By Ron Pestone
“You think I’m crazy, I’m not going to share any of my ideas, thoughts or trade secrets with any of my competitors”. I have heard a version of this statement so many times from so many hard working contractors and every time I hear it I cringe. The problem is that this belief is so deeply embedded that to challenge it rivals the progressive thoughts in history like the world is round, not flat and that there is no fear of falling off the edge if you ventured past the horizon.
More contractors than not fear they will fall off the edge by sharing anything and as such believe it is much safer to stay put and play it close to the vest. With this article I bring great news, there is nothing to fear, the planet is round and there are great discoveries and opportunities out there.
Let’s start with the big boys. You know, the guys that are doing projects in the tens of millions and hundreds of millions of dollars. Names almost everyone in the business recognize, companies so many try to emulate. Now while these companies might seem awesome to the casual looker, a closer look reveals that many of the companies, if not all, joint venture many of their large projects. Many times they joint venture these huge projects with their keenest competitors. Why would they do such a dangerous thing? Why let their competitor into their organization? Well, they do it for bonding, banking, talent and for a desire not to stretch their resources to the breaking point. They do it because in our business it makes sense.
I have been involved in numerous joint ventures on large projects with a variety of companies and I have witnessed many others. In almost all cases the results have been positive. And at the heart of all joint ventures is the concept of sharing. Joint ventures start with the blessing that it permits two or more companies the ability to bid and produce a project that no single contractor in the joint venture had the ability to do alone. Bonding companies are conservative by nature and they have good reasons for that. They want to see good financials, excellent track records and lots of talent. They want to see a long line of continuous profits and while they might excuse a few failures they do not want to see a pattern of failure. They also want to see cash, lots of it. They want the cash they see to have sticking power. They do not want to see cash flooding in for a financial statement. They want to see a steady continuous flow over a long period of time. Just like building a brick wall, brick by brick firmly bound together until they have formed a strong permanent wall that can survive a storm. Most bonding companies have a philosophy based on the three little piggies. Remember the one that survived the wolf?
As important as cash is bonding companies like to see excellent banking relations, long term where credit lines have been granted, used and repaid, a relationship where the bank and the contractor are seen as being on the same team. When you put a couple of medium size companies together that meet these criteria you find bonding companies that are willing to issue bonds to this joint venture that is way above any of their individual bonding lines. This is true more so with larger companies. I have seen bonds issued for dollar values that mimicked the Gross National Product of many small countries. So, in short for these two reasons alone it makes sense to joint venture when the right project comes along.