Term Paper on "Negotiated Tendering Partnering"

Term Paper 19 pages (6415 words) Sources: 1+

[EXCERPT] . . . .

Negotiations (Tendering)

Partnering for Innovation and Maximizing Profits

Negotiated Tendering, another term for partnering, is an integral part of the construction industry. Seldom does one company possess all of the skills and labor necessary to complete a job by them. The construction industry has specific guidelines to help companies operate in a relationship that is beneficial and avoids conflict situations. Conflict is costly in legal expenses, time lost, and the degradation of the relationship. The best solution to resolving conflicts is to avoid them in the first place. The following will explore literature regarding the hypothesis that partnering is the key to the formation of innovative relationships. Innovative relationships result in maximizing profits by taking advantage of the innovations of both companies and by avoiding costly legal battles. This research will explore the elements that result in a successful partnership and those that can undermine the ability to develop a successful partnership.

What is a partnership?

Partnering, in its most simplistic form, means people working together. It construes a voluntary system of handling normal, everyday jobsite construction problems in a mutually agreeable manner. The goal is to resolve conflicts before they turn into major issues that result in costly lawsuits. There is nothing mysterious about partnering, but it does require the right attitudes from all parties involves. In a partnering relationship all stakeholders resolve problematic issues by peacefully employing a positive and cooperative attitude. The partners must be able to focus on the big picture and common goals, rather then individual wants and needs.

Real world problems are complex. The first step prior to negotiations is to narrow the focus of the problem and clarify what is needed to resolve the issue. Service means a willingness to meet the client's needs. Endless contract-based disputes can jeopardize the ability of companies to meet the service needs of the client. The client must be the primary focus of all parties involved. Taking the time at the start of the project to identify common goals, common interests, lines of communication, and a commitment to co-operative problem solving, and organisational structure will encourage dispute resolution and the ability to achieve project goals.

Partnering means establishing a working relationship among all team members that is based on co-operation, teamwork and achievement of mutual goals and objectives. Structured organizational learning is a key element in the ability to develop cohesive teams. Partnerships have a long-term viewpoint, whereas lesser relationships tend to focus on short-term gains for selfish reasons. Building team cohesiveness occurs on several levels. The first level is within the individual companies that will be involved in the negotiation process. The second level of team cohesiveness arises from the common objective of serving the needs of the client. All companies must share in the accomplishment of job objectives and strategies. At times there may be a conflict between team goals within an organization and team goals between organizations.

The first step in developing effective partnerships on the job site is to gain an understanding of the value of partnerships and strategic alliances. However, it is not enough to simply desire to develop these types of relationships. Developing sustainable relationships means knowing the hallmarks of a successful relationship and the characteristics of an unsuccessful relationship. Both sides must be committed to the maintenance of the relationship and be aware of situations that could harm the relationship.

When many people think of partnering and negotiations, they refer to lawyers and contracts in their lexicon. However, partnering and strategic alliances mean more than legal agreements and the enforcement of individual rights. Partnering means creating a positive and supportive environment that nurtures relationships that will endure not only for the present contract, but that may lead to further collaboration in the future. As one can see, partnerships and strategic alliances are much more complex and involve a number of psychological and sociological factors that go beyond the initial contract negotiation phase.

The Anatomy of a Strategic Alliance

Strategic alliances in the construction industry have many characteristics that are unique due to the nature of the industry. In addition, each and every jobsite has conditions that are only applicable to it. However, these differences aside, strategic alliances have many things in common with any other strategic alliance. The strategic alliance is a joint venture that can be formed for many reasons.

The most common reasons for forming a joint venture are cost-sharing, conflict management, or the complete merger of two companies (Lexis-Nexis 2006). The strategic alliance comes together for a specific purpose and for the accomplishment of a defined task or goal. There are several legal reasons for forming a strategic alliance. The first is to create an organization that can better compete in the marketplace (Lexis-Nexis 2006). Sometimes the partnership is designed to roll-up different organizations into a single legal entity. However, this is not typically the case in the construction industry, with a majority of the projects. Most partnerships in this industry are formed for the accomplishment of a defined task with a specific start date and end date. Partnerships make all of the organizations involved stronger, both economically and in their ability to combine resources to get the job done.

As one can see, there are many advantages to forming a strategic alliance or partnership. However, there are several disadvantages as well. One of the key disadvantages of strategic alliances is that many of them fail (Lexis-Nexis, 2006). The failure of a strategic alliance can cause more harm to the entities involved than if they had never formed in the first place. The old adage, "nothing ventured, nothing gained" may hold true, but one must also consider the downside in every business venture. In some cases the gains and loses may be personal, but on other hand, they may also place the entire project in jeopardy. Before embarking on a partnership, one must carefully weigh the risks and advantages to each.

According to Lexis-Nexis, there are several considerations that must be considered before entering into a strategic alliance of any type. These factors apply to the construction industry, just as any other joint venture. The points to consider are:

Costs of operating

Ownership and control

Profits and losses

Labor and employment laws

Potential liability exposure

Insurance coverage

Tax consequences

Regulatory hurdles

Administrative issues

Marketing angles

Many of these factors are not under control of the parties involved, such as labor and employment laws and regulatory hurdles. However, many of these factors can be terms of negotiation between the two parties. Administrative issues, ownership and control are important elements in the formation of the partnership. The amount of legal planning depends on the nature of the alliance and the goals of the partnership.

Many times on the construction site companies are together as a result of the job award and proposal process. They do not have the luxury of choosing with whom they will work. The owner or their representative is often responsible for hiring the various contractors involved in job completion. In some circumstances the owner will hire a general contractor, or project manager to oversee and coordinate the various entities involved. In this case, the organization and relationships are the result of external forces and not the result of individual negotiations. The general contractor will make the rules and will be the solve person responsible for dispute resolution. They act as a communication line between the contractors and the owner of the building or project.

In this type of scenario, relationships among various contractors may be strained or difficult. The contractors may have different structures and organizational cultures that affect their ability to work together for common goals. Sometimes the contractor may have to work with a partner that they would have avoided in any other situation. This creates a strained or difficult relationship at best. However, with the proper skills and knowledge, both parties can learn to work together for the benefit of everyone involved.

Determinants of Successful Alliances

Now we know that forming a partnership can lead to many benefits for both parties involved. There may be concerns that need to be addressed so that the relationships will be able to flourish. No that we know what a strategic alliance is and how it differs in the construction industry, let us turn our attentions to what elements will increase the likelihood of a successful strategic alliance.

No where has the importance of strategic alliances been more evident than in the global aerospace industry. Joint ventures are common in this industry and are the norm in order to maintain the global nature of the market. Studying the business relationships in this industry can give us a glimpse into the problems and solutions that may exist in other industries as well. Dussauge and Garrette (1995) examined relationships in the global aerospace industry and found several important findings that impact modern procedures on a global basis.

The most difficult partnership to form is that which is between former competitors. For instance, two plumbing contractors may have to… READ MORE

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