A partnership is an effective way of pooling together finance, technology, skills, and specialization. This has become more evident in the construction sector where the industry keeps modifying itself regarding design and technologies and the varied needs tailored by clients. Therefore, a partnership has become leverage for acquiring higher bids and advanced tenders from the government and private sectors. Constructors who are capable of pulling together complex teams, experienced in all major advances in the construction industry and who enjoy a wealth of experience, stands a greater chance of winning a bid given the belief that such contractors have the knowledge and resource base to undertake projects of great magnitude. This project reviews various literature discussing the benefits and challenges of forming such partnerships.
Levels of partnership
The level of partnership is determined by the commitment level of the parties entering a partnership. Three main partnership strategies can be employed including tactical, operational and strategic levels of partnership (Folinas, 2012). The operational partnership is focused on streamlining and determining rationales for operations to increase output whereby partners focus on their strength (Folinas, 2012). The partners come together to capitalize on what each does best. The second form of partnership, Tactical partnerships, involves a coming together of companies with unique tactics or fields of operation (Folinas, 2012). A tactical partnership could involve an engineer, contractor, and an architect with different abilities. The partners are independent on their own and thus do not involve one company capitalizing on another's strength. The final level of partnership, strategic partnership, is the best form of a partnership involving partners who share strategies (Folinas, 2012). The partnership is close and binding resulting in the production of unique products.
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A partnership has several benefits such as efficient management of resources where resources can be reused or used in reasonable amounts, better negotiation level for better offers, technological boosts, improved skill input among others. Limitations are also to be expected from such a collaboration in terms of transfer of company intellectual knowledge, engaging with unproductive partners, future competitions for projects, management problems, and profit distributions among others.
Literature References
Wu, S., Greenwood, D., & Steel, G. (2008). Exploring the attributes of collaborative working in the construction industry. Northumbria Working Paper Series: Interdisciplinary Studies in the Built and Virtual Environment, 1 (2), 135-147.
According to Wu, Greenwood & Steel (2008), Cooperative partnership also known as a collaborative partnership is misunderstood by many constructors confusing between it and alliance. The partnership is useful, especially when meeting external pressure such as time, building functions, technology, and strong competitions ( Wu, Greenwood & Steel, 2008). Also, it helps in managing internal pressures. For example, a continuous exchange of client's representatives may cause cumbersome introductions and re-education to bring the new representative on par with the progress. Maintenance of the same representative, on the other hand, will ensure that the client and the contractors have cooperation and reduced time and work distribution over time.
Akintoye, A., & Main, J. (2007). Collaborative relationships in construction: the UK contractors' perception. Engineering, Construction and Architectural Management, 14 (6), 597-617.
According to the research published by Akintoye & Main, 2007, constructors in the UK begun partnerships for various reasons such as gaining access to advanced technology, risk sharing, market demands, resources accumulation and demands by the clients. They further argue that collaborative partnership is the way to go in an age where technology is taking control over traditional selections of independent construction companies and that collaborative strategy can perform at their best when the process begins from the top management down to the lower levels (Akintoye & Main, 2007). They also argue that the companies involved must be capable to provide their best, be compatible with each other in the task involved, committed to the partnership and have open levels of control (Akintoye & Main, 2007).
Skeggs, C. (2003). Project partnering in the international construction industry. International Construction Law Review, 20 (4), 456-482.
Skeggs (2003) provides useful information on the history of the cooperative partnership beginning with the US army corps. The major factors leading to the establishment of corporations by the Army Corps was to avoid major problems such as delayed completion of projects, litigation, and cost overrun (Skeggs, 2003). He moves on to identify the United Kingdom as the leading nation in introducing partnership, officially, in a different format such as the oil exploration by the BP and other corporations (Skeggs, 2003). A partnership is identified as involving series of processes and not just a common relationship between parties with a shared objective and notes that partnership can be short-term on a single project or long-term on a strategic basis (Skeggs, 2003). Importantly, he notes that levels, nature, and responsibilities to be witnessed in partnerships vary with the legal factors in each country (Skeggs, 2003). The paper also identifies the benefits of partnership as minimized litigation, efficient time management, innovativeness, and cost management (Skeggs, 2003). The paper identifies the major elements of partnership as the contract and project delivery (Skeggs, 2003).
Opportunities for Forming Partnerships
Formation of partnership in large construction companies is a concept that has grown and has numerous advantages to be reaped such as skills, technical knowledge, management, organization, finance and so on. It is becoming increasingly difficult to operate singly in the construction industry given the transformations that are hitting the sector. Partnerships occur at various levels and in various fields. The formation of partnerships is mostly motivated by the difference in skill level, specialization, and input and the urge of meeting a common target ( Huth, 2012 ). One of the benefits to be derived from forming partnerships in construction companies include the privilege of sharing losses and profits, the convergence of skills and specialty, the freedom of enjoying less restrictions by government regulations, and sharing of starting capital, and an effective management of the supply chain ( Huth, 2012; Cartlidge, 2006). These benefits place a group of investors at an advantage ground of obtaining expensive contracts and sharing the costs and the specialization areas. A sole proprietor will find it difficult to bid for such mega projects given his narrow finances and the range of specialization. Another benefit relates to the pooling together of experienced leadership and management team, which will be important in the planning, and execution of transformative ideas (Pinto, Slevin, &English, 2009 ).
In the construction industry, the ability to win a contract is determined by the size of a company, its vastness in producing complex technologies and customer specifications; as opposed to other industries where companies major in producing homogeneous products, constriction companies have to produce unique designs over and over again( Vogt, 2011 ). These advantages are availed by the formation of partnerships with various constructors specializing in specific areas to help provide finance and logistics ( Chan &Cheung, 2014 ). Even though partnership has proven a strategic tool for many constructors, there are limitations to this option as discussed hereafter.
Challenges of Forming Partnerships
The formations of partnerships have limiting factors that impede the success of such complex entities. Some of these limitations include uncertain life, lack of harmonious operations, difficulty in the transfer of shares, and unlimited liability among others ( Bresnen,& Marshall,2010 ). In the case of unlimited liability, circumstances may occur requiring the parties involved to settle a liability; the case may end unfavorably for a single partner when he is required to settle all the liability incurred from his/her savings especially in cases involving architectural designs that are faulty ( Sido, 2006 ). Another case may involve opinions and managerial disagreements given each member's right to participate in the management, and decision-making process. When there is disagreement, the partnership may be closed, and this will be unhealthy for the business given its dependence on the presence of every partner ( Scribner, 2011 ).
Sometimes, a case may occur in which a partner decides to quite, dies or is incapacitated; the partnership will be dissolved given its lack of legal authority to continue beyond the lifespan of a single member who quits thereby creating the problem of uncertain lifespan (Ogunlana, 2003). The unpredictable lifespan of a partnership arrangement complicates the execution of construction tenders in case a member specializing in one area quits thereby crippling the entire team. Finally, the partnership may act as a rope tying a member to it given the consideration of each of the member's opinion in case one member needs to sell or transfer his share to an external party ( Hess, 2007 ). The partner will remain held against his wish until such a time that the partners will agree.
However, these factors can only impede the success of a partnership deal if the members involved entertaining practices that may lead to disagreements and hardship in the management of the partnership( Bresnen,& Marshall,2010 ). Despite the limitations, the benefits obtained from partnerships outweigh the limitations faced during the partnership transactions, which make it more attractive in the construction sector than doing a sole proprietorship.
The Outcome of Partnerships on Running Projects
In the construction sector, partnerships serve, as a life channel, enabling the achievement of great feats that otherwise would have been unrealistic under sole-proprietorship however large the single constructor may be. Some of the benefits reaped by the project from partnership include high-quality product achieved through specialized expertise, available resources and effective management and coordination of the project ( Gorod, White, Ireland, Gandhi & Sauser, 2014 ) . As noted earlier on, partnership pulls together a team with diverse experience obtained from repeated constructions and work with other teams. The members share a common interest which enhances watchfulness and determination to accomplish one’s part; the commitment is not evident where a sole proprietor has no one but himself and the customer to answer to ( Bovens, Goodin & Schillemans, 2014; Knipling, 2011 ). The sole proprietor is left to act from his whim, which may include disrespecting the customer's choice. Partnership, on the other hand, demands accountability that helps in achieving quality products or services. The time limit for achieving the project goals will also be shortened given that in partnership most of the resources are often availed requiring only the implementation and proper management of the resources ( Hughes, Hillebrandt, Greenwood, & Kwawu, 2006 ). Of great significance is the production of product and services that met the customer needs; when a project meets a customer need and is attractive to other potential clients, the construction will market itself and win the constrictors more job opportunities ( Kunitzky, 2010 ). Thus, the project will benefit highly regarding quality, time, efficiency and marketability having met all the requirements outlined by the customer as enabled by the large team of experts availed by the partnership deal.
The Outcome of Partnerships on Involved Parties
Construction partnership predisposes constructors to obtain several benefits that lead to the development of the partners and the construction industry as a whole. As noted earlier on, property development partnership brings together experts from various fields and unites them in the accomplishment of a single objective. Regardless of the method in which the contractors are contacted and enlisted for the job, the coming together of various constructors results in the knowledge transfer, innovations, and removal of old irrelevant knowledge and skills(Smith, 2017). Knowledge transfer will lead to the development of the constructors, which is also helpful to the progression of the construction sector by ensuring that new skills are added to old ones. In the end, given that partnership enables constructors to win big tenders, the formation of partnership helps in increasing profitability and minimizing of losses through sharing of liabilities and losses (Cain, 2008; Murray & Dainty, 2013).
Again, when partners come together and concentrate their skills, the production of a good product will help in marketing the team, which may end up working together in several projects unless the complexity of a given tax demands a reshuffling of the team (Pietroforte, 2002). In most cases, successful teams enjoy job security and have the added advantage of winning more tenders from the public and private sectors. Therefore, the constructor will gain new skills, earn higher profits, and enjoy job security from subsequent tenders as a result of successful completion and this will reflect in the development of the construction sector through stiff competition (Kaya, 2013).
The formation of a partnership in the construction sector involving the acquisition of large tenders from the government and the private sector is not a new trend but one that has grown and developed into a reliable strategy for winning tenders. The marketability of a constructor or construction company is enhanced by its size, which is an indicator of its ability to undertake large tenders. The formation of partnerships creates conglomerates that can bring resources together, skills and technology and thereby improve their chance of winning tenders. Such partnerships have great advantages such as the presence of experienced team, management, and skills, sharing of losses and liabilities and increased profitability. However, limitations such as disagreements on important decisions, the rest of the members cover the unlimited liability of a member, the unpredictable lifespan of such partnerships, and resignation or incapacitation of one member threaten their success. The partnership has helped to revolutionize the construction sector by enabling knowledge transfer and improved marketability and competition. The constructors also benefit through knowledge transfer, job security, and pooled profitability.
References
Bovens, M., Goodin, R. E., & Schillemans, T. (Eds.). (2014). The Oxford handbook of public accountability . Oxford: Oxford University Press.
Bresnen, M.& Marshall, N. (2010). Building partnerships: case studies of client-contractor collaboration in the UK construction industry. Construction Management and Economics, 18 (7): 819-832.
Cain, C. T. (2008). Profitable partnering for lean construction . Thousand Oaks, CA: John Wiley & Sons.
Cartlidge, D. (2006). Public-private partnerships in construction . New York, NY: Routledge.
Chan, A. & Cheung, E. (2014). Public-Private Partnerships in International Construction: Learning from case studies . New York, NY: Routledge.
Folinas, D. (Ed.). (2012). Outsourcing Management for Supply Chain Operations and Logistics Service . IGI Global.
Good, A., White, B. E., Ireland, V., Gandhi, S. J., & Sauser, B. (2014). Case studies in the system of systems, enterprise systems, and complex systems engineering . New York, NY: CRC Press.
Hess, S. A. (Ed.). (2007). Design professional and construction manager law . New York, NY: American Bar Association.
Hughes, W., Hillebrandt, P. M., Greenwood, D., & Kwawu, W. (2006). Procurement in the construction industry: the impact and cost of alternative market and supply processes . New York, NY: Routledge.
Huth, M. (2012). Residential Construction Academy: Basic Principles for Construction . New York, NY: Cengage Learning.
Kaya, K. (2013). ARGE–construction partnership in Germany: legal issues in cooperation with different engineering firms . Anchor Academic Publishing (AAP_Verlag).
Knipling, R. R. (2011). Safety Management in small motor carriers (Vol. 22). Transportation Research Board.
Kunitzky, R. (2010). Partnership Marketing: How to grow your business and transform your brand through smart collaboration . Thousand Oaks, CA: John Wiley & Sons.
Murray, M., & Dainty, A. (Eds.). (2013). Corporate social responsibility in the construction industry . New York, NY: Routledge.
Ogunlana, S. (2003). Profitable partnering in construction procurement . New York, NY: Routledge.
Pietroforte, R. (2002). Building international construction alliances: Successful partnering for construction firms . New York, NY: Routledge.
Pinto, J. K., Slevin, D. P. &English, B. (2009). Trust in projects: An empirical assessment of owner/contractor relationships. International Journal of Project Management, 27 (6): 638-648.
Scribner, M. (2011). The Limitations of Public-Private Partnerships Recent Lessons from the Surface Transportation and Real Estate Sectors . Competitive Enterprise Institute. Retrieved Sept 8, 2018, from https://cei.org/sites/default/files/Marc%20Scribner%20-%20The%20Limitations%20of%20Public-Private%20Partnerships.pdf
Sido, K. R. (2006). Architect and engineer liability: Claims against design professionals . London: Aspen Publishers Online.
Skeggs, C. (2003). Project partnering in the international construction industry. International Construction Law Review, 20 (4), 456-482.
Smith, A. J. (2017). Estimating, Tendering, and Bidding for Construction Work . London: Macmillan International Higher Education.
Vogt, J. (2011). Value Creation within the Construction Industry: A Study of Strategic Takeovers (Vol. 3). Peter Lang.
Wu, S., Greenwood, D., & Steel, G. (2008). Exploring the attributes of collaborative working in the construction industry. Northumbria Working Paper Series: Interdisciplinary Studies in the Built and Virtual Environment, 1 (2), 135-147.
