Strength in Numbers

Service/Maintenance August 2020
Published On
Aug 14, 2020

Electrical contractors form joint ventures for many reasons: to improve their competitive position to win a contract that they have targeted, for new construction or for service and maintenance.

No matter the motivation, electrical contractors should never feel reluctant to seek the additional strength that a joint venture can provide. Major public corporations with far greater resources than any EC on the planet form joint ventures all the time for the same reasons. Here are a few examples.

Combined expertise

Early in the COVID-19 pandemic, healthcare institutions sounded an alarm about the shortage of breathing-assistance ventilators for coronavirus patients. In a lightning-fast response to this overwhelming need, Minneapolis-based medical device company Medtronic stepped up production of ventilators. The company took an even more important step: it rushed to collaborate with Intel to produce a modified ventilator that could be monitored remotely from outside any patient area, better protecting healthcare workers. Thanks to this collaboration—which took place within a matter of weeks—these new ventilator units were soon up and running in intensive care units. This lesson in the power of combined expertise can be applied to joint ventures in electrical contracting, sometimes in situations that carry a comparable level of importance to the community.

Hometown advantage

Recently, a French company partnered with a Chinese company to develop offshore wind farms in China. The offshore wind market is steadily growing, and, in China, it reportedly has been booming. The news of this new Sino-French collaboration stands out because it comes at a time when the Chinese are loosening their long-standing requirements for outsiders to form JVs.

This example of a business deal halfway around the globe dramatizes the point that, while there has never been a strictly legal requirement for an electrical contractor—traditionally referred to as a traveling contractor—to team up with a hometown company in certain markets, there has always been an abundance of practical reasons to do so. The law might not require it, but good judgment dictates it. Incidentally, this lesson applies to many other fields.

Financial requirements

One of the most celebrated construction industry collaborations of all time, Six Companies Inc., was formed 90 years ago for building the Boulder Dam, now Hoover Dam. Though at the time the contractors involved were some of the biggest builders in the country, none of the individual companies on its own could secure a performance bond of the magnitude required. This would be the largest single project ever funded by the U.S. government up until then. Only through collaboration could the contractors meet the surety requirements.

A new JV business model

Classic reasons to form joint ventures—combined expertise, hometown advantage and financial requirements—have led to fortunate outcomes through the years for electrical contractors in situations where they could not go it alone. Up to now, joint ventures have essentially remained the same in their general form.

An innovative JV business model could take hold in the new normal that is already well underway, along with so many other alterations to the course of business.

Most JVs have been two-company, project-related partnerships. For example, a pair of electrical contractors teaming up to tackle a supersized contract for a massive new facility. But there very well could be opportunities in which one EC took the lead to deliver service and maintenance solutions in partnerships with a large number of hometown firms throughout a region or across the country. The one-to-many business model opens up a whole new realm of possibilities enabled by the technology available today.

A one-to-many joint-venture model could deliver electrical service and maintenance solutions in multiple market areas with the kind of uniform national coverage that we have come to take for granted in other fields. Imagine regional or national design-build-operate developers that could use the fiscal confidence of the same partner for operations across many markets.

As the center of gravity in the electrical industry shifts away from the basic products and services that were historically marshaled to illuminate and power the country toward more complex systems with constantly-advancing technologies, a one-to-many JV model could provide much-needed service and maintenance solutions.

About the Author

Andrew P. McCoy and Fred Sargent

SARGENT is an electrical industry consultant focusing on service expertise. He can be reached at MCCOY is the Preston and Catharine White Fellow and department head of the Department of Building Construction in the Myers-Lawson...

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