By Steve Rizer
Be “exceedingly careful” when choosing a joint venture partner in construction, Trauner Consulting Services Inc. Director Richard Burnham told professionals attending a webinar that WPL Publishing held earlier this month. In emphasizing the point to a target audience of construction contractors, owners, and their attorneys, he compared such a partnership to that of a marriage, with factors involving effective communication and the meshing of different personalities being of paramount importance.
It is "absolutely imperative" for joint venture partners to have "a high level of communication [among themselves], a freedom of communication at the highest level within joint venture organizations,” Burnham said. “In other words, the CEO [chief executive officer] of each of the joint venture partners ought to have a good working relationship. They ought to know and trust one another, and they ought to be able to communicate with one another in an open and honest manner.” A lack of sound communication among the partners can damage the joint venture structure itself, he said.
Burnham also stressed the importance of personalities dovetailing in a joint venture partnership. “I am filled with nothing but admiration for [many] contractors in that they are risk takers, they are bold people, they are decisive people, [and] they are strong-willed people. There are a lot of [type] A personalities … among general contractors, and that very strength in being a contractor in itself [can] be a weakness within a joint venture. I ask the question …, ‘Can you, from a personality standpoint, handle being a minority partner?’”
Burnham later reported that “one of the most common elements of disputes I see in joint ventures is simply where personalities begin to get in the way of a sober and thorough and conscientious [review] of the facts involved in a situation…. [P]robably a good 50 percent of my time is spent in dispute-type of situations, and when all the dust settles and people say to me, ‘What happened? Why did things go wrong on that job?’, quite often … I have to say, ‘One of the major contributing factors is, son of a gun, they just couldn’t get along.’ Their personalities got in the way of dealing with things in a more professional manner. And that needs to be understood.
Burnham also told webinar attendees it is important to ensure that a “cultural fit” among joint venture partners exists. “You want to joint venture with parties that share your own ethical standards.”
Summing up the joint venture experience, Burnham said, “I’m not stretching it too much to say that a joint venture can be a lot like a marriage: you can get involved in a very good one, and it can be very good, or you can get involved in a very bad one, and it can be very bad.”
During the 90-minute webinar, Burnham also discussed definitions of key terms in joint venture partnerships; why such partnerships are becoming more common; the benefits of joint venture partnerships to contractors, owners, and sureties; typical provisions found in joint venture agreements; other management challenges inherent in joint venture partnerships; and “some pitfalls to avoid.”
A recording of the webinar, entitled “The Fundamentals of Joint Ventures in Construction,” can be purchased via the following link: http://constructionpronet.com/Products/jointventures-OnDemand.aspx.