by Ellison Clary,J
Joint venture is a buzz phrase in the state construction industry for a reason, says Dave Simpson of Carolinas AGC (Associated General Contractors). The arrangements are proliferating, including in the public building sector.
More general contractors are teaming up with each other, along with contractors and subcontractors, says Simpson, the North Carolina Building Director in the CAGC Raleigh office.
In a rough economy, “people are scrambling to survive,” he observes. With fewer dollars for construction and with greater competition, company executives are thinking innovatively.
Teamwork is a necessity as the NC Department of Transportation sends out more design-build projects, says Berry Jenkins, Simpson’s compatriot in Raleigh who is the NC Highway Heavy Division director for CAGC.
“The whole concept is predicated on DOT letting a contract where they give the team basic information,” Jenkins explains. “Then the team builds the project for a certain price.”
A giant joint venture is that of Archer Western Contractors and Granite Construction Co. on a 12.6 mile section of the Western Wake Freeway. The firms formed Raleigh-Durham Road Builders to work on the state’s first toll thoroughfare.
Dave Moyar, who came from Archer Western, is senior project manager for Raleigh-Durham Road Builders on the nearly $450 million job. Archer Western operates offices in Morrisville and Charlotte, with a regional hub in Atlanta. Granite Construction is from Watsonville, CA.
The size and complexity of work caused the partnership to make sense, Moyar says. On jobs this big, insurance companies encourage joint ventures, he continues, and adds, “It spreads the risk, so we’re not opposed to it.”
Though the road segment isn’t scheduled for final completion until mid-2013, Moyar already sees synergy among the 250 workers.
“The most pleasant surprise is how quickly we’ve jelled,” he says. “It happened because we have a common goal. The two firms have created a great marriage.”
A marriage is exactly what a joint venture is, says Bob Glusenkamp, senior vice president of Rodgers Builders. The Charlotte firm has been a partner in 25 joint ventures since the mid-90s.
“The cultures have to match,” Glusenkamp says. “At some point, tough decisions have to be made. You need to make them at the lowest level, preferably on the job site. You have to empower your people.”
The first Rodgers collaboration was with Hardin Construction of Atlanta on Belle Meade Retirement Community in Southern Pines. It succeeded because Rodgers brought strong healthcare experience and Hardin offered hospitality expertise.
Through the years, the two companies partnered on Charlotte’s huge Gateway Village as well as program management work at Central Piedmont Community College.
After a bond issue in 2000, Rodgers found partners to pursue construction manager at-risk projects at UNC-Chapel Hill and NC State.
Rodgers likes at-risk because owners choose contractors based on qualifications, yet the contractors must come together to provide a teaming structure. Since about 85 percent of any contract pays subcontractors which bid competitively, Rodgers doesn’t believe the method entails more client cost.
Other Rodgers partners have included the Walter B. Davis Company, The Rentenbach Companies, R.T. Dooley and Balfour Beatty. On student housing at UNC Charlotte, Rodgers is paired with H.J. Russell & Company of Atlanta, the country’s largest African-American-owned outfit, which keeps a Durham office.
Recently, the office for Historically Underutilized Businesses presented the Rodgers-Russell combination its Good Faith Efforts Award.
“They have the same philosophy we do,” Glusenkamp says of Russell. “We’re partnering to develop small minority companies.” An example is DayeCo Construction Company of Durham which has helped on sites at NC Central and NC State.
“The goal is to see DayeCo compete against us,” says Glusenkamp. “We would rather compete against good-quality companies.”
Richard Conner, partner at Conner Gwyn Schenck in Greensboro, injects a legal caution: A joint venture is a contractual business undertaking. “It’s very important that the agreement clearly identify the purpose of the joint venture and the rights and responsibilities between the parties. And it should be reduced to writing.”
Federal government work is another area where joint ventures are popping up, says Joe Angell, Department of Defense program manager in the Raleigh office of Vanasse Hangen Brustlin, Inc., headquartered in Massachusetts. It’s primarily a consultant and design firm.
“Partnerships bring a competitive advantage,” Angell says. “When Company A has a skill in site development and Company B has a skill in building, why not form a joint venture?”
As director of the North Carolina chapter of the Design-Build Institute of America, Angell promotes partnerships and is seeing a big up-tick. He praises the NC Military Business Center for its help.
Jennifer Burrell-Willson is a military construction specialist in the Fayetteville headquarters of the NC Military Business Center that operates satellite offices around the state. She lists three reasons for more joint ventures and teaming arrangements.
First, project size is mushrooming. The average large project used to be around $20 million but now jobs go past $100 million, mostly because the government feels a greater need to combine projects.
“There’s an increase in the design and construction of complexes at Camp Lejeune and Fort Bragg that include barracks, dining halls and operations facilities that are combined into one procurement,” she says. “So you see some awards in North Carolina in the $100 million to $200 million range.”
For survival, many contractors are moving into the government sector, so the government establishes more stringent selection criteria as competition grows.
“Sometimes it’s in the best interest of contractors not only to combine their forces for execution but to combine their experience and qualifications to present better for selection,” Burrell-Willson says.
Finally, federal small business procurements are getting bigger, she says, some up to $15 million or more. In response, small businesses are teaming to expand capacity and qualifications. Further, the Small Business Administration is encouraging mentor-protégé arrangements for socially and economically disadvantaged businesses.
With a different view on that subject is Katie Tyler, president of Tyler 2 Construction Inc. in Charlotte.
“Frankly, I don’t want to partner with somebody that only sees me as somebody that’s going to help them get a job,” says Tyler, whose firm has participated in arrangements she prefers to call strategic alliances.
Her firm participates in such alliances when they make sense by benefiting all parties, she added.
Tyler 2 cooperated with Charlotte’s FN Thompson when the Charlotte campus of Johnson & Wales University requested such an arrangement on a student residence building. Later, Tyler 2 was the lead company in an association with FN Thompson on a building for Charlotte’s Carolina Neurosurgery & Spine Associates.
“We as individual organizations know more than we think we do and have strengths we may not recognize until we have the opportunity to use them,” Tyler says. “We at Tyler 2 discovered the strengths of communication, paperwork and job-cost control. We’re good at those and better than other companies who had a whole lot more history.”
Currently, Tyler 2 is fast-tracking a 60,000-square-foot structure for Carolinas HealthCare System in an alliance with three major subcontractors. “We’re calling it an innovative design process,” she says.
Tyler suggests four important questions to answer before pursuing any collaboration: What is the reason? What are the strengths of each firm? What would be missing without an alliance?
And the most important, she says, is: “How does this benefit the client?”