Long-term capital projects can be daunting and difficult to tackle alone. By partnering with other organizations for mutual benefit, companies can realize up to a 30% reduction in schedule and between 15% and 30% cost savings (McKinsey & Company, 2021)1. Through partnership, businesses gain access to skills, resources and relationships that would otherwise be inaccessible or too risky to pursue on their own. In this blog post, we will explore the various benefits of partnering in capital projects – from surface-level impacts to long-term effects – as well as potential risks associated with the process. With strategic collaboration and intelligent decision making, companies can unlock the power of partnership to launch successful capital projects.
Benefits
1. Shared Resources
When multiple businesses are working together on a project, they can share complementary resources and expertise. The combination of knowledge, technology, skills, and capital strengthens the competitiveness and capabilities of all partners. (Chan et al, 2004)2
2. Cost Savings
Partnering can lead to cost savings. The immediate impact can be seen in resource sharing where overhead costs such as mobilization, recruitment and HR could be combined. Digging deeper, cost savings may be realized on expenses such as materials, labor, and equipment through scale or supplier relationships. Deeper still could be alternatives to achieve the same goals in different ways or leveraging the same changes in a project to achieve more. These are savings that can be passed on to the customer!
3. Improved Quality
Businesses that have partnered can share ideas and expertise to ensure the final product is of the highest possible quality. Having multiple businesses working together, each partner can leverage their unique skillset and avoid staffing for roles outside of their niche. With established best practices they can identify what will deliver a quality project and ensure that the level of quality is maintained.
4. Enhanced Reputation
Partnerships can often lead to each partner contributing to the reputation of the others involved. Working with other reputable businesses can help to increase confidence in the process, and show the team is committed to delivering high-quality work. Upon successful completion, each partner now has a reputation of ensuring they have the best teams available to achieve a goal.
5. Access to New Markets and Tools
Partners can often provide each other with access to new markets and tools. Through exposure to more ideas, connections with new suppliers, or highlighting different capabilities, each partner may have the opportunity to utilize new tools and solve problems in new ways through previously inaccessible markets.
6. Risk Mitigation
Multiple businesses partnered together can share the risk associated with capital projects. This can help achieve a goal that may have been out of reach financially for any one company and reduce the financial burden if a project does not go as planned. Additionally, with shared risk, businesses are more likely to continue working together through any bumps along the way.
Risks
1. Differing Goals and Objectives
Partnerships may be confronted with the risk of two businesses having different goals, objectives, and expectations. One business may be focused on ensuring quality, while the other may be more concerned with maximizing profits. While both focused on completing the project, it may create conflict about how to address various phases of large-scale capital work.
2. Difficult to Manage Relationships
Relationships between partners can sometimes be difficult to manage. Disagreements between businesses or even individuals at each can take time to resolve causing delays or other problems. Additionally, if one business is not performing to expectations, it can reflect poorly on both damage the relationship between businesses as well as reputation with customers.
3. Cultural Mismatches
Meshing how different partners participate in capital work can be difficult, from general communication, to meeting times, and even storage solutions, the workplace culture can create difficulties. One team may generally use email for traceability whereas another may prefer face to face meetings or phone calls for a more personal touch. Additionally, work schedules and time-zone differences may lead to scheduling conflicts and breaking up how a team generally gets work done. Furthermore, one partner may prefer local storage and sending files via email, or another cloud storage, or yet both could use different cloud storage solutions. These details can all cause early project stress and make completing capital work more difficult.
4. Unclear roles and responsibilities
Relationships between partners can sometimes be difficult to manage if clear roles and responsibilities are not defined. Who has final say? Who is responsible for specific items? In some instances where each partner has specific expertise it can be obvious, but where overlap occurs, it can lead to issues. Without identifying responsibilities work may be duplicated, decisions may not be made, or deliverables could be missed.
Conclusion
Leveraging the expertise of another organization can be a great way to deliver on large-scale projects, but it’s important to understand both the risks and benefits before entering any partnership. By taking the time to assess your needs and priorities, you can ensure that any partnerships you form are in line with your goals and help you reach new levels of success.
If you’re looking to expand into life science capital work, give us a call or send us an email. Our team of experts are ready to help you navigate the world of large-scale capital projects.
Gearoid O’Sullivan
Email: Gearoid.osullivan@wmeng.com
Cell: (207) 956-2219
References
1 Shankar Chandrasekaran, Steffen Fuchs, Shakeel Kalidas, Gerhard Nel, Prakash Parbhoo, Mckinsey & Company, 2021, An ecosystem of partners: The foundation of capital project excellence, https://www.mckinsey.com/capabilities/operations/how-we-help-clients/capital-excellence
2 Albert P.C. Chan, Daniel W.M Chan, Y.H. Chiang, B.S. Tang; Edwind H.W. Chan, Kathy S.K. Ho, 2004, Exploring Critical Success Factors for Partnering in Construction Projects, Exploring Critical Success Factors for Partnering in Construction Projects | Journal of Construction Engineering and Management | Vol 130, No 2 (ascelibrary.org)