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(PM-994) Long Term Objectives are Beneficial for JV Partners

Primary Author: Todd M. Vandenhaak, PE CCE CFCC
Co-author(s): Carlos Manuel Vara, CFCC PSP

Audience Focus: Basic
Application Type: Experience-Based
Venue: 2012 AACE International Annual Meeting, San Antonio, TX, USA

Abstract: In large industrial projects where a general contractor wraps engineering, procurement and construction into a combined agreement, the EPC party often encompasses a designer and/or multiple contractors joined together under a joint venture agreement. This results in complicated relationships that can influence the execution of the project and prompt questions regarding project management. Who should be the lead from the owner’s perspective? Which party is better equipped to manage and oversee the process from design to completion? Without consideration of these questions, simple internal conflicts and differences may trigger significant delays and cost overruns while the owner is not receiving proper notices and communication. How can the owner avoid these when selecting a JV team for a project?

There is no shortage of actual project overruns and delays to help examine the pros and cons of JV arrangements, and the potential root causes for these issues often form the basis of disputes. These examples demonstrate that it is in the owner’s interest to attempt to influence the structure and risk-sharing mechanism between joint venture partners.