the opportunity to work on much larger project than they could initially budget for. There are many reasons for setting up a domestic joint venture the most common being:Ī typical joint venture might split the project costs 50/50 between the two parties. It can also help you navigate the minefield of local rules, regulations and cultural sensitivities. Rather than starting from scratch, a joint venture with a local partner can give you access to tried and trusted local subcontractors / suppliers etc. Local expertise can be beneficial to accelerate the initial integration into a region. When a contractor enters a country or region for the first time it may be unfamiliar with the practices, culture and procedures of the area. In this article we look into why organisations enter into joint ventures and what the possible risks are. Known as joint ventures, allowing multiple companies to create a commercial alliance for a particular project or series of projects is becoming more common in the construction industry.
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