Business Excellence-Enhancing Project Returns : Financial and Project Management Strategies

By Dr Punit Sethi, PhD

Excellence in Strategies/PM
(continuous stream of successfully managed)

Time Cost/ROI Performance Customer Relation Internal

Internal Metrics Culture Work Flow

5Ms
Men Material Machine Money Minutes

Value Engineering
Reduce Cost Improving Function (improving functionalities & performance)

Joint Ventures as Financial & PM Strategies

Joint ventures (JV)

to carry out a specific project or simply to assist with the growth and continuation of a business. For success and enlarging Business. To meet Technical and Financial Qualification.

JV
Business Agreement for finite time, a new entity & new asset-contributing equity. Good JV- Comprehensive Map of duties & obligations; minimizes complications.

Consideration for JV
What is being achieved Exclusive Negotiation Confidentiality (Undertaking) ? Limitations of Territory

What consents, approvals, licenses and permits are necessary for JV to operate?
If cross border whos jurisdiction?

Laws of foreign ownership and investment.

Exchange controls, Relevant Taxes and Duties

Funding
Own Resources External Resources Parties payment in cash or payment in kind such as expertise and resources Must agree to percentage (%) of benefit for JV. Working Capital requirement.

Any losses.
Expansion Costs.

Advantages : JV For new products and latest technology entering into market, R & D of others joint venture allows two competitors to join forces, increase their market exposure, and compete at a higher level against other, more powerful companies in the same industry. It also allows two connected businesses to cooperate on a joint project in a certain market.

Advantages : JV In India, going for JV has become essential for most of the Indian Companies as per Government norms/rule position even for Pre-Qualification for qualifying to go to next stage of bidding. Desires technical experience forces Indian Companies to go for JV e.g Technical Capacity for purpose of evaluation (Project experience /Construction Experience on Eligible Projects in Highways Sector (Highways, Expressways, Bridges, Tunnels and Airfields) or Core Sector (Power, Telecom, Ports, Airports, Railways, Metro Rail, Industrial Parks/estates, logistics parks, pipelines, irrigation, water supply, sewerage and real estate development).

Disadvantages : JV Negotiating a joint venture can be complex and time consuming. It involves thorough research of the market and territory in which the products will be sold or the project will be organized.

Joint ventures can be expensive to set up initially.

Action Checklist Study any joint venture you might set up carefully. Obtain as much information from as many sources as you can before committing to an expensive joint-venture agreement. Plan it carefully and set up a realistic business plan with your business partner.

Know your market and make sure that you have analyzed the consequences for your own business of entering into a jointventure agreement.
Economize by negotiating a reasonable rate with your legal advisers, but remember that it is better to incur costs by obtaining legal advice than to enter into a joint venture under terms that you do not understand.

Dos and Donts

Do Choose your partner in the joint venture carefully, as you will be legally bound for a set period of time, under obligations that will prove costly if they are not successfully performed.

* Involve your solicitors in the evaluation of both the risks and potential benefits of entering into a joint venture. * Negotiate your rates and make a contingency plan for any cost over-run. Plan carefully how the joint-venture will operate, how the profits will be distributed and who will take responsibility for what.

Dos and Donts

Do

* Remember to have appropriate stake in JV to get your experience considered on your own for next Project. (like NHAI says minimum equity of 26% for any earlier projects to be in eligible category to claim experience).

Dont

Dont make the mistake of being attracted by the idea of a joint venture that has not been thoroughly planned and thought through.

* Dont overlook the importance of setting up a contingency plan in case the joint venture will not work and the relationship breaks down.

FIDIC for Financial & PM Strategies

Knowledge of FIDIC
(e.g especially International Bidding; Model Concessionaire Agreement) Knowledge of FIDIC. The acronym FIDIC stands for Fdration Internationale Des Ingnieurs-Conseils, French for the International Federation of Consulting Engineers. The founding member countries of the FIDIC were Belgium, France and Switzerland Located at the World Trade Center in Geneva, Switzerland, FIDIC aims to represent globally the consulting engineering industry by promoting the business interests of firms supplying technology-based intellectual services for the built and natural environment. FIDIC is well known in the consulting engineering industry for its work in defining Conditions of Contract for the Construction Industry worldwide; code of ethics-fair, unbiased, impartial.

FIDIC

Companies and organizations belonging to FIDIC national member associations are encouraged to announce themselves as FIDIC members and use the FIDIC logo. The use of the logo is strictly controlled, and all FIDIC products and services are protected by the FIDIC trademark.
*

The backbone of the body of FIDIC's publications is FIDIC's selection of contracts and agreements.
FIDIC publishes conditions of contract for: EPC/Turnkey Projects Plant and Design Build Contract (updates Yellow Book and Orange Book)

The Short Form

Construction Contract (updates the Red Book) Works of Civil Engineering Construction (The Red Book) Electrical & Mechanical Works (The Yellow Book)

Design-Build and Turnkey (The Orange Book)

In 1999, a suite of three new conditions of contract was published by FIDIC, following the basic structure and wording harmonised and updated around the previous FIDIC Design-Build and Turnkey Contract (the 1992 Orange Book). These conditions, known as the FIDIC rainbow, were the Conditions of Con- tract for: l Construction, the so-called Red Book, for works designed by the Employer l Plant and Design-Build, the so-called Yellow Book, for works designed by the EPC/Turnkey Projects, the so-called Silver Book, for works

Contractor l designed by the

Contractor

Red

Construction Civil Engr

Employer Contractor

Yellow Plant D & B E & M (Orange) Silver EPC T/K Green Short Gold DBO/Long White E & C -------------------------

Employer Employer Contactor Employer

Blue

Dredging & recla

------ Employer

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