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Assessment of the critical success factors of joint
ventures in the South African construction industry
by
BUHLE MANITSHANA
A dissertation submitted to
THE FACULTY OF ENGINEERING AND BUILT ENVIRONMENT
At the department of
QUANTITY SURVEYING AND CONSTRUCTION MANAGEMENT
At the
UNIVERSITY OF JOHANNESBURG
In partial fulfilment of the requirements for the Degree
Masters of Technology in Construction Management
Supervisor: Prof W.D. Thwala
October, 2012
i
Declaration
I, Buhle Manitshana, hereby declare that the research study done on "Assessment of
the critical success factors of joint ventures in the South African construction
industry" is my own work and that all the sources used or quoted through the study
have been indicated and acknowledged by means of complete references. Authors
who have not been cited but whose work has significantly contributed to the thinking
and formation of the study have also been granted due acknowledgement in the
references. Furthermore, this report has not been submitted in any other university or
higher education institution for any degree or examination. It must lastly be noted that
although recognition of fellow researchers has been acknowledged, the study
expresses my own opinions and not necessarily those of the University of
Johannesburg.
----------------------- ------------------------- -----------------------
Signature Student number Date
ii
Dedication
I dedicate this research study to my late father Sibewu Thomas Manitshana and my
ever supportive mother, Lulama Patricia Manitshana.
Tata I know that where ever you are, you are proud of me. Although you are not here
to celebrate with us yet your spirit still lives within us.
Lastly, I would like to thank my parents for the lessons that they taught me and for the
selflessness of sacrificing all that you did to ensure that I got the best education they
could afford.
It is as a result of this that I dedicate this to you…
iii
Acknowledgements
� Firstly I would like to thank my heavenly father, Lord Jesus Christ, for the
endless strength, courage and inspiration to complete this research.
� To my supervisor, Professor Wellington Didibhuku Thwala, indeed you are
not just a mentor, leader and a guardian, but you are beyond that. I thank you
putting up with the endless promises and disappointments that I brought at
times. Your input, assistance and continued belief in me carried me to this
point. I sincerely thank you Prof.
� I would also like to thank the University of Johannesburg library staff for all
the trainings and assistance in acquiring and finding of the required literature.
Mr Clinton sir, your efforts have also not gone unnoticed.
� I further thank my “driver”, indeed you are as precious as your name says.
Thank you to Mtwana for the support and to Bori for being an example all the
time. You guys know that I look up to you.
� Last but not the least I want to thank the dream team. Wilda and Godfrey,
without your support and encouragement my friends, I am certain that I would
not have completed the study in the given time. You guys are truly a blessing
in my life.
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ABSTRACT
The aim of the study was to assessment of the critical success factors of joint ventures
in the South African construction industry. The study strived to further establish the
benefits and sustainability of contractor joint ventures between established contractors
and small and medium contractors in the industry. In undertaking the study, primary
data relative to contractor joint ventures was obtained by means of an administered
questionnaire to one hundred and twelve (112) contractor representatives in the South
African construction industry that had partaken or had an involvement in a joint
venture project, to both the established and small and medium contractors. The
findings indicate that multiple factors lead to the successfulness of contractor joint
ventures, among these however, the main factors found to be efficient planning,
commitment, trust, communication and comprehension. Other findings included the
main benefits of both emerging and established contractor as well as the factors that
can be used to measure the success of joint ventures. The research limitations can be
said to include the fact that the study focused only on contractors that had previously
taken part in a joint ventures project in Gauteng.
v
TABLE OF CONTENTS Page
Declaration...................................................................................................................................... i
Dedication.. .................................................................................................................................... ii
Acknowledgements ...................................................................................................................... iii
Abstract ......................................................................................................................................... iv
List of Abbreviations ................................................................................................................... xi
List of Figures ............................................................................................................................. xiii
List of Tables .............................................................................................................................. xiv
CHAPTER 1 ...................................................................................................................................1
1.0. Background ...........................................................................................................................1
1.1. Problem Statement ................................................................................................................2
1.1.1. Sub-problems ..............................................................................................................2
1.2. Objective ..............................................................................................................................2
13. Motivation of the study .........................................................................................................3
1.4. Significance of the study ......................................................................................................3
1.5. Literature review ..................................................................................................................3
1.6. Research Methodology ........................................................................................................6
1.7. Ethics....................................................................................................................................7
1.8. Outline of Chapters ..............................................................................................................8
1.9. Conclusion .........................................................................................................................11
CHAPTER 2 .................................................................................................................................13
2.0. Literature review on Malaysia ...........................................................................................13
2.1. Introduction ........................................................................................................................13
2.2. Definition of a joint venture ...............................................................................................15
2.3. Types of contractor joint ventures .....................................................................................17
2.3.1. A joint venture agreement .......................................................................................17
2.3.2. A Consortium ..........................................................................................................18
2.3.3. A Partnership ..........................................................................................................19
2.4. Causes of joint ventures in Malaysia .................................................................................21
vi
2.5. Benefits of joint ventures in Malaysia ...............................................................................23
2.6. Factors that attribute to the success of a joint venture in Malaysia ...................................26
2.7. Sustainability measures ......................................................................................................28
2.8. Conclusion .........................................................................................................................29
CHAPTER 3 .................................................................................................................................32
3.0. Literature review on the United Kingdom .............................................................................32
3.1. Introduction……..….. ...........................................................................................................32
3.2. Background on the UK construction industry ..................................................................32
3.3. History of Joint ventures in the UK ..................................................................................33
3.4. Various forms of contractor joint ventures in the UK ......................................................34
3.4.1. Joint venture agreements.........................................................................................35
3.4.2. Strategic alliances ...................................................................................................35
3.4.3. Project based collaborations ...................................................................................37
3.4.4. Partnerships and Consortiums ................................................................................37
3.5. Causes of Joint ventures in the UK ...................................................................................37
3.5.1. Pooling resources ...................................................................................................39
3.5.2. Sharing of risk .......................................................................................................39
3.5.3. Entry to foreign markets .......................................................................................40
3.6. Benefits of joint ventures in the UK ................................................................................41
3.6.1. Increased client satisfaction .................................................................................42
3.6.2. Increased the range of expertise ...........................................................................42
3.6.3. Inter-organizational learning ................................................................................42
3.6.4. Risk and liabilities can be shared by the contractors ...........................................43
3.6.5. Increased contractor performance on site. ...........................................................43
3.6.6. Access and entry to new markets .........................................................................43
3.6.7. Staff development and satisfaction ......................................................................44
3.6.8. Better understanding between partners ................................................................44
3.6.9. Improved buildability...........................................................................................44
3.6.10. Better predictability of time and cost .................................................................45
3.6.11. Stability ..............................................................................................................45
3.7. Success factors in the UK ................................................................................................45
3.7.1. Commitment ........................................................................................................46
3.7.2. Mutual objectives .................................................................................................46
vii
3.7.3. Continuous improvement .....................................................................................46
3.7.4. Selection ...............................................................................................................47
3.7.5. Communication ....................................................................................................47
3.7.6. Teamwork ............................................................................................................48
3.7.7. Trust and openness ...............................................................................................48
3.7.8. Political stability ..................................................................................................49
3.7.9. Legal factors .........................................................................................................50
3.7.10. Cultural factors...................................................................................................50
3.7.11. Technical factors ................................................................................................50
3.7.12. Managerial/Organizational factors .....................................................................51
3.7.13. Economic factors ...............................................................................................51
3.7.14. Environmental factors ........................................................................................51
3.7.15. Social factors ......................................................................................................51
3.7.11. Sustainability of joint venture initiatives in the UK ...................................................52
3.7.12. Conclusion ..................................................................................................................53
CHAPTER 4 .................................................................................................................................55
4.0. Literature review on Ghana .............................................................................................55
4.1. Introduction .....................................................................................................................55
4.2. History of the Ghanaian construction industry ................................................................55
4.2.1 Overview of the Ghanaian construction industry ..................................................56
4.2.2. Current state of the Ghanaian construction industry .............................................57
4.3. Contractor grading in the Ghanaian construction industry .............................................59
4.4. Types of joint ventures.....................................................................................................60
4.5. Benefits of joint ventures .................................................................................................61
4.5.1. Access to new or foreign markets .........................................................................62
4.5.2. Procurement advantages .......................................................................................63
4.5.3. Skills Development ...............................................................................................64 4.5
4.5.4. technology transfer ..............................................................................................64
4.5.5. Improved Profitability ............................................................................................65
4.5.6. Inter-organizational learning ..................................................................................65
4.5.7. Improved productivity ...........................................................................................65
4.6. Benefits of joint ventures 65
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4.7. Sustainability…………………….....................................................................................69
4.8. Projects ..............................................................................................................................69
4.9. Conclusion ........................................................................................................................70
CHAPTER 5 .................................................................................................................................72
5.0. Literature review on South Africa ...................................................................................72
5.1. Introduction .....................................................................................................................72
5.2. History of the South African construction industry .........................................................74
5.3. Legislation on joint ventures in South Africa .................................................................76
5.4. Contractor Development Programmes (CPD) .................................................................77
5.4.1. Reasons and aims of contractor development programmes .................................78
4.4.2. Overview of some of the contractor development programmes ...........................79
4.4.3. Challenges faced on South Africa’s National CPD ..............................................79
5.5. Construction Industry Development Board (CIDB) ........................................................80
5.5.1. What CIDB is and its role in the S.A. construction industry ...............................81
5.5.2. Background and history of the CIDB ..................................................................81
5.5.3. Mandate of the CIDB ...........................................................................................82
5.5.4. Register of Contractors ........................................................................................82
5.6. Women in Construction 84
5.7. Reasons for joint ventures……………………. ...............................................................85
5.8. Benefits of joint ventures……………………. ................................................................86
5.9. Success factors of joint ventures……………………. .....................................................88
5.10. Conclusion .....................................................................................................................89
5.11. Lessons learnt from international and South African literature .....................................90
5.11.1. Differences .........................................................................................................91
5.11.2. Similarities .........................................................................................................92
CHAPTER 6 .................................................................................................................................94
6.0. Research Methodology ..................................................................................................94
6.1. Introduction ....................................................................................................................94
6.2. Where the research was undertaken ...............................................................................94
6.2.1. Municipalities within Gauteng ............................................................................95
6.2.2 Brief history and various name changes of Gauteng ...........................................96
6.2.3 Post-apartheid political background ....................................................................96
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6.2.4. General information on Gauteng ........................................................................96
6.2.5. Economy of Gauteng ..........................................................................................97 5.7
6.3. Methodology .................................................................................................................97
6.3.1. Descriptive survey method .................................................................................98
6.3.2. Historical method ................................................................................................98
6.3.3. Analytical survey method ..................................................................................98
6.3.4. The experimental method ...................................................................................98
6.3.5. The chosen research method ...............................................................................99
6.4. Quantitative and Qualitative research method ..............................................................99
6.4.1. Quantitative research method .............................................................................99
6.4.2. Qualitative research method .............................................................................100
6.4.3. Selected research method ..................................................................................101
6.5.Sampling…………………… ....................................................................................101
6.5.1. Probability sampling .........................................................................................102
6.5.2. Non-probability sampling .................................................................................104
6.5.3. The sample size 106
6.6. Variables ..................................................................................................................106
6.6.1. Validity and Reliability .....................................................................................107
6.7. Sample size and Process to be followed .................................................................108
6.8. Conclusion .............................................................................................................109
CHAPTER 7 ...............................................................................................................................110
7.0. Data Analysis and Findings ....................................................................................110
7.1. Introduction ...........................................................................................................110
7.2. Demographic data ..................................................................................................110
7.2.1. Gender…….. 110
7.2.2. Ethnicity…….. ............................................................................................111 104
7.3. Current position in the company ............................................................................111
7.4. CIDB Grading…….. 112
7.5. Number of current projects ....................................................................................113
7.6. Number of joint venture projects out of current projects .......................................114
7.7. Main reasons for participating in joint ventures ....................................................115
7.8. Main reasons for NOT participating in joint ventures ...........................................116
7.9. Years of experience in contractor joint ventures…….. .........................................117
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7.10. Are there any preconditions required for joint ventures ......................................118
7.10.1. If yes, what are these preconditions…….. ...............................................119
7.11. Do you believe joint ventures lead to better project success ...............................119
7.12. Rating of joint ventures based on experience .....................................................120
7.13. Mean Item Score .................................................................................................121
7.14. Form of joint venture ..........................................................................................122
7.15. Barriers of joint ventures ....................................................................................123
7.16. Benefits that arise from joint ventures ................................................................124
7.16.1. Benefits for emerging contractors…….. .................................................125
7.16.2. Benefits for established contractors…….. ..............................................126
7.17. Procurement advantages .....................................................................................127
7.18. Success factors ....................................................................................................127
7.19. Field of expertise for emerging contractors ........................................................129
7.20. Joint venture skills development contribution ....................................................130
7.21. Most successful form of joint venture ................................................................131
7.22. Factors used to measure the success of a joint venture .......................................132
7.23. Sustainability of contractor joint ventures ..........................................................132
7.24. Conclusion ..........................................................................................................133
CHAPTER 8 ...............................................................................................................................135
8.0. Conclusion and Recommendations ........................................................................135
8.1. Introduction ............................................................................................................135
8.2. Review of the research objectives..........................................................................135
8.2.1. Objective 1 ...................................................................................................135
8.2.2. Objective 2 ...................................................................................................136
8.2.3. Objective 3 ...................................................................................................137
8.3. Conclusion .............................................................................................................138
8.4. Recommendations ..................................................................................................139
8.5. Summary of the study ............................................................................................140
8.6. Future research .......................................................................................................142
REFERENCES ...........................................................................................................................144
APPENDICES ............................................................................................................................159
APPENDIX A: Questionnaire .....................................................................................................159
xi
LIST OF ABBREVIATIONS
ANC African National Congress
APP Affirmable Procurement Policy
ASGISA Accelerated Shared Growth Initiative for South Africa
BBBEE Broad Based Black Economic Empowerment
BBBEEA Broad Based Black Economic Empowerment Act
BCAWU Building, Construction and Allied Workers Union
BCC Black Construction Council
BCI Black Construction Industry
BEE Black Economic Empowerment
BIFSA Building Industries Federation of South Africa
BMF Black Management Forum
BPCRS Best Practice Contractor Recognition Scheme
CCC Construction Contact Centres
CD Contractor Development
CDP Contractor Development Programme
CE Civil Engineering
CED Construction Employment Development Forum
CEITS Civil Engineering Industry Training Scheme
CETA Construction Education and Training Authority
CIDB Construction Industry Development Board
CII Construction Industry Indicators
CIOB Chartered Institute of Building
CIP Contractor Incubator Programme
CMS Construction Management System
CRS Contractor Registers Services
CSBP Centre for Small Business Promotion
CSIR Council for Scientific and Industrial Research
DBSA Development Bank of Southern Africa
DTI Department of Trade and Industry
DPW Department of Public Works
EC Emerging Contractor
ECDC Eastern Cape Development Programme
ECDM Emerging Contractor Development Model
ECDP Emerging Contractor Development Programme
EDS Enterprise Development Services
EPWP Expanded Public Works Programme
ESDA Employment Skills Development Agency
FET Further Education and Training
FNB First National Bank
FSDCA Free State Development Corporation Act
FSGDSP Free State Growth and Development Strategic Plan
GB General Building
GBCSA Green Building Council of South Africa
GCC General Conditions of Contract
GCD Growth and Contractor Development
GEAR Growth, Employment and Redistribution
xii
GDP Gross Domestic Product
GoG Government of Ghana
HDI Historically Disadvantaged Individual
HDSA Historically Disadvantaged South African
ICJV International Contractor Joint Venture
IDC Industrial Development Corporation
IDIP Infrastructure Delivery Improvement Programme
IDMT Infrastructure Delivery Management Toolkit
IDT Independent Development Trust
IECDM Integrated Emerging Contractor Development Model
ILO International Labour Organisation
IMF International Monetary Fund
JBCC Joint Building Committee Contract
JV Joint Venture
MBSA Master Builders South Africa
NSBA National Small Business Act
NCDP National Contractor Development Programme
NDPW National Department of Public Works
NEC New Engineering Contract
NEDLC National Economic Development and Labour Council
NEF National Empowerment Fund
NGO Non-Governmental Organisation
NHBRC National Home Builders Registration Council
NPWP National Public Works Programme
NQF National Qualifications Framework
NRA: National Roads Authority
OHS Occupational Health and Safety
PDI Previously Disadvantaged Individual
PDP Performance Development Plan
PE Potentially Emerging
PFMA Public Finance Management Act
PPP Public Private Partnership
PPPFA Preferential Procurement Policy Framework Act
RDP Reconstructive Development Programme
SABS South African Bureau of Standards
SAFCEC South African Federation of Civil Engineering Contractors
SAICA South African Institute of Chartered Accountants
SAQA South African Quality Assurance body
SAWIC South African Women in Construction
SEDA Small Enterprise Development Agency
SACEM South African Construction Excellence Model
SETA Sector Education Training Authority
SMME Small Medium and Micro Enterprise
SALGA South African Local Government Association
SARS South African Revenue Service
TPP Targeted Procurement Policy
USA United States of America
UK United Kingdom
xiii
LIST OF FIGURES
Figure 2.1 Joint Venture Agreements
Figure 2.2 Typical construction consortiums
Figure 6.1 Municipalities within Gauteng
Figure 7.1 Gender of the respondents
Figure 7.2 CIDB Gradings
Figure 7.3 Number of JV projects
Figure 7.4 Proportion of JV projects to current projects
Figure 7.5 Number of years of experience in JV projects
Figure 7.6 JV preconditions
Figure 7.7 Do JV’s lead to better project success
Figure 7.8 JV relations to project success
Figure 7.9 Joint venture benefits
Figure 7.10 Benefits for emerging contractors
Figure 7.11 Benefits for established contractors
Figure 7.12 Procurement benefits
xiv
LIST OF TABLES
Table 2.1 Different forms of partnering
Table 4.1 Ghanaian contractor work categories
Table 4.2 Ghanaian contractor classification or grading
Table 4.3 Ghanaian Public Construction Project Procurement
Table 5.1 South African contractor grading
Table 5.2 Women owned contractors in South Africa
Table 7.1 Ethnicity of the respondents
Table 7.2 Current position of respondents in the company
Table 7.3 Number of current projects
Table 7.4 Main reasons for JV Projects
Table 7.5 Reason for not undertaking JV Projects
Table 7.6 JV preconditions
Table 7.7 Forms of JV’s
Table 7.8 Barriers of JV’s
Table 7.9 Success factors
Table 7.10 Field of expertise for emerging contractors
Table 7.11 JV contributions to skills development
Table 8.1 JV Success factors
1
Chapter 1 – Introduction
1.0 Background
Joint ventures in the South African building industry are one’s that can be said to primarily
involve large construction companies and small, or emerging, contractors working together
on projects whereby each partner can contribute their expertise in a certain field, and can, at
the same time, learn from the other partner (Nkado & Falkof 1997). The basis of these joint
ventures not only yields growth within the small or emerging contractors but also serves
multiple functions such as mentoring, exposure of the emerging contractor to large scale
projects and the obvious aspects of developing of essential managerial and other relevant
technical skills. These are all but a few of the aspects that contractor joint ventures yield in
the South African construction industry.
Furthermore, construction entities, both large and small, benefit from contractor joint
ventures by not only enhancing their competitive position but also broaden the reach of their
companies and in so doing making it easier for them to obtain new work (McIntosh, 2002).
Wooldridge (2010) further outlines that many international construction companies are
increasingly entering into joint ventures with local companies in developing countries to
explore perceived profitable opportunities through the penetration of new markets. It
therefore become somewhat obvious then that the obtaining of new work aids the various
entities as it provides an opportunity for them to widen their client base. In addition, it must
be mentioned that upon widening of the contractor’s client base, more often than not, the
joint ventures incorporate mixed cultures, as the various partners learn from each other.
Dalle and Potts (1999) stated that there must be compelling reasons why parties to a
construction contract resort to the formation of a joint venture in contrast to the conventional
contractor and subcontractor relationship. Although Dalle and Potts (1999) argue that joint
ventures are not the easiest to manage and operate, Adnan & Morledge (2004) noted that
construction joint ventures are becoming increasingly popular in both multinational
construction firms and local governments.
According to the Council for Scientific and Industrial Research (2004) black South Africans
were historically excluded from participating freely in the economy in the apartheid
2
government resulted in a society marked by vast discrepancies and disparities. Any attempt to
progress towards a shared economy that could meet the needs of all people of South Africa
required the gap between Blacks and Whites, in terms of skills and opportunities, to be
reduced in as short a time as possible.
With this in mind and understanding the past experiences that the South African construction
industry has overcome, it becomes understandable why joint ventures seem to be a fast
growing trend in the country. One wonders whether or not it could perhaps be due to
governments strategy of trying to empower previously disadvantaged beings, or perhaps a
mechanism of neutralising an industry which is largely monopolised by large construction
companies?
Having mentioned the above, the purpose of this research must however not be
misunderstood in any way. The purpose of this research is to assess the key factors that lead
to the success of contractor joint ventures as well as the benefits yielded by these contractors
in the South African construction industry.
1.1 Problem Statement
In South Africa small and medium sized contractors had not benefited from joint venture
projects.
1.1.1 Sub-problems:
1. Is the success of the contractor joint venture beneficial to both of the contractors undertaking the joint venture?
2. Are the benefits yielded from the contractor joint venture essential to the South
African construction industry?
3. Are joint venture initiatives sustainable in the future?
1.2 Objectives
1. To investigate the benefits of contractor joint ventures between large contractors
and small and medium contractors in the construction industry.
3
2. To investigate the factors that lead to the success of contractor joint ventures in
the construction industry
3. To assess the sustainability of joint venture projects in the construction industry
1.3 Motivation of the study
This study was motivated by the notable increase of contractor joint ventures in South Africa.
This observation was one that was evident particularly in government funded initiatives in the
construction industry. Furthermore, the focus on infrastructure development in the sector for
the 2010 world cup and beyond somewhat highlighted the above mentioned observation. The
other aspect that brought about curiosity was the manner in which small and medium
contractors have increased and grown in the country, according to the Construction Industry
Development Board (2010). The above mentioned factors formed the basis of interest into the
selected field and topic of study and the author hopes that the questions that arise will not
only bring about knowledge and understanding but will further ease curiosity to those parties
who bear a similar interest in this field of study.
1.4 Significance of the study
The significance of this study is that this research forms a platform on which further and
more in-depth research can be formed on the success factors and benefits of joint ventures in
South Africa. On a larger scale, the vast difference in comparison between international
literature on joint ventures against that published in South Africa, it is clear that major
differences were noted in that arena. Moreover, this research served to bring about a positive
aspect, reasons for success and benefits of joint ventures, in spite of the exhausted dwelling
into the risk aspects and other failure related studies. With that said, it is clear that the study
not only added to the body of knowledge that is being built in South Africa, but also the one
being built by the international construction community at large.
1.5 Literature Review
In reviewing literature on joint ventures, multiple journal articles, books and magazines were
reviewed, however limited literature addressing the direct study under assessment was found.
Although this is said, findings relating to given aspects of the study were unruffled. Through
this study, relevant literature was established and henceforth reviewed and presented through
4
the various literature review chapters. Below is a synopsis of certain avenues explored in
some of the chapters of literature.
Joint ventures in the construction industry are often seen and used as a tool for expansion,
both on the international and domestic front by contractors (Elo, 2009). With evident
reductions of investor’s interest to spend as a result of the economic crunch (IMF, 2009),
contractors have been forced to find alternative solutions to survive and sustain their practice.
Indeed, some will argue that there are multiple ways in which contractors can go about doing
such, however one such manner that can’t be ignored is that of jointly venturing as
contractors into the undertaking of projects.
According to Ahiaga-Dagbui, Fugar, McCarter, & Adinyira (2011) international construction
companies are increasingly entering into joint ventures with local contracting companies in
developing countries to explore perceived profitable opportunities. These authors further
express that regardless of the challenges and difficulties encountered in managing joint
ventures, these initiatives generally offer a number of benefits. The authors further argue that
the primary challenges lie with overcoming and understanding the differences in political,
cultural and legal frameworks, technical and managerial capabilities, and national economic
environments
In identifying the key factors affecting the success of joint ventures (JVs), it was established
that research that had previously been done generally related to the critical success factors of
the JV life cycle as a whole, rather than categorizing various factors into different stages of
JV life cycle (Gale & Luo, 2004). These authors further express that literature on criteria for
successful contractor joint ventures is vague, and it is largely suggested that a joint venture
can be viewed as successful if it improves the competitive position of the contractors, through
the partners learning from each other about technology and management know-how.
It must be mentioned however; that various researchers argue different opinions as to what
attributes success among contractors undertaking a joint venture project. In this regard, the
study has found, through the literature reviews that organisational success, the exchange of
resources, trust, communication, commitment, technical and managerial skills as well as
knowledge transfer through inter-organizational learning are among the most essential factors
that lead to the success of contractors in undertaking joint ventures.
5
The findings of Derco (1999) also revealed that contractors should use caution and address
the issues from the onset, while establishing clear understanding of each contractor’s role in
the project in order to increase the likelihood of success. The above author also further that
constant communication and trust play key roles in a joint ventures, while Sillars (1998) on
the hand believes that organisational success is at the pinnacle of every joint venture
embarked upon by contractors. Sillars views this to be the case as failure of an organisation to
be able to handle its internal matters, may more often than not, imply failure in a joint venture
with a fellow contractor. Although this is arguable, the author of this study believes that this
aspect cannot be left unnoticed.
In addition, it must be highlighted that according to Sillars & Kangari (2004) contractors to a
joint venture contribute, typically through contractual agreements and/or joint venture
agreements, various resources ranging from technical skills, machinery, and experience to
finance. Each organization agrees to contribute a given percentage of the above mentioned
resources and henceforth meets its contractual obligations. Essentially, it can be said at this
point that the shortage of skills and previous disadvantage of black contractors in the South
African construction industry are some of the primary causes on joint venture are based.
Having briefly highlighted some of the success factors to be elaborated upon and also being
knowledgeable of the fact that this research is twofold, the second aspect is that of the study
assesses the benefits that arise from contractors engaging on joint venture projects. Is it only
emerging contractors that benefits from joint venture projects? Do the large and perhaps more
experienced contractors benefit anything more than obtaining work (and making a profit)
from such joint ventures? These are all but a few questions that arise at times when joint
venture projects are thought of. In outlining some of the benefits of joint ventures, the
primary objective is to provide a synopsis of what is to come in the actual literature review
chapter to follow.
The major benefits that joint venture projects yields are classified into seven primary
elements which include broadening of the client base, the sharing of risk, increase in profit,
increase in market share, the enhancing of the competitive position and lastly the learning of
new cultures and languages (McIntosh, 2002). Though other benefits that may be directly
6
beneficial to the emerging or larger contractors will be explored, the guidelines of such
exploration are bound within the above mentioned elements.
The Construction Industry Development Board (2007) supports McIntosh however; it further
breaks down the elements into simpler terms. The CIDB (2007) through the Construction
Contact Centre (CCC) identifies the benefits of emerging contractor to be, among others, the
follows:
• Access to information on financial assistance offered by various financial
institutions
• Access to information on materials, suppliers, pricing, etc
• Business to business linkage enabling contractors to contact each other and find
appropriate partners and skills
• Facilitate limited access to technology - computers, website facilities, software
relevant to contracting, tendering, safety and quality management
• Access to training, workshops and seminars
• Potential sub-contracting opportunities.
The Construction Contact Centre not only identifies the benefits for emerging contractors in a
joint venture but also the benefits of the larger and usually more established contractor within
that given joint venture. The benefits among others include the sourcing of sub-contractors
and future joint venture opportunities as well as facilitating the implementation of the
construction charter and lastly supporting in growing the South African construction industry
(CIDB, 2007).
1.6 Research Methodology
The methodology that was utilised in this study is primary and secondary data. The primary
data was collected in the form of a questionnaire survey and the secondary data was based on
published literature.
o The sample selection sought was exclusively contractors that had undertaken a
joint venture projects with another contractor, be it undertaking the joint venture
as the established or the emerging contractor. The sample was a purposive sample
in this given pool, however an equal number of questionnaires were distributed to
7
both large and emerging contractors. The sample size that was used was a total of
one hundred and twelve (112), implying that sixty one questionnaires were
distributed to small and medium contractors and similarly to the larger
contractors.
o The questionnaire collected data from sources that were part or had previously
taken part of a contractor joint venture project. As mentioned earlier, the
questionnaire incorporated both the emerging contractors as well as established
contractors with the relevant experience in joint venture initiatives.
o The current literature was extracted from various sources and professional bodies
ranging from books to accredited journals and databases from professional bodies
such as the Chartered Institute of Builders (CIOB), the Council for Scientific
Research Institute (CSIR) and even the Council for Built Environment (CBE). The
last source that was used was be the internet. The literature extracted from this
source however is limited to less than fifteen percent of the total literature that the
study yields.
o Upon completion of the collection of the primary and secondary data, the data will
then be reviewed, processed and analysed such as to formulate and produce the
required information and analysis. The analysis of the methodology will be an
aspect which will be dealt with in the third chapter of this research.
1.7 Ethics
This research was an ethical study that eliminated plagiarism through the acknowledgement
of the authors utilised through the study. The research also adhered to the codes of ethics
published for the University of Johannesburg and the built environment at large. The built
environment includes among other bodies the CIOB, the South African Council for Project
and Construction Management Professionals (SACPCMP) and the Construction Industry
Development Board (CIDB). The above mentioned bodies publications of ethics was guided
primarily by the institutions publication of ethics regarding research work, the institution
being the University of Johannesburg.
8
1.8 Outline of Chapters
This research study on the assessment of the success factors and benefits of joint ventures
incorpoarted a total of eight chapters upon completion and the outline of the chapters is
briefly discussed below as follow:
o Chapter one
o This research proposal formed the chapter one of this research study. The
chapter one was then altered and adjusted upon completion to take into account
the various changes that were encountered through the compilation of this study.
o Chapter two
o Chapter two of this research was an in depth study of the literature that is in
place in Malaysia. This is the case as it was found that multiple studies, similar
to the one being proposed for this study, have been undertaken in that part of the
world. The primary function of this chapter is to acknowledge literature that in
place in Malaysia which is relative to the focus of this study. This aspect will
also make the study more credible as it will be backed up by the views of other
researchers who have undertaken research of similar manner. Furthermore, this
chapter defined joint ventures and formed a basis for the meaning of joint
ventures, for the purpose of this study. Moreover, review and recognize all
secondary data collected, utilised and that which assisted the author in
formulating his argument and viewpoints. This chapter incorporated four major
sections, namely: The causes of contractor joint ventures in Malaysia, the
benefits of contractor joint ventures, the success factors that contributed to the
contractor joint ventures and lastly reflect on the relationships that the joint
ventures created between the contractors to the undertaken joint venture.
o Citations and references were all in accordance with the requirements, with the
Harvard method of referencing adopted in all its proceeds.
9
� Chapter three
o Chapter three of this research study continued to strengthen the authors argument
as it was an additional chapter of literature review of data that is in place in the
United Kingdom (UK). This chapter, just like chapter two, acknowledged and
recognized literature and authors who have contributed in formulating literature
that in place in the UK, which is relative to the focus of this study. Moreover, this
chapter reviewed and recognized all secondary data collected, utilised and that
which assisted the author of this research in further continuing his argument and
viewpoints. This chapter further incorporated four major sections, namely: The
causes of contractor joint ventures in the UK, the benefits of contractor joint
ventures, the success factors that contributed to the contractor joint ventures and
lastly reflect on the relationships that the joint ventures created between the
contractors to the undertaken joint venture. Citations and references were all in
accordance with the requirements, with the Harvard method of referencing again
being the adopted method in all its proceeds.
� Chapter four
o Chapter four of the study reviewed literature that is in place in Africa, particularly
Ghana. This chapter, just like chapter two and three, also acknowledged and
recognized literature and authors who have contributed in formulating literature
that in place in the Ghana construction industry, which is relative to the focus of
this study. In reviewing the chapter, secondary data was collected and utilised to
assisted the author of this research in consolidating his argument and viewpoints.
This admired to the structure set in the previous chapters in that it too also
incorporated four major sections, namely: The history of the Ghanaian
construction industry, the causes of contractor joint ventures in the Ghana, the
benefits of contractor joint ventures and the success factors that contributed to the
contractor joint ventures.
o Like all the other literature review chapters, citations and references were all in
accordance with the requirements and the Harvard method of referencing was
adopted in all its proceeds.
10
� Chapter five
o Chapter five of the study reviewed literature that is in place in South Africa. This
chapter not only aided in contributing to literature that is place in South Africa
when it came to contractor joint ventures but also made a platform for comparison
of the various literature reviewed in the previous chapters as well as the objectives
of this research study. Similarly to chapters two, three and four, this chapter also
acknowledged and recognized literature and authors who had contributed in
formulating literature that in place in the South African construction industry,
which was relative to the focus of this study. Moreover, this chapter further
reviewed and recognized all secondary data collected, utilised and that which
assisted the author of this research in consolidating his argument and viewpoints.
This chapter also incorporated four major sections, namely: The causes of
contractor joint ventures in the South Africa, the benefits of contractor joint
ventures, the success factors that contributed to the contractor joint ventures and
lastly reflect on the relationships that the joint ventures created between the
contractors to the undertaken joint venture. The last section to this chapter was a
comparison between major differences and similarities of literature which is in
place between various countries for which literature was reviewed. A conclusion
which summarises the chapter will then ensure the completion of chapter five.
o Like all the other literature review chapters, citations and references were all
aligned to be in accordance with the requirements of the adopted method of
referencing, the Harvard method.
� Chapter six
o The focus of chapter six was an analysis of the various forms of methodologies
that can be utilized in conducting a research study and further supported by a
comprehensive reasoning as to why the chosen methodology was chosen for this
particular study. The design of the questionnaire for extracting of the primary data
was also undertaken in this chapter, followed by the actual data collection itself.
The methodology to be utilised for the purpose of this was that of a survey method
for the compiling of the primary data. It was only upon completion of the
11
collection of the primary data that chapter six of the study will be viewed as
complete.
� Chapter seven
o The seventh chapter of this research brought about the analysis of the data
collected through the questionnaires. The data was analysed through the use of
various forms of analysis ranging from graphs to the likert scales and other
forms of quantitative analysis methods. The chapter also formed the basis for the
conveying of the findings brought about by the study in order to be able to
undertake a comparison of these findings to the initially proposed objectives set
about in this chapter.
� Chapter eight
o Chapter eight of this research study focused on the conclusion and
recommendations that the study managed to establish. The purpose of this
chapter was to bring about solutions and recommendations relative to the
initially thought objectives and the problem statement. Furthermore, chapter
eight also established, through its’ recommendations, other aspects and areas of
improvement for further research purposes. In completion of this last chapter the
problem statement and the objectives set out in the first chapter were all noted
and the objectives answered. A logical link of all the chapters tied up the study
coupled by a conclusion which entailed a review of all the chapters in the study.
The last section completed the research study on the assessment of the success
factors and benefits of joint venture projects in the SA construction industry.
In completing the research study, the last aspect that was done was the attachment of
appendix A, which is a copy of the questionnaire that was drawn for the collection of the
primary data.
1.9 Conclusion
In concluding what has been observed during the course of compiling the first chapter of this
research study, it is clear that multiple questions remain unanswered in this particular topic of
12
study. The answers to these questions will hopefully not only assist in bridging the gap in this
regard but will also within itself bring up other questions that researchers may establish.
It can further be said that the general observations that have been evident thus far are those of
the vast difference in international studies on joint ventures and South African studies on this
very aspect. This also aspect also brings about other questions, however the primary
challenge will be bringing about the two differences and formulating one clear observation in
the chapters to follow.
Furthermore, the selection of the methodology, sampling techniques and data analysis
mechanisms thereon were all briefly introduced in this chapter. The methods of analysing the
data and bringing about a comprehensive conclusion will also follow in the chapters to come.
Lastly, the motivation of the study not only enabled the author to seek funding for the study
but also ensured an ethical approach in all undertakings with regard to the study.
In conclusion, it is clear that the intended study has its challenges, however it is hoped that
the questions and challenges that have been highlighted are not only answered but are also
utilised by researchers who seek to take studies of this nature further.
13
Chapter 2 – Literature review on Malaysia
2.1. Introduction
This chapter served to focus on contractor joint venture initiatives in the Malaysian
construction industry, with particular emphasis on the causes of such contractor joint
ventures. Furthermore, the benefits as well as the success factors that contribute to the
contractor joint ventures in Malaysia were also reviewed. Lastly, the chapter reflected on the
relationships that the joint ventures create between the contractors to the various undertaken
joint ventures.
Firstly, it must be said that the reason why the literature review has been undertaken on
Malaysia is as a result of the country’s economy as well as its construction industry which
can both be directly compared with that of South Africa. The comparison of the two
countries, for the purpose of this research, is one that was concluded primarily on the basis of
both size and expenditure spent on infrastructure development in the two countries.
Moreover, Malaysia, just like South Africa, can be said to be an emerging market in the
global economy as both these countries are still third world countries.
According to Larson and Drexler (1997), partnering or joint ventures benefits all parties
involved in a construction project, including the contractors, subcontractors, the owner and
the management, as well as on-site employees. Scott (2001), further expands on Larson’s (et
al) thoughts, stated that although partnering may take many forms, it still seeks to address the
issue of adversarialism directly. The author further believes that joint ventures are primarily
based on the simple premise that better results can be achieved for all participating companies
if they work together towards agreed common goals rather than as individual companies each
with its own separate agenda and objective.
Construction joint ventures in Malaysia are becoming increasingly popular both in
multinational construction firms and local government in order to achieve their individual
objectives (Adnan & Morledge, 2004). The increase that has been evident within the firms of
the Malaysian construction industry can be attributed to multiple factors that include, among
others, the fact that the Malaysian government advocates for joint venture initiatives and
therefore encouraging and supporting local contractors to participate in regional and global
14
markets based on their expertise and experience of construction of buildings, infrastructure
projects, highways, power generation, port and airport construction (Adnan & Morledge,
2004). It is as a result of this vast increase and success thereon of the above mentioned
contractor joint ventures that have formed the basis of this study.
Adnan (2008) brings about a more comprehensive description of the Malaysian construction
industry, describing it as one that, although accounts for less than 5 percent of the GDP, is an
important contributor to Malaysia’s growth because of its extensive linkages with the other
economic sectors. This can be said to be the case as Malaysia’s construction industry includes
activities ranging from constructing building, roads, electricity or other transmission lines or
towers, pipelines, oil refinery to other specific civil engineering projects.
Furthermore, Adnan (2008) outlines that the Malaysian construction industry is a
conglomeration of diverse sub-industries loosely lumped together as a sector of the economy.
The author elaborates on the above, emphasizing how the industry is primarily concerned
with building and civil engineering, and its main activities relating to the planning,
regulation, design, manufacturing, construction, fabrication and maintenance of buildings,
infrastructure facilities and process plant.
In addition, the building sector of the industry encompasses the construction of commercial,
industrial and housing (high, medium and low-cost) projects; infrastructure facilities includes
the construction of roads and highways, drainage, sewerage, industrial structures, dams and
water retaining structure projects; whilst process process-plant construction ranges from
sewerage, water treatment, energy to fertilizer and food projects, with the scale of
construction projects may vary from work worth a few hundred Ringgit to major schemes
costing several billion Ringgit (Adnan, 2008).
Moreover, it is projects of such a nature that provide excellent opportunities for the local
Malaysian contractors to come together and combine their skills and expertise. By the same
token, such projects further provide an opportunity for foreign contractors to team up with
Malaysian contractors to explore business opportunities in achieving the Malaysian
Government policy of becoming fully industrialized as part of a contribution towards
VISION 2020 (Mohammed, 2000).
15
The above mentioned aspects may be said to be all but a few of the factors that may lead to
joint venturing or partnering being a preferred method of undertaken given construction
projects in the Malaysian construction industry.
2.2. Definition of a joint venture
It is only logical that the first step should be to define and have a clear understanding of what
contractor joint ventures are, on both a local and international scale, and thereafter
differentiate between the two.
Like many research topics, multiple authors believe, argue and bring about an array of
different definitions of what local and international contractor joint ventures are, even though
there are certain aspects of similarity within them. Some on the other hand are completely
independent in their thinking, defining contractor joint ventures as arrangements in which
each of the joint venture contractors invests resources with the intention of getting as much as
possible in return for the investment (Mjoen & Tallman, 1997). Indeed, the issue of a
company trying to maximise its investment cannot be disputed, however the question that
came about was: is that possibly be all there is to a joint venture?
Rightfully so, the answer to the above question slowly unveiled itself with increased reading.
More appropriate and concise definitions of contractor joint ventures were obtained. One of
the definitions of contractor joint ventures was that of Adnan & Morledge (2003) who
suggests that contractor joint ventures may be associated with procedures used to respond to
specific business phenomena such as access to new markets, specific government policy,
business capacity, technology transfer or economies of scale.
Some of the older researchers, Young & Bradford (1977), define contractor joint ventures as
an enterprise, corporation or partnership, formed by two or more contractors, individuals, or
contracting organisations, at least one of which is an operating entity which wishes to
broaden its activities, for the purpose of conducting a new, profit-motivated business of
limited duration.
16
With all of the above definitions in mind, it is however the definition Carter, Cushman &
Hartz (1988) of construction joint ventures that seemed the most appropriate in this instance,
defining construction joint ventures as:
“A business alliance of limited duration formed by two or more unrelated
businesses or professional entities for the purpose of furnishing engineering,
consulting, procurement, construction and construction management services
by consolidating the skills and resources of the participants”
It must also be said that Scott’s (2001) definition of joint venturing, or partnering as he refers
to it, is a relationship between two or more companies or organisations which is formed with
the express intent of improving performance in the delivery of projects.
Indeed Scott’s definition of joint venturing cannot be disputed as it is one of the few that
brings about an accurate and precise understanding of what a joint venture is, however it is
still Carter, Cushman & Hartz’s (1988) definition of contractor joint ventures that will be
utilised for the purpose of this research study.
Similarly with international contractor joint ventures where, Evan (1978) defines an
international joint venture (IJV) as a multipartite structure, owned by at least two parent
firms. Mohamed (2003) takes it one step further and describes an IJV as a situation in which
two or more legally separate bodies form a jointly owned entity in which they invest and
engage in various decision making activities where at least one of the parties is based outside
the country where the venture is taking place. A more specific definition is offered by Julian
(2005) who defines an international construction joint venture (ICJV) as a:
“Subsidiary company that is established by a corporation together with a partner
company in a foreign country, the normal case being the multinational company from
an industrialised economy having a share of some twenty percent or more in the
equity of a company outside its home country, with the remainder of the equity being
in possession of a company located in the country where the joint venture is to be
established”
17
Therefore, based on the above definition of ICJVs in the literature, it was found fit that for
the purpose of this research study the above definition be utilised throughout the study when
referring to ICJVs.
2.3. Types of contractor joint ventures
It is without a doubt that an array of types or forms of joint ventures can be entered into by
contractors. The nature or type of venturing that these parties enter into plays a pivotal role in
determining whether or not the joint venture will yield fruitful and productive outcomes or
not. It is as a result of this therefore that the various types of joint ventures that contractors
can enter into in the construction industry are explored below.
According to O’Neill and Rawling (2002), there are four primary types of joint
venturing that contractors can opt to venture into. The four types are:
1. A joint venture agreement
2. A limited liability joint venture company
3. A consortium [either incorporated or un- incorporated]
4. A partnership [either incorporated or un- incorporated]
2.3.1. A joint venture agreement
O’Neill and Rawling (2002) define a joint venture agreement as a contractual agreement
document that governs the relationship between the joint venture partners.
These authors further elaborate, emphasizing that the purpose of the joint venture agreement
is for the contractors to the joint venture, or the joint venture partners, to set out their
understanding of how the relationships in the joint venture will be governed in both preparing
and submitting a tender for the works and, if successful, fulfilling the obligations of the
construction contract once it has been awarded.
Furthermore, it can be said that a joint venture agreement document may well include topics
ranging from apportionment of elements that include the funding the tender and, if
18
successful, the construction contract, the degree of initial participation of each joint venture
partner, the financial interests of each party, the rights, liabilities, obligations, responsibilities,
risks, costs, expenses, profit and losses, as well as other aspects that are not mention above,
for each joint venture partner.
Moreover, the joint venture agreement document will also highlight aspects such as
bankruptcy of a joint venture partner, default by the joint venture and the liability of each
joint venture partner, as well as the risk of default by the minority partner to the joint venture
(O’Neill & Rawling, 2002).
The sketch below illustrates how the joint venture agreement, as a of type of joint venture,
would bind the contractors (say two) into a single contract with the employer. The sketch is
as follows:
The Client (Employer)
Client is binded into a single contract
Figure 2.1 (Figure adopted from Scott, 2002)
In addition to the above, it must be added that according to
2.3.2. A consortium
According to Gruneberg & Hughes (2004) a construction consortium may be defined as an
arrangement between a number of firms in which each firm contributes an equity stake in the
form of risk capital or payment in kind in order to qualify as a member. Furthermore, the
Contractor A + Contractor B
19
remuneration of the consortium members may be calculated as a percentage share of the net
profits of the consortium.
According to Gruneberg & Hughes (2008), the parties to a consortium may among other
include the client, the developer, equity funder, architect, engineer and the contractor. The
communication channels of the various parties to the consortium are illustrated below to be as
follows by the authors. The figure below shows the parties forming the consortium as those
that are below the line under the public or private sector client, with the client being the one
above the above mentioned line.
Figure 2.2 – An arrangement of parties forming a construction consortium.
2.3.3. A partnership
Bennett and Jayes (1995) define a partnership as an arrangement involving two or more
persons who have agreed to undertake a business venture as co-owners, with the intent to
make a profit.
Ward and Chapman (2003) further assert that the primary difference between partnering
(joint venture) and a partnership is that the members of a joint venture have teamed together
Public or
Private
sector
client
Developer Engineer Contractor Architect Equity
Funder
20
for a particular purpose or project, while the members of a partnership have joined together to
run a business in common.
It must be concluded that out of all of the methods that have been outlined above, the joint
venture agreements were found to be the most successful types of joint ventures in Malaysia.
This conclusion was drawn from the fact that contractors prefer this form of joint venture as
they find it suitable for all parties concerned in a project. Furthermore, the fact that the bulk
of joint ventures in the country take upon this form of joint venture and manage to
successfully complete the projects as well as maintaining good relations with the contractors
with which the project was undertaken.
On the other hand, the Australian Institution of Civil Engineering Surveyors (1997) argue that
the different forms of joint ventures, or partnering as they refer to it, may be classified as
tabulated below. This argument can also not be disregarded as it can be regarded as an
expanded form of the four primary categorize that O’Neill and Rawling (2002) were
explaining earlier on. The table is thereby illustrated below as follows:
Forms of partnering Relationship
duration
Basis of partner
selection
Condition for use
Project One-off Competition/negotiation All projects. Best for
high value
Strategic/full Long-term Competition/negotiation Where good business
case, part of medium-
long term strategy
Post-award One-off Competition Public projects,
including series of
small projects
Pre-selection One-off/long-term Negotiation Any project,
Advanced selection of
contractors
Coordination One-off/long-term Competition/negotiation Any project,
Agreement overlaid
21
agreement on standard contract
Semi project One-off Limited competition All projects where
scope of negotiation is
limited
Table 2.1. Different forms of Partnering. (Source: Institution of Civil Engineering
Surveyors, 1997)
2.4. Causes of joint ventures in Malaysia
Ali, Mohd-Don, Alias, Kamaruzzaman, and Pitt (2010) also suggest that small companies in
Malaysia often face problems attaining a good reputation and credibility for themselves, let
alone competing with their established counterparts which have mostly been in the industry
for longed. On the other hand, the bigger companies may well at times; face a shortage of
expertise or a sufficient workforce to perform certain tasks. It is by this therefore that the
contractor joint venture concept appears to be an ideal solution for such a predicament as it
ensures mutual benefit to all parties involved by creating a win – win situation. Furthermore,
Ali et al. (2010) also highlight the fact that partnering in the Malaysian construction industry
is receiving a positive response as it understands the difficulties of joining the historical
divisions.
Construction organizations have extensively used joint ventures (JVs) as a means of
transforming hostile, adversarial owner-contractor relationships into more collaborative
teams (Larson et al., 1997). This may be due to the fact that, the construction industry
involves too many parties, including suppliers, clients, contractors, consultants and so on (Ali
et al, 2010).
Walker and Johannes (2003) believe that the cause of organisations embarking on joint
ventures is to add value to the company’s shareholdings through increased profits and often
to expand business opportunities through increasing market share, penetration of new markets
and eventual take-over activity of that given market. Adnan & Morledge (2003) agrees with
Walker & Johannes but further adds that some of the possible causes of international
22
contractor joint ventures could perhaps be due to specific government policy, business
capacity and even technology transfer in the construction industry.
Consequently, the government of Malaysia is encouraging and supporting local contractors to
participate in regional and global markets based on their expertise and experience of
construction of buildings, infrastructure projects, highways, power generation, port and
airport construction (Adnan & Morledge, 2003). The Malaysian government has not only
encouraged the Malaysian contractors to participate more actively in joint venture initiatives
but has also injected significant funding in this regard in order to support and advocate for
this cause.
Moreover, the government has, in its Vision 2020, devoted and outlined joint venturing in the
Malaysian construction industry as one of the mechanisms that it plans on utilising on its
quest of achieving its vision of the country becoming fully industrialised (Adnan &
Morledge, 2003). These authors further explain that the opportunities provided by the
Malaysian government are excellent opportunities for local Malaysian contractors to combine
with each other and for foreign contractors to team up with the local Malaysian contractors to
explore business opportunities put forth by the government.
Furthermore, Sillars and Kangari (2004) also further emphasizes that contracting
organisations may also embark on joint ventures as a result of globalization which creates an
environment in which contractors struggle to win projects in the traditional markets, forcing
them to join forces with other contracting organisations that they may usually find themselves
competing with.
Beamish & Lupton (2009) also elaborate on some of the reasons why contracting
organisations embark on joint ventures, saying that the contracting firms aim to create new
products and services, as well as the primary aspects of increasing its knowledge, improving
its capabilities, technical skills and other resources through engaging on different challenges.
Furthermore, these authors also outline that other causes could be as a result of contractors
taking on projects that are larger than what the contractor would normally undertake, with a
view toward spreading the risk through combining with another contractor in order to
generate bonding capacity that each contractor would not have, individually.
23
According to Azmi and Kamarani (2002) a contractor who has an established organization in
a Malaysia may teams up with a contractor with little or no experience in the country but who
offers specialized engineering knowledge or skill for reasons such as technological advances.
These contractors may be in a form of a foreign contractor teaming up with a local contractor
who may have political or other valuable relationships in the local country.
2.5. Benefits of joint ventures in Malaysia
The use of joint venture relationships in the construction industry has become a means of
providing the concentration of economic resources, skill and knowledge required to
negotiate, bond and complete large scale construction projects (Carter, Cushman & Hartz,
1988). This is the case as more often than not contractors will look at the size of the project
and the capacity of their resources (manpower, management, financial capability, material,
equipment and technical ability) when considering whether or not to tender for a major
project and thereafter consider the implications that committing some of these resources to
the major project will have on the organisation.
Furthermore, Walker and Johannes (2003) also suggest that joint venturing with a foreign co-
venturer may well open the doors to new markets and projects as it may sometimes be a pre-
qualifying requirement that a foreign company is to join forces with a local contractor in
order to be awarded a tender in that foreign country. Moreover, significant tax and custom
duties concessions may well be available to joint ventures having local partners.
According to Pau (2005), the establishment or creation of a new relationship (joint venture)
between parties involved in a construction project allows the requirements of the client to be
understood throughout the supply chain. Furthermore, such a relationship also enables all the
parties to the project to participate and also brings about innovative ways of working, which
in turn lead to a reduction in costs and time of the project.
According to Ali et al. (2010), there are thirteen common categories in which the benefits of
joint ventures can be placed, and these may be said to include:
1. Reduced litigation
2. Improved cost control
24
3. Improved time control
4. Improved product quality
5. Efficient problem solving
6. Closer relationships
7. Enhanced communication
8. Continuous improvement
9. Potential for innovation
10. Lower administrative costs
11. Improved safety performance
12. Increased satisfaction
13. Improved culture
Ali et al. (2010) then proceed and explain how each aspect benefits the contractors to the
joint venture. These authors explain the reduction of litigation through noting that in
partnering arrangements, the problems of disputes, claims or litigations are reduced to a
minimum as a result of open communication and improved working relationships.
Moreover, Ali et al. (2010) explain the benefits of time and cost control in a joint venture
through the use of Li, Cheng, Love, and Irani (2001) and Albanese (1994) findings,
respectively. Li et al. (2001), denotes that partnering helps to reduce delay in construction
projects in many ways, including better schedule performance, timely decisions, and reliable
programming. The time aspect is especially reduced with the early involvement of
contractors, in particular at the design stage, as this assists in constructability input and
maximizing value engineering, which in turn both improves the cost and schedule.
On the other hand, Ali et al. (2010) outlines that Albanese (1994) suggests that several
reasons for better cost performance including alleviating, re-working, reducing scheduled
25
times, heightening the involvement of team members, improving trust, reducing scope
definition problems, open communication, lowering change order rates, improving problem
solving, eliminating blame shifting, improving the understanding of project objectives and
decreasing adversarial relations.
According to Loraine (1996), a partnering effort also creates a focus on learning, continuous
improvement and the raises the quality of products and processes. This author also explains
that it is primarily when contractors advocate for continuous improvement and improving the
expertise of co-ventures, through focusing on individual activities, that the quality of products
and processes are improved.
According to Ali et al. (2010), in non-partnered projects, communication among the parties is
essentially hierarchical. This implies that most working instructions are conveyed indirectly
to those carrying out the work. This is where the partnering approach makes a difference by
promoting openness trust and efficient communication through common and alleviative
language. Li et al. (2010), further adds that the improved communication results in fewer
surprises in terms of schedule delays and increased costs, which might otherwise lead to
disputes and litigations.
Ali et al. (2010) also indicate that a closer relationship is formed among the partners of a joint
venture through enhanced communication, the identification of shared goals and objectives,
the recognition of problems arising, and an agreement to identify those problems using a
customized procedure.
Although these Ali et al. (2010) continues to elaborate and acknowledge the findings of other
authors, in an attempt to explain the above listed benefits of joint ventures, the above aspects
reduced litigation, improved cost control, improved time control, improved product quality,
efficient problem solving, the formation of closer relationships and the enhancement of
communication channels are deeded sufficient for the purpose of this study.
26
2.6. Factors that attribute to the success of joint ventures in Malaysia
According to Adnan and Morledge (2003), the definition of critical success factors that is
applicable, particularly, to construction joint venture projects can be said to be one that
includes:
“Those few factors, which, when applied to a joint venture scenario, can lead to
and/or will actively contribute to, a profitable conclusion for one or more of the
parties involved.”
These authors further continue and outline some of the aspects that they highlighted to be key
factors that lead to the success of a construction joint venture projects. These factors were
found to include among others the following:
1. Agreement of Contract
2. Commitment
3. Cooperation
4. Management Control
5. Inter-Partner Trust
6. Financial Stability
7. Criteria For Partner Selection
8. Cultural Understanding
9. Mutual Understanding
10. Compatibility of Objectives
11. Motivation
12. Knowledge Transfer
27
13. Communication
14. Organizational structure
The agreement of the contract terms was found to be a factor that leads to the successful
undertaking of a joint venture project between contractors as each contractor understood what
the expected outcome from each end entailed. Moreover, the role of each contractor and the
consequences thereon of letting the co-venture down are all aspects that are finalised on the
agreement of the contract terms.
Adnan and Morledge (2003) believe that commitment reflects the actions of some key
decision makers regarding continuation of the relationship, acceptance of the joint goals and
the values of the partnership, and the willingness to invest resources in the relationship.
Furthermore, commitment is important as it provide a long-term basis, resources and
capabilities to the specific needs of the JV for its success. These authors also extract some of
the thoughts of Srindharan (1995) who suggests that in order for the joint venture to succeed;
all the partners to the joint venture agreement should have total commitment to the joint
venture as well as to each other.
Adnan and Morledge (2003) continue explaining, expressing that cooperation plays an
important factor as shared problems solving reflects the degree to which the parties share
responsibility both for dealing with problems and maintaining their relationship. Moreover,
cooperation behaviour between the parent companies help to reduce potentially burdensome
monitoring and safeguards costs within the joint venture. Changes in the environment, of
strategies, and bargaining power over the life of the venture can affect cooperation
dramatically (Adnan & Morledge, 2003).
Culture has a profound impact on contractor joint ventures as many of the problems and
obstacles in construction joint ventures have their roots in the cross-cultural communication
and understanding (Ying, 1996). Ying also believes that cultural factors, though it is not the
dominant or the only force which influences a joint venture, is certainly one of the most
important and least understood. Beamish and Lupton (2009) on the other hand believe that
28
issues related to cultural differences on joint venture projects may be mitigated by training
those managers who are going to be exported to the joint venture adequately before sending
them on the assignment to the foreign joint venture.
In addition, trust is often considered to be a very important ingredient of managing
relationships. Within organizations, trust contributes to more effective implementation of
strategy, greater managerial coordination and more effective work teams. It is by this
therefore that a high level of trust might be crucial for joint venture success (Adnan &
Morledge, 2003).
Also, Adnan and Morledge (2003) suggest that it is essential to be sure that a prospective
partner can generate sufficient financial resources to maintain the ventures’ efforts. It is by
this therefore that these authors also suggest that the credit-worthiness of a prospective joint
venture parties’ parent company should be scrutinized and its current management
competence and resources must be ascertained. Lastly, it is advisable to include a clause in
the joint venture agreement to cover this factor or aspect of the joint venture.
The ease of communication between the partners is another potential problem which should
be considered when evaluating a potential partner’s suitability. Without proper
communication, problems can occur as a result of differences between national or ethnic
cultures, including language, as well as differing corporate cultures (Adnan & Morledge,
2003). It is therefore crucial that thorough channels of communication are established from
the onset of the project in order to alleviate any aspects of poor or miscommunication.
Beamish and Lupton (2009) further explains that managerial or organisational factors are
those factors that relate to inadequate or ineffective managerial skills within the organisation.
Sillars and Kangari (2007) also add to these findings, enforcing the fact that the success of
each organisation lies with its own management and failure of organisational success may
alter with the project success.
2.7. Sustainability measures
Ali et al. (2010) earlier suggested that small companies in Malaysia often face problems
attaining a good reputation and credibility for themselves, let alone competing with their
29
established counterparts which have mostly been in the industry for longed. Through
undertaking joint venture initiatives, literature reveals that smaller contractors can attain the
following attributes:
• Develop new knowledge & expertise
• Increase levels of professional development
• Generate positive reputation
• New market penetration
• Develop new business relationships
• Enhance skills and independence
Having acquired the above mentioned attributes, with particular emphasis on the
enhancement of independence and the development of new business relations, the question of
whether or not joint venture initiatives are sustainable or not seemed to have been answered.
Walker and Johannes (2003) also outlined that contractors may be competing in the future
through joint venture initiatives and indeed Ali et al (2010) indicates that there construction
industry has seen a notable increase in, not only the number of small contractors but also in
the number of joint ventures initiatives in Malaysia.
With the above in mind, it is clear that joint ventures between contracting organisations in the
construction industry, on both a local - local basis and foreign – local basis, are ones that will
be seen on a far larger scale in the future.
2.8. Conclusion
In concluding the literature review on the Malaysian construction industry, it must be
indicated that the chapter commenced with a brief overview of the state of the Malaysian
construction industry through the identification of the various facets that, when brought
together, make up the sector. Also, an array of factors that advocate for the advancement of
contractor joint ventures in the industry were also identified.
30
Secondly, definitions that may be deeded sufficient for the purpose of the study for both
contractor joint ventures on a local basis and international construction joint ventures were
outlined. These definitions will be applicable throughout the study when referring to the
above mentioned aspect.
Another aspect that was highlighted was that of the various types and forms of joint venture
initiatives or partnering that were applicable in, not only the Malaysian construction industry
but in, the construction industry as a whole. These aspects were identified to be ordinary joint
venture agreement between two or more contractors, partnerships, consortiums and limited
liability joint venture companies.
Moreover, possible causes of joint venture initiatives were found in literature and among
other factors the aspects of smaller contractors struggling to attain a reputable reputation as
well as the challenge of a lack of adequate skills, expertise and management ability were all
aspects that were brought to foe. On the other hand, the larger contracting companies faced a
shortage of expertise or a sufficient workforce to perform certain tasks and the ideology of a
joint venture with a smaller contractor posed a win-win situation for all parties concerned.
Also, the encouragement and support that the Malaysian government brought towards joint
ventures further provided an ideal platform for contractors to embark on contractor joint
ventures in Malaysia. Furthermore, the other cause that was identified was that of joint
venture initiatives being able to understand the difficulty of joining historical divisions in
Malaysian construction industry. Other causes were also identified and briefly explained
earlier on as well.
The following aspects were identified to be the direct benefits that were yielded from a
contractor joint venture in the Malaysian construction industry and these aspects included the
reduction in litigation, improved cost control, improved time control, improved product
quality, efficient problem solving, closer relationships, enhanced communication, continuous
improvement, potential for innovation, lower administrative costs, improved safety
performance, increased satisfaction, improved culture. These aspects are all explained in
slight detail in the literature review.
31
On the aspect of the factors that contribute to the success of a joint venture project, several
factors were listed in the literature review and these factors include, all but to mention a few,
commitment, co-operation, trust, communication, mutual respect and cultural understanding
among other factors.
Lastly, several aspects were identified as possible tools that utilised in assisting a country in
determining whether or not its contractor joint venture initiatives yielded their intended
purpose and whether or not such initiatives were sustainable in that particular environment.
Having assessed and understood the need, causes, benefits and success factors that come into
play in the Malaysian construction industry, it is without a doubt that even though vast
challenges are faced by the sector, however contractor joint ventures will definitely play a
significant role in the future of the Malaysian construction industry.
32
Chapter 3 – Literature review on United Kingdom
3.1. Introduction
This chapter serves to focus on contractor joint venture initiatives in the United Kingdom
(UK) construction industry, with particular emphasis on the causes of such contractor joint
ventures. Furthermore, an overview of the various forms or types of joint venture initiatives
that come into play in the UK construction industry will be assessed and conclusions will be
drawn on the forms which are found to be the most common forms utilised, as well as those
forms which are found to be most successful in the above mentioned region. Moreover, the
benefits as well as the success factors that contribute to the contractor joint ventures in UK
will also be reviewed. Lastly, the chapter will reflect on the relationships that the joint
ventures create between the contractors to the various undertaken joint ventures.
It must be noted that a number of authors have also indicated that in the construction
industry, where firms are project based, the concept of alliancing or joint venturing of
contractors is gathering momentum (Walker and Johannes, 2003; Love, Tse, Holt and
Proverbs, 2002; Dainty, Briscoe, and Millett, 2001). These authors, with particular emphasis
on Walker, indicate the growth or increase that the sector has experienced since the
witnessing some of the successes of joint ventures on certain projects. Other such authors
who share the same views as the above mentioned authors include Contractor and Lorange
(2002) who assert that the alliance phenomena is not only here to stay but it is also set to
grow rapidly in the UK. Indeed, such hindsight from these authors who all predicted that the
concept of alliancing/partnering or joint venturing, as it is sometimes referred to, has lived up
to its expectations as per the findings of (Akintoye and Main, 2007; Hartmann and Bresnen,
2010).
3.2. Background on the UK Construction Industry
It must be outlined from the onset that, for the purpose of this research, the countries which
herein constitute the UK construction industry are the various construction industries of
England, Scotland, Wales and Ireland. Together, these various countries’ construction
industries will be referred to as the UK construction industry. Furthermore, it must also be
said the primary reason for the selection of this literature review of the UK construction
33
industry is that of the success it has enjoyed in advocating and embarking on its journey of
continual utilization of contractor joint ventures.
According to the Strategic Forum for construction (2009), the UK construction industry has
an annual turnover of more than one hundred billion pounds (£100 billion) and accounts for
almost ten percent (10%) of the UK Gross Domestic Product (GDP). Furthermore, the forum
continues to elaborate, stating that the UK construction industry employs some two million
people in more than two hundred and fifty thousand (250 000) different companies.
The pathway, thoughts and viewpoints of the various material or literature that is in place,
with regards to the UK construction industry, will aid the assessment of the reasons why this
sector campaigns for contractor joint ventures as well as the benefits and factors that attribute
to the success of such initiatives. The conclusions drawn from these aspects will thereafter
enable comparisons within the various segments on which the literature reviews are
undertaken. With that in mind, the above statement thereby becomes applicable in all facets,
and for the purpose, of this chapter.
3.3. History of Joint Ventures in the UK
Partnering in the UK construction industry developed following the success of similar
approaches in the petrochemical industry and the US building industry (Skeggs, 2004). It is
from here that the UK therefore adopted the philosophy of joint venturing and henceforth
implemented this “new” route of project delivery on a number of projects, which included
among others the It is therefore imperative that one is aware that according to Li, Cheng &
Love (2000) the term “partnering” has been used interchangeably with alliance across various
industries, including the construction industry.
According to Akintoye & Main (2007), recommendations within the Latham report (1994)
and the Egan report (1998), have led to an increasing use of collaborative arrangements such
as long-term/strategic arrangements, partnering, joint ventures, public private partnerships,
prime contracting and supply chain management in order to improve the construction
development process in the UK construction industry.
34
The above authors further express that partnering in the UK can and does operate as the
context for the whole project from inception to completion. Although some of the authors
(Wood, 2005; Larson, 1997) argue that partnering should only really be applicable as a means
to a more efficient and quickened construction process, through the agreement of the
contractors of cause, some will argue (Akintoye & Main, 2007) that early involvement sets a
platform for a more successful joint venture or partnering agreements across most measures
of performance. As crucial as this point may be, however is must be said that it deviates the
purpose and scope of this research study.
With the above aspect in mind, it is that partnering has made a significant impact at various
levels of the construction industry. Whether its impact amounts to a fundamental shift in how
business is conducted as claimed by some Beach (2005), it is highly debatable. With that
being said however, a study drawing on the opinions of 48 commercial managers in the UK
concluded that partnering represents perhaps the most significant development to date as a
means of improving project performance whilst offering direct benefit to clients and
contractors (Wood, 2005).
It is perhaps fair to say that it is partially as a result of these direct benefits that Wood (2005)
suggests what he suggests above, with particular emphasis on the benefits reaped from the
contractor’s end, that this research study was undertaken to begin with. It must however be
said that, having previously mentioned that the study not only advocates to investigate the
causes, benefits and success factor that attribute to the success of a contractor joint venture,
but it further hopes to devise or suggest a mechanism that can be utilised in evaluating the
sustainability of a joint venture initiative among contractors.
With all of the above aspects in mind, it must be remembered that the first aspect to be
investigated in the UK construction industry is that of the various forms or types of joint
venture initiatives that come into play in this sector.
3.4. Various forms of contractor joint ventures in the UK.
In investigating the various forms of contractor joint ventures in the UK construction
industry, it can be said that one particular author contributed significantly in the gathering of
literature in this regard. Similarly to the various forms of contractor joint ventures that were
35
found in Malaysia, Scott (2001) as well as Construction Excellence (2004) suggest that the
UK construction industry has four main forms of contractor joint ventures, namely:
• A joint venture agreement
• Strategic Alliances
• Project Based Collaborations
• Consortium and Partnerships
3.4.1. Joint venture agreements
O’Neill and Rawling (2002) define a joint venture agreement as a contractual agreement
document that governs the relationship between the joint venture partners.
These authors further elaborate, emphasizing that the purpose of the joint venture agreement
is for the contractors to the joint venture, or the joint venture partners, to set out their
understanding of how the relationships in the joint venture will be governed in both preparing
and submitting a tender for the works and, if successful, fulfilling the obligations of the
construction contract once it has been awarded.
Furthermore, it can be said that a joint venture agreement document may well include topics
ranging from apportionment of elements that include the funding the tender and, if
successful, the construction contract, the degree of initial participation of each joint venture
partner, the financial interests of each party, the rights, liabilities, obligations, responsibilities,
risks, costs, expenses, profit and losses, as well as other aspects that are not mention above,
for each joint venture partner.
3.4.2. Strategic alliances
Strategic alliances are alliances that are formed between two or more entities, for strategic
purposes of achieving set goals and objectives. Such form of alliances can be compared to,
and in some instances can be said to be, limited company form of joint venture.
Douma, Bilderbeek, Idenburg and Looise (2000) are of the view that the need to cooperate is
determined by pressure on continuity, market opportunities, time pressure or the number of
alternative options. They identify the six drivers for strategic fit in collaboration as listed
below. These include:
36
� That cooperation is only advisable when partners have a shared vision of future
development within the industry in which an alliance will be formed, and of the
impact that these developments will have on their individual positions.
� That precondition for strategic alliances is compatibility of strategies of the
parties to the alliance.
� That the alliance partners will only be prepared to make concessions when the
alliance is of strategic importance to them
� That a successful alliance requires mutual dependency
� That the alliance should have added value for the partners and/or their customers
� Partners must carefully consider whether the market will accept that alliance.
According to McDermott (1999), strategic alliances can be delivered under a framework
agreement or a framework contract. The author substantiates, enforcing that under a
framework agreement each project is let as a separate contract but governed by the terms of
the alliance agreement. Alternatively, under a framework contract each project is a separate
task or scheme governed by the original contract for the duration of the alliance. The
advantage of the framework agreement is that it offers increased flexibility and, it has been
argued, that from a public sector procurement perspective, only framework agreements would
satisfy statutory auditing guidelines.
Some Chinese authors (Xu and Wang, 2001) compared strategic alliances undertaken in the
UK to those that were being formed in China at a time when the Chinese construction
industry was evolving due to and under the impact of the world trade organization which
promoted global trade liberalization with the core criteria of market access and national
treatment.
Literature has also revealed that even though strategic alliances of companies may be
intended for a long term basis, the vast differentiation in culture and management systems.
37
3.4.3. Project Based Collaborations
Project based collaborations are usually once off collaborations in which two or more entities
come together for the purpose jointly undertaking the project. Some of reasoning behind
project based collaborations is for the joint entities to bring together specialised expertise,
joint resources (labour, plant and money) as the project may be beyond the scope of single
entity. Furthermore, companies may also decide to partake in a joint venture to strengthen
and afford themselves an advantage over their competitors. It must also be said that project
based collaborations are best utilised for high value projects.
3.4.4. Partnerships and Consortiums
According to Gruneberg & Hughes (2008), the parties to a consortium may among other
include the client, the developer, equity funder, architect, engineer and the contractor. A
consortium usually takes the form of arrangement between a number of firms in which each
firm contributes an equity stake in the form of risk capital or payment in kind in order to
qualify as a member.
Similarly to a consortium, a partnership is an arrangement involving two or more persons
who have agreed to undertake a business venture as co-owners. Ward and Chapman (2003)
further assert that the primary difference between partnering (joint venture) and a partnership
is that the members of a joint venture have teamed together for a particular purpose or
project, while the members of a partnership have joined together to run a business in
common.
It must be concluded that out of all of the methods that have been outlined above, the project
based collaborations were found to be the most successful types of joint ventures in the UK
construction industry. This conclusion was drawn from the fact that contractors prefer this
form of joint venture as they find it suitable for all parties concerned in a project.
3.5. Causes of Joint venture ventures in the UK.
In the nineteen ninety’s (1990s) a number of industry- and government-sponsored reports
sharply criticized the construction industry for its insufficient project performance, lack of
integration, adversarial nature of its inter-organizational relationships, and its pronounced
38
blame culture (CII 1991; Latham 1994; Egan 1998). These reports have triggered the search
for more collaborative forms of inter-organizational arrangements in construction, and
partnering has emerged as a general concept embracing a variety of such cooperative working
relationships between construction parties (Hartmann & Bresnen, 2010). The reports by Sir
Michael Latham, Sir John Egan and the Institute of Civil Engineers (NEC partnering option)
have not only lead to a vast increase in joint venturing or partnering, as they refer to it, but
has also resulted in certain sectors primarily advocating for partnering on a more frequent
basis in the UK.
Bresnen and Marshall (2002) suggest that partnering or joint venturing is a dynamic and
interactive process characterized by sense making, perception-forming and inter-
organizational learning and transfer of knowledge and expertise, rather than being a
prescriptive measure of procuring construction projects. This point not only directly
correlates to the research but also indicates and reinforces that joint venture initiatives can be
used as a platform of blending the experienced contractors with those that are not so
experienced such as to bridge the gap between the two parties.
Hartmann and Bresnen (2010) put forward an argument that establishing a partnering
relationship in construction is not only a matter of the joint construction of knowledge on
way of working. These authors continue clarifying on this aspect, emphasizing that
establishing a joint venture is also a matter of discarding old routines, attitudes and habits.
Unlearning even becomes a precondition for learning and consequently for partnering.
Although the concept of unlearning is given limited attention in scholarly literature compared
to the opposed concept of learning (Tsang and Zahra, 2008), it has been acknowledged that
previous knowledge potentially impacts learning processes and therefore unlearning is a
necessary means to allow for the inclusion of new information and behaviour (Becker, 2008).
In an effort to establish some of the root causes of partnering in the UK construction industry,
Hibberd (2004) believes that the cause of partnering would be helped if the industry
articulated an agreed philosophy for partnering and identified the appropriate benchmarks. In
literature however, the appropriate benchmark has yet to be identified even though the work
of Constructing Excellence in recent years has improved the position, according to Hibberd.
39
Dalle and Potts (1999) put forward all but a few reasons as to why UK contractors advocate
or participate in joint ventures. These reasons may be listed as:
1. Pooling resources
2. Sharing of risk
3. Entry to new or foreign markets
3.5.1. Pooling resources
Dalle and Potts (1999) highlight the most essential need and cause of why pooling of
resources occurs, through the ideas brought about by Cushman (1992). This author argues
that the fundamental reason for teaming of contractors with other contractors and/or other
participants is the need to bring together the resources to enable the team to provide the kind
and magnitude of services which each participant would not be able to provide individually.
Furthermore, these authors also bring to light that it is also as a result of the complexity of
large projects and the specialist skills and resources required that contractors are allowed to
participate in certain phases of construction where they have most experience and expertise
through a joint venture arrangement. This aspect also enables the contractors t the joint
venture to also learn from the various specialist contractors in a quest to improve and enlarge
their knowledge and expertise in that given specialist area. It must however be clear that the
bulk of the joint venture initiatives that are embarked upon as a result of pooling of resources
are those that are, more often than not, undertaken between well established firms with an
aim of joining forces to not only yield a competitive edge but to make significant profits.
3.5.2. Sharing of risk
In most projects in the construction industry, risk is an ever present factor that cannot be
entirely eliminated but can rather be reduced through adequate monitoring systems or
mechanisms. Such a mechanism may come in the form of a joint venture. Joint ventures lend
themselves to serve as vehicles for the sharing of commercial risks, an important
consideration in the case of a substantial construction project which may entail a large
financial commitment over a number of years (Dalle and Potts, 1999).
40
3.5.3. Entry to foreign markets
Dalle and Potts (1999) expand on the findings of Whittaker (1995) who then suggested that
many countries had enacted foreign investment controls which require foreign companies to
enter into arrangements with one or more local companies with a view to imparting their
expertise to the local firms in order to decrease the country’s dependence on foreign expertise
in the future. This aspect simply meant that overseas contractors could enter a local market,
with some degree of comfort, by establishing a joint venture with an established local
contractor. Since these findings however, a multitude of literature has since been found and
added to industry, particularly that pertaining to the Chinese construction industry and their
methods of attracting foreign investment. As joyous and exciting as these aspects may be,
however they are all beyond the scope of this study.
Other causes that come into play when it comes to partnering in the UK construction industry
are those that are typically led by clients, who are drawn from a small group of clients who
have a continuous or consistent flow of construction work of buildings or facilities to be used
by their business rather than for selling for use by others (Cushman, 2001). These clients that
Cushman refers to are therefore potentially able to shift away from single project tendering
and opt for partnering as this not only widens their options but also moves away from
increasing life cycle costs of the various projects. The contractors on the other hand have the
surety of securing repeat business, according to Cushman (2001).
Other aspects that were revealed and emphasized through the study conducted by Fortune and
Setiawan (2005), on partnering practice, was that joint ventures in the UK were highly
prompted by two crucial aspects in the recent years. These aspects were said to be those of
project delivery and changing the procurement process of procuring of construction work.
These authors then elaborate on these aspects arguing that partnering practice not only makes
for good practice however, it further aids in cost reduction, time reduction and improved
quality of work. These three factors of reduced time and cost and improved quality of work
are merely outlined and highlighted in this study and no further discussion into them in
entered into, as they are deemed to be beyond the scope of this research.
41
The second aspect of changing the procurement process is one that was long indicated in the
UK, even as early as the Egan and Latham reports. Such changes are brought about by the
client, government and industry as a whole as all parties all strive find innovative ways of
cultivating and combating poor project performances. Yet again, it is fair to say that dwelling
into this aspect would again be deviating from the bounds of this study.
3.6. Benefits of joint ventures in the UK
Joint ventures in the UK construction industry yield numerous benefits to both emerging and
established contractors. These benefits range from those most critical to others that may be
viewed as not so important. Indeed, various authors bring different views on the benefits that
joint ventures create and the significance of those benefits. Even some of the authors who can
be said to be against the initiative of partnering in the UK, Bresnen, Wood and so other
authors, do believe that joint ventures could yield beneficial aspects, when undertaken
diligently in the correct manner. Such observations are seen in literature and these benefits
will be explored in this context of the study.
It must be said although there are numerous benefits that are said to be in place in literature as
a whole, however only a select few will be explored for the purpose of this research.
Essentially, partnering promotes improved performance through collaborative business
relationships based on best value rather than lowest cost. Contract awards are still subject to
rigorous competition, but judged on pre-determined combinations of quality and cost. It
should therefore come as no surprise that some of the benefits of partnering may be said to
include among others the following:
3.6.1. Increased client satisfaction
3.6.2. Increased the range of expertise
3.6.3. Inter-organizational learning
3.6.4. Risks and liabilities can be shared by the contractors
3.6.5. Increased contractor performance on site
42
3.6.6. Access or entry to new foreign and local markets
3.6.7. Staff development and satisfaction
3.6.8. Better understanding between partners (Improved Relationships)
3.6.9. Improved “buildability”
3.6.10. Better predictability of time and cost
3.6.11. Stability
3.6.1. Increased client satisfaction
It is without a doubt that clients always strive to achieve the best quality of work within their
required time frame and preferably, at the lowest cost. Dalle and Potts (1999) advocate that
joint ventures can yield improved quality of work as the various contractors to the joint
venture attempt to place themselves at the pinnacle of their co-venturers by setting the highest
standard possible. As mentioned earlier, joint ventures may prove to be cheaper at times for a
client depending on the magnitude of work required. Furthermore, should a client opt for a
joint venture with known contractors, the entire tending process is significantly minimised.
Taking these three factors into account, clients undertaking a joint venture tend to yield
increased satisfaction.
3.6.2. Increased the range of expertise
McIntosh (2002) points out that joint ventures give contracting organisations opportunities to
reach out and provide services to a wider range of clients than they would normally meet
before engaging on the venture. Moreover, contractors are also afforded an opportunity to
learn from their joint venture partners, such as to widen and increase their range of expertise.
It is no secret that certain contractors limit themselves to given specialities and in undertaking
a joint venture with such a contractor, the parties can share knowledge and skills.
43
3.6.3. Inter-organizational learning
Farrell, Oczkowski & Kharabsheh (2009) believes that successful learning is also a benefit of
contractor joint venturing. These authors further explain successful learning, or alternatively
learning success, as the extent to which the foreign partner achieves its learning goals. The
learning goals may further be simplified into three basic aspects of learning, which can be
said to be the acquiring of knowledge of governmental issues, culture, and the market of the
host country. Bresnen and Marshall (2002) also suggest that partnering or joint venturing is a
dynamic and interactive process characterized by sense making, perception-forming and
inter-organizational learning and transfer of knowledge and expertise. These authors further
argue that a joint venture should primarily yield inter-organisational learning such as to
enforce the process of unlearning, as Hartmann (2010) points out.
3.6.4. Risks and liabilities can be shared by the contractors
According to McIntosh (2002), other benefits that arise from contractor joint venture
initiatives are those of sharing the risk and liabilities entailed in the joint venture. Upon
embarking on a joint venture, the co-venturing contractors not only share their resources and
finances, but also spread the risk of loss in case things do not turn out as anticipated. It is
without a doubt that there are indeed various forms in which contractors can be accountable
or limit their accountability thereof within a joint venture, depending on the form of
agreement entered into. On most instances however, contractors can be said to be jointly
liable for most of the aspects of the project when engaging on a joint venture initiative. Yet
again, McIntosh (2002) briefly outlines that the percentage of liability can be indicated from
the onset of the joint venture for each party, similarly with the profit sharing on the project.
3.6.5. Increased contractor performance on site
The findings of Butcher and Sheehan (2009) suggest that joint ventures have a way of
enhancing contractors’ performance on site. Perhaps this could be rationalised as a result of
the direct and indirect competitiveness that may well arise or even be established among the
various parties entered into the joint venture. On the other hand, increased assurance of a
consistent flow of work may also be reason enough to encourage such performance.
44
3.6.6. Access and entry to new markets
Whittaker (1995) proposed that many countries had enacted foreign investment controls
which require foreign companies to enter into arrangements with one or more local
companies with a view to imparting their expertise to the local firms in order to decrease the
country’s dependence on foreign expertise in the future. In more recent times, Walker &
Johannes (2003) suggest that joint venturing with a foreign co-venturer may well open the
doors to new markets and projects as it may sometimes be a pre-qualifying requirement that a
foreign company is to join forces with a local contractor in order to be awarded a tender in
that foreign country. Moreover, significant tax and custom duties concessions may well be
available to joint ventures having local partners. These methods of access and entry to new
markets may be correlated to strategic alliancing, as literature so point it.
3.6.7. Staff development and satisfaction
Having previously mentioned that joint ventures may yield a consistent flow of work for
contractors, which then enables them to forecast their profits and improve their resource
(staff) empowerment. Contractors are able to plan their staff development and attempt to
meet their needs through an array of mechanisms.
3.6.8. Better understanding between partners (Better relationships)
Akintoye and Main (2007) strongly believe that for any collaborative arrangement to work,
the relationship between parties needs to be one of good standing. It is then only once good
relations have been established that understanding of the individual parties, as well as
understanding of the requirement for the joint venture, can be possible.
3.6.9. Improved buildability
At times projects are designed to meet certain authentic views and structural strength without
much consideration being given as to how such designs are to be achieved. With the
involvement of the contractor through the early stages of the project, the buildability aspect
can also be incorporated into the design of the project.
45
This aspect not only enables a shorter construction period but also allows the contractor to
bring insight on possibly cheaper materials that could be utilised without compromising the
requirement and quality that the other parties (architect and structural engineer) advocate for.
3.6.10. Better predictability of time and cost
Having mentioned above that early involvement of the contractor can assist in reducing the
construction time period, joint ventures also enable cost reductions, according to Ingirige and
Sexton (2006). Moreover, joint ventures reduce the cost through eliminating or minimising
the tendering stage as the client may well have a particular contractor(s) that he would like to
utilise for that given project.
3.6.11. Stability
An assured contingent of work, more often than not, tends to bring about stability to the
contractor. The stability is brought about in the sense that the contractor is afforded an
opportunity to plan his resource requirement as well as anticipated profits for a significant
time period.
3.7. Success factors in the UK
According to Matthews (1999) consensus exists among researchers that there are certain
aspects that be categorised as to the essential ingredients of successful partnering. This author
continues on his views, enforcing that essentially the relationship of the parties to the joint
venture must be based on trust, dedication to common goals and an understanding of each
other’s individual expectations and values.
It is without a doubt that joint ventures do not always go according to plan and it is by this
therefore that the factors that aid in making joint ventures successful are assessed. Firstly
though, success factors, or more commonly known as critical success factors (CSF), are the
key areas of activity in which favourable results are absolutely necessary for managers to
reach their goals (Hardcastle, Edwards, Akintoye & Li, 2004).
46
Some of the CSF can be said to include the following:
1. Commitment
2. Mutual objectives
3. Continuous Improvement
4. Selection
5. Communication Teamwork
6. Trust and Openness
3.7.1. Commitment
There must be commitment from the highest level that is continually communicated and
reinforced throughout the organisation. Partnering requires a change in the culture in which
most people have been trained and to which they have become accustomed for the whole of
their working lives. If they believe that lip service is being paid to ‘just another initiative’, the
partnering arrangement will not succeed. It is crucial to seek and achieve buy-in from all
those who will be involve.
Commitment on the other hand refers to the dedication and interest of all related parties in the
project. High level of commitment is required by all project participants during various stages
as this not only ensures effective project planning and control but also clearly defines the
goals and priorities of all stakeholders in the project.
3.7.2. Mutual objectives
Successful partnering involves establishing clearly defined objectives that meet the aims of
each of the parties. Unless realistic and achievable goals are mutually agreed, there is no
basis for partnering. Perhaps the most important and critical goal, underpinning a range of
hard and soft objectives, is the alignment of commercial objectives.
3.7.3. Continuous improvement
47
This is one of the main drivers for partnering, leading to greater efficiency and competitive
advantage. In order to demonstrate improvement, relevant indicators must be determined and
performance measured. These can be compared with internal or external benchmarks.
3.7.4. Selection
Given that trust is such a critical factor in partnering, it is not surprising that a significant
proportion of these arrangements have been entered into by companies that already have
developed good working relationships.
However, having determined what attributes are required of the partner, a structured selection
process must be employed. Typical considerations, in addition to financial and technical
qualifications, may include:
• Understanding of partnering
• Previous partnering experience
• Compatible values and culture
• Health and safety procedures
• Customer care
• Environmental policy
3.7.5. Communication
The intention of the arrangement and the necessary change in attitude, must be conveyed to
all people directly and indirectly involved in the participating organisations. This must be
reinforced at appropriate intervals.
However, communication is a two-way process comprising listening as well as providing
information. An effective process must be established to encourage innovative ideas or
suggestions that are accepted or rejected with an explanation within a reasonable period of
time.
48
Effective and efficient communication has been considered extremely important by
researchers for obtaining better outcomes on projects (Toor & Ogunlana 2008).
Communication is vital on part of both client as well as other parties involved in the
construction joint venture. This is the case as all stakeholders in the project need to clearly
communicate mutual needs, issues, problems, and suggestions in order to ensure that not
many confrontations occur during the course of the project. It is without a doubt that
communication lapses can cause increased costs and delays, which in turn cause conflicts on
the construction sites.
Champions should be appointed to promote the arrangement, capture experience, assist in
developing procedures, keep abreast of developments and communicate with others.
3.7.6. Teamwork
It is recommended that a series of workshops are established, run by an external facilitator, to
explore any issues and promote the culture necessary for developing integrated teams. These
are often accompanied by social events to assist in breaking down barriers. Actions such as
joint training programmes, co-location of offices and joint administration and records can
help create the right environment.
3.7.7. Trust and openness
Much is talked about the need for trust, but this cannot be imposed. It has to be earned by
consistently being seen to be doing what one said one would do. By being open about
concerns and potential problems, solutions can invariably be developed together that would
not have been possible with one party alone.
On the other hand, Toor & Ogunlana (2008) believe that the factors that lead to the
successfulness of contractor joint ventures are comprehension, competence, commitment and
communication, which together they call the critical COMs of success. These authors argue
that these factor or COMs of success can fairly guarantee the success in large-scale
construction projects. Comprehension refers to the use of facts and data to support actions at
all levels of decision-making as well as knowing exactly what the client really wants in order
to clearly prioritise the goals of project as per the client’s requirements.
49
Moreover, the competence of the project team is said to be a critical factor as competence of
a project team ensures adequate comprehension of the project, as all team members have their
own expertise in their areas. A competent team also ensures that there are no loop holes left
in the preparation as well as implementation of the project plans.
Other success factors identified include top management support, complementarities of skills,
cooperative culture, shared goals and objectives (Akintoye & Main, 2007).
Qiao, Wang, Tiong, & Chan (2001) suggests that the aspects of appropriate project
identification, together with a suitable selection of subcontractors and a stable political and
economic environment, are all contributing factors to a successful joint venture. Furthermore,
Qiao et al (2001) also add that an attractive financial package and suitable management
control will also be factors that contribute.
Kwak (2002) agrees with Qiao, Wang, Tiong, & Chan and he further categorises success
factors into ten aspects, namely:
1. Political stability
2. Legal factors
3. Cultural factors
4. Technical factors
5. Managerial/Organisational factors
6. Economical aspects
7. Environmental factors
8. Social factors
3.7.8. Political stability
Kwak (2002) further elaborates on political factors, saying that these factors refer to issues at
the national and regional level and arise as a result of the inconsistency in government
50
policies, laws and regulations, with an end result of political instability. Moreover, these
factors contribute to an environment of uncertainty on return of capital investment as political
instability may result in frequent change of governments or even go as far as stimulating
immediate change of policies which then adversely affect the successful achievement of
objectives of the joint venture initiative.
3.7.9. Legal Factors
Legal factors refer to unexpected changes in government policies pertinent to laws and
regulations and currency conversion; absence of appropriate regulatory systems; rates and
methods of taxation including customs, royalties, convertibility of currency; role of local
courts in arbitration; and the methods by which electricity tariffs are set and approved (Kwak,
2002).
3.7.10. Cultural Factors
Culture has a profound impact on international construction joint ventures as many of the
problems and obstacles in international construction joint ventures have their roots in the
cross-cultural communication and understanding (Ying, 1996). Ying also believes that
Cultural factor, though it is not the dominant or the only force which influences an
international JV, is certainly one of the most important and least understood. Beamish &
Lupton (2009) on the other hand believe that issues related to cultural differences on joint
venture projects may be mitigated by training those managers who are going to be exported
to the joint venture adequately before sending them on the assignment to the foreign joint
venture.
3.7.11. Technical Factors
Ozorhon, Arditi, Dikmen & Birgonul (2007) describes technical factors as factors that refer
to use of technology including design, engineering, procurement, construction, equipment
installation, and operation of the equipment and its compatibility with accomplishment of
project objectives. Furthermore these authors believe that project design standards,
specifications, and construction methods must be carefully selected so that they will be
51
appropriate to the local financial, human, and material resources required during both the
implementation phase of the project and its subsequent operation.
3.7.12. Managerial/Organizational Factors
Beamish & Lupton (2009) support Kwaks argument and they further explain
managerial/organisational factors as those factors that relate to inadequate or ineffective
managerial skills within the organisation. Furthermore, Sillars and Kangari (2007) also
alluded to the fact that the success of each organisation lies with its own management and
failure of organisational success may alter with the project success.
3.7.13. Economic Factors
Sillars and Kangari (2007) continue to agree with Kwak (2002) and further enforce that
economic factors are factors that the organisations to the joint venture may not have complete
control over. These factors encompass aspects such as changes in domestic economic
conditions or even regulatory changes resulting in a need for some changes in initially agrees
prices of the materials, labour and other resources.
3.7.14. Environmental Factors
Kwak (2002) also explains environmental factors as the factors that refer to issues in conflict
with established environmental regulations of the recipient country. These factors comprise
pollution related issues such as noise, air pollution, water pollution, and visual disturbances.
Moreover, other issues relating to natural resources such as unsustainable use of natural
resources including minerals, water, land, and flora and fauna are all encompassed in
environmental factors that need to be addressed.
3.7.15. Social Factors
Kwak (2002) lastly explains social factors as those factors that include hostility due to
religion, customs, and ethnicity of the project participants, social uprising or riots due to
ethnicity or polarization of social strata and security of the stakeholders. In addition,
overestimation of capacity of the beneficiaries and resistance of the beneficiaries to new
social values and standards effects of economic change or new technology.
52
Having mentioned all of the above, it goes without say that the success factors that are
yielded from international construction joint ventures are not singular elements but are rather
an incorporation of multiple elements that, when put together, form a complete package. In
recapping what the package entails, it can be said that comprehension, competence,
commitment and communication form the basis of the success factors and the political
stability, legal factors, cultural factors, technical factors managerial or organizational factors,
economical aspects as well as the environmental and social factors build from the established
base. Though certain researchers may dispute this, however it is without a doubt that the
above literature well supports these findings.
3.8. Sustainability of joint venture initiatives in UK
The quest for sustainability has put the construction industry under immense pressure from
the Government and general public to improve its unsustainable pattern of project delivery
(Adetunji, Price, Fleming and Kemp, 2003). These authors continue elaborating, expressing
that ssustainable construction is currently an extremely important issue to many different
types of stakeholder. Furthermore, sustainability is being driven and enforced by the UK
Government through stringent fiscal policies and regulations, as well as several government
initiatives.
In addition, stakeholders are becoming more aware of the global challenge and are using their
power to exert pressure on the companies as evidenced by growing numbers of green
consumers. According to Adetunji et al. (2003), it is as a result of these factors therefore that
the concept of sustainable construction through alliancing provides a means for long-term
success and a framework to redress initiative overload by integrating key aspects of
Rethinking Construction, environmental protection, health and safety performance, and
community interaction.
Partnering practices can be said to be one’s of a sustainable nature in the UK construction
industry as these are primarily driven by government and thereby encouraging all other
parties to partake in such practices. The policies and regulations that are in place make it
easier for companies interested in engaging on joint ventures, while at the same time
affording them an upper hand above their competitors.
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3.9. Conclusion
The ideology of joint ventures or partnering in the UK construction industry that has been
reviewed in this research literature has provided some incite as to why such ventures are
engaged upon in this part of the world. It can therefore be said that partnering and
collaborations were encouraged from as early as nineteen ninety four through the Latham
report and then further affirmed in nineteen ninety eight in the Egan report. These two reports
therefore laid a platform and henceforth created an opportunity for further research into
aspects of partnering and alliancing.
Since then, multiple authors have seized the opportunity and dwelled into multiple literature
encompassing joint ventures in the UK construction industry. The various literature however,
is still not sufficient as many gaps in literature still need to be filled.
Indeed, much still remains to be researched on the UK construction joint venture perspective
as there is partially limited literature available on this avenue. Gale & Luo (2004) also
expresses how literature on criteria for successful joint ventures is vague. The above
mentioned aspect therefore commands prospective researchers, researchers and practitioners
to all come together and build the body of knowledge on alliancing or partnering in the UK
construction industry. With all of these thoughts in mind, it is clear that research
opportunities are in abundance on joint venture related topics in the UK as much still needs to
be explored and investigated in the UK construction industry.
It was also found that the main forms of joint ventures initiatives that existed in the UK are
those of Joint venture agreements, Strategic alliancing, project based collaborations and
Partnerships and Consortiums. Though other forms may exist however these four forms
explored as they are regarded as the main forms of alliancing that are in play in the UK
construction industry.
The causes of joint ventures that were identified in this chapter included those of pooling
resources, sharing of risk and entry to new or foreign markets. The other cause that was
mentioned is that of joint ventures that are typically led by clients.
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It must also be outlined that the benefits and critical success factors or factors of success that
enable such initiatives to continue and grow have also been highlighted above. With regard to
the benefits that are yielded through joint ventures in the UK construction industry, these
benefits can be said to be beneficial to all parties involved in the joint venture.
The benefits that were revealed through literature include among others increased client
satisfaction, increased the range of expertise, inter-organizational learning, risks and
liabilities can be shared by the contractors, increased contractor performance on site, access
or entry to new foreign and local markets, staff development and satisfaction, better
understanding between partners (Improved Relationships), improved ‘buildability’ through
early involvement of the contractors, better predictability of time and cost, as well as stability
which provides more confidence for better planning and investment in staff and resources.
The last aspect that was highlighted, with some degree of depth, was that of the factors of
success or critical success factors in the UK construction industry. Having mentioned all of
the above, it goes without say that the success factors that are yielded from international
construction joint ventures are not singular elements but are rather an incorporation of
multiple elements that, when put together, form a complete package. In recapping what the
package entails, it can be said that comprehension, competence, commitment, continuous
improvement, selection, mutual objectives, teamwork, trust and openness and communication
form the basis of the success factors and the political stability, legal factors, cultural factors,
technical factors managerial or organisational factors, economical aspects as well as the
environmental and social factors build from the established base. Though certain researchers
may dispute this, however it is without a doubt that the above literature well supports these
findings.
In conclusion, it must be mentioned that the sustainability of joint ventures in the UK is a
highly possible aspect as it is one being driven and enforced by the UK government through
stringent fiscal policies and regulations, as well as several government initiatives. In addition,
alliancing provides an avenue for rethinking construction and providing alternative methods
to conventional construction processes and procedures.
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Chapter 4 – Literature review on Ghana
4.1. Introduction
This chapter serves to investigate contractor joint ventures in the Ghanaian construction
industry, with emphasis on the causes of such ventures as well as the benefits that arise from
such initiatives. Moreover elements or factors that are essential to the success of such
initiatives will also be examined and well as sustainability of joint ventures also being
evaluated. In this era of globalization and competition, most companies seek avenues to
become market leaders, gain competitive advantage or penetrate into new and unfamiliar
markets (Ahiaga-Dagbui, 2010). A number of options are available for inter-organizational
relationships for mutual gains and one such avenue is the use of Joint Ventures.
Wooldridge (2010) further outlines that many international construction companies are
increasingly entering into joint ventures with local companies in developing countries to
explore perceived profitable opportunities through the penetration of new markets. In
addition, Ahiaga-Dagbui, Fugar, McCarter & Adinyira (2011) add onto Wooldridge’s
thoughts, accentuating that joint ventures generally offer a number of benefits even though
the management of such initiatives may be complex.
4.2. History of the Ghanaian construction industry
The formal Ghanaian Construction Industry (GCI) comprising clients, contractors, architects,
quantity surveyors, engineers etc. is a British development handed down as a result of the
historical links between the two (Ahadzie et al, 2008). These authors further elaborate that
during the pre-independence era, local construction capacity especially with respect to local
construction companies was totally non-existent in any recognizable form. It is therefore not
surprising that, almost all construction contracts were awarded mostly to British
Conglomerates during this period. Naturally, the trend began to change when the care-taker
government of Nkrumah was sworn in the early 1950s.
There is no denying the fact that, since independence, various governments have attempted to
introduce modernity and professionalism towards improving local construction capacity and
making it more competitive.
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However, after 50 years of independence typical rural construction practices remain virtually
unchanged from what pertained in colonial times. Alternatively, while urban construction has
integrated into modern tenets, the form of construction practices still appears relatively very
elementary technologically unsophisticated and outmoded. It is by this therefore that when
current standards are examined within the context of contemporary global construction
practices, the Ghanaian industry could be described as being at the cross road.
The technical and managerial capacity of local contractors has many a time also been
questioned. The reality is that, in this age of complexity and technologically driven high
quality projects, Ghanaian contractors, like many of their counterpart in the sub-region, are
yet to be integrated. Of course, it is much easier to criticize contractors for lack of
development in the industry since they are the forefront of producing the end product,
however, apart from their own weaknesses which admittedly is managerial and
professionalism, it is also true that there are many systemic problems (e.g. perennial delays
in payment procedures) that have not helped in engendering their growth (Ahadzie et al.
2010).
Furthermore, it must be expressed that according to the findings by Anvuur and
Kumaraswamy (2007), it is a result of this that the government of president Kufour (2001-
2009) identified construction as a priority sector for foreign and private investment, thus
enabling ease of entry of foreign contractors to partner with Ghanaian contractors in order to
undertake major projects in the country.
The above trends therefore show a clear and distinct view that joint ventures have been in
existence in the Ghanaian construction industry since the days before independence,
regardless of the form they took. To date, joint ventures are still a driving force in the
Ghanaian construction industry as many of the large infrastructure projects are conducted
through partnering.
4.2.1. Overview of Ghanaian construction industry
With Cote’Ivore, Benin and Togo on its borders, Ghana is a tropical country south of the
Sahara Desert in West Africa. The Government of Ghana (GoG) (2010) depicts the capital
Accra as a city that is 5 degrees north of the Equator and lies nearly on the prime meridian (0
57
degrees longitude), due south of London. The GOG further elaborates, emphasizing that
english is the official national language and is widely read and spoken as education and
government structures are derived from British models. Inter-ethnic strife is not a feature of
the country despite a multiplicity of African language and dialects, and a diverse history.
Despite its turbulent history in the first decades following independence, Ghana has emerged
in the 1990s as a stable, multi-party democracy. With a population of only twenty four
million people (Ghanaian Statistical Services, 2010) and a growth rate of over twenty percent
in 2011, Ghana is said to be the fastest growing economy in the world for 2011 (International
Monetary Fund, 2011). It therefore comes as no surprise that Ghana is one of the few
countries in western Africa to offer real economic promise, and, as one of the model
reformers in Africa that is unlikely to face sanctions from donors, including the IMF any time
in the near future.
According to the Ghanaian Statistical Services (2010), the Ghanaian construction industry
accounted for ten percent (10%) of the countries’ gross domestic product (GDP). It therefore
comes as no surprise that sector plays an essential role in countries economy as it remains as
one of the major routes for generating or creating new wealth and value to meet other
economic and social goals and challenges in Ghana (Ahiaga-Dagbui, Fugar, McCarter &
Adinyira, 2011).
4.2.2. Current state of the Ghanaian construction industry.
According to Ahiaga-Dagbui, Fugar, McCarter & Adinyira (2011), who found that the World
Bank (2009) believes that Ghana currently enjoys significant stability in macro-economic
activity, largely because of the high level of support provided by the Developmental Partners
(Multi Donor Budget Support in 2009 was US$425 million). Furthermore, the IMF (2010)
has described Ghana as being on track in achieving its fiscal targets of significant reduction
in budget deficits to 8% by the end of 2010 from 20% in 2008.
In highlighting some of the challenges facing the Ghanaian construction industry, the high
cost and frequent shortage of materials are currently one of the most challenging factors as
over seventy percent of building materials are imported and in instances where the material is
58
manufactured locally, the bulk of the raw materials are imported (Ghana Statistical Service,
2010).
Moreover, Ahiaga-Dagbui, Fugar, McCarter & Adinyira (2011) emphasize Egmond &
Erkelens’ (2007) conclusions that the majority of Ghanaian contractors lack sound financial
base as they do not have sufficient access to funds and credit facilities. Notably, the Ghanain
contractors do not have the appropriate technological capabilities, plant and equipment and
key personal to handle projects properly (Egmond & Erkelens, 2007). It is as a result of these
very facts that the government of president Kufour eased and encouraged the entrance and
assistance of foreign contractors to partner with Ghanaian contractors in order to undertake
major projects in the country (Anvuur and Kumaraswamy, 2006), as mentioned earlier.
On a more positive front, the government of Ghana (GoG) has made strong and clear views
in their budget speech for the twenty twelve year that it will indeed be a year of infrastructure
development for accelerated growth and employment creation. With an uncompromised
budget for infrastructure development, the government of Ghana has serious intentions of
sealing the voids that have long been evident in their country. This positive outlook prepares
things well for the oncoming medium term; however the question still remains as to whether
or not the budget will be utilized for its intended purpose.
Still on the 2012 outlook, the GoG intends on implementing the infrastructure development
for accelerated growth and employment creation plan within the following sectors (GoG,
2011):
• Electricity, Oil and Gas;
• Water and Sanitation;
• Railways, Roads, and Ports;
• Health, Education, Agriculture
As mentioned before, the implementation of the infrastructure development in the above
sectors will not only enable the government to fill the long standing gaps in its infrastructure,
59
but will also aid it in achieving its set theme as outlined in the 2012 budget speech by finance
and economic planning minister, Dr Kwabena Duffour.
4.3 Contractor grading in Ghanaian construction industry
With the chapter based on contractor joint ventures in the GCI, the author deemed it
appropriate to mention and briefly describe the contractor classification in the GCI.
According to Gyadu-Asiedu (2009) contractors in Ghana are grouped into eight categories
(A, B, C, S, D, K, E and G) according to the type of works they undertake. The table below
depicts the various classifications.
Category Type of Work
A Roads, Airports, and Related Structures
B Bridges, Culverts and other Structures
C Labour based road works
S Steel bridges and structures: construction rehabilitation and
maintenance
D General building works
K General civil works
E Electrical works
G Plumbing works
Table 4.1. (Source: Gyadu-Asiedu, 2009)
In each of the eight categories, contractors are grouped into four, three, two and one based on
the value of work they are eligible for undertaking (Vulink, 2004).
Contractor Classification or grading Value of works undertaken
Class (grade) 1 Not restricted to any project value
Class (grade) 2 From $200,001 to $500,000
Class (grade) 3 From $75,001 to $200,000
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Class (grade) 4 Up to $75,000
Table 4.2 (Source: Vulink, 2004)
The above table illustrates the findings of Dansoh (2005) who clarifies that class four
contractors can tender for contracts $75,000; class three up to $200,000; class two up to
$500,000 and class one can undertake contracts of all amounts.
It is through the some Assibey-Mensah’s (2008) findings that it is established that the
Ghanaian construction industry is largely inhabited by small and medium contractors, who
are mostly indigenous Ghanaian contractors. These contractors are primarily general building
contractors, category D, and are generally class three or four.
Ahadzie (2008) also highlights the need for a Ghanaian construction industry development
board. The author denotes that the CIDB, when established, has the role of ensuring that
contractor programmes matches the national development agenda. The board would also be
responsible for competitive participation of local contractors, technical and managerial skills
improvement, growth and expansion of domestic construction enterprise, employment
generation capacity, delivery of quality work, efficiency/timely delivery of work and
sustainability in the Ghanaian construction industry.
Furthermore, Ahadzie continues to indicate that the construction industry provides the
infrastructure and facilities required for other sectors of the economy to flourish through the
provision of schools for education and training, factories and shops for commercial and
business activities as well as housing for basic human needs. The industry also provides
hospitals for health care, buildings for the national communications network and roads for
transportation and delivery of goods and materials. Lastly, the author expresses that it is the
generation of these physical assets that many modern economies, both developed and
developing, have successfully exploited towards achieving and sustaining the requisite socio-
economic progress.
4.4. Types of joint ventures
According to Ahiaga-Dagbui (2010), while the terms joint ventures, partnerships, consortia
and strategic alliances may suggest the similar meaning in general use, they are very different
in business terms with regards to the level of risk sharing, strength of relationship between
61
the companies involved and generally in the way the relationship is set-up. Joint ventures are
the most structured and regulated, with sharing of equity and formation of a new entity
(Landers, 2008). Consortiums involve a number of partners, with one company managing the
project and the others doing the work at their own set prices (Kurtz and Boon, 1984).
Ahiaga-Dagbui (2010) continues on Cheng and Li’s (2002) thoughts, revealing that while
partnering involves no sharing of equity and is usually loose in the nature of controls and
hierarchy, alliances lie mid-way between the two involving voluntary arrangements between
firms for the co-development of a product, sharing technologies, services or knowledge. On
the other hand, Matthews (1999) established that partnering stops short of full commitment
by the partners, thus allowing them to retain their separate identity. Matthews further
suggests that the driving force behind the formation of any of these relationships is the
enhancement of organizational capacity. Generally, contractors would want to achieve their
aims more rapidly and with lesser problems when operating in foreign markets.
According to Wong (2005), the main reason for using any of these forms of relationship with
a local partner is primarily for risk mitigation. Lowe (2007) further suggests that the local
contractor, who has been working in that market for some time, has first-hand knowledge and
experience of business in that market, knows the key players and local procedures, is familiar
with the culture and customs of the people, market trends and the nature of customer and
client demand and supply. This is why the selection of local partner may be very critical to
the success of any joint venture or partnership.
4.5. Benefits of joint ventures
While sum will argue that the chapter has omitted an integral part of this chapter of the study,
being the reasons or causes of joint ventures, others will respond, equally arguing that the
benefits arise as a result of the reasons, thereby highlighting the correlation between the two
aspects.
For the sake of adhering to social norms, a few reasons are mentioned below as to why
people opt to venture into joint ventures at times:
• An entry strategy into a new or foreign market (Mathews 1999: Adnan, 2008)
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• Increased profitability (Harrigan, 1988; Butcher and Sheehan, 2009 )
• As a result of government initiative through legislation (Adnan, 2008; Beamish
& Lupton, 2009)
• Gaining competitive advantage as joint ventures can be used as a procurement
strategy (Harrigan, 1988; Adnan, 2008; Laryea, 2010)
• Sharing of risk among a pool of parties (Yan and Luo, 2001; Lim and Liu, 2001).
When it comes to the benefits that arise form joint venture initiatives in the Ghanaian
construction industry, it must be said that though benefits may be slightly inclined for the
local or subcontractors, there are also benefits that emerge for the established (primarily
foreign contractor in this instance) contractors in the GCI. Some of the benefits that were
found in literature will be listed below and thereafter brief discussions will follow.
• Access to new or foreign markets
• Procurement advantages
• Skills Development
• Technology transfer
• Improved Productivity
• Inter-organizational learning
• Increased Profitability
4.5.1. Access to new or foreign markets
One of the main reasons for the formation of joint ventures by contractors in Ghana is for
entry into the Ghanaian construction industry (Laryea, 2010). This is the case as these foreign
contractors co-venture with the indigenous Ghanaian contractors in order to acquire large
public contracts, thus utilizing them a tool for their access into the new and unfamiliar market
as indicated by Williamson (1994). Ahiaga-Dagbui (2010) believes that this works both ways
for the partnering companies as each company uses the venture to gain access into the other's
63
market. Ahiaga-Dagbui further suggests that it is challenging to enter a new market without
first-hand knowledge of the culture, consumer behaviour, marketing strategies and practices,
foreign companies may find it extremely difficult to enter and operate in a new environment.
Using a local company as a partner would greatly help in overcoming this barrier (Adnan,
2008). Although both contractors benefit from accessing the new markets, it must be
emphasized however that the foreign contractor may be viewed to be the one yielding the
most benefits on this particular instance. This is the case as Laryea (2010) highlights the
difficulties that face foreign contractors in penetrating new markets, whereas the local
indigenous contractors (though unfamiliar with large scale projects) are familiar with the ins-
and-outs of their industry.
4.5.2. Procurement advantages
Following the public procurement Act (2003), construction activities in Ghana (government
projects) are organised essentially as a tripartite arrangement between the client, professional
consultants and the contractor (Ahiaga-Dagbui, 2010). The author further suggests that as a
result of the act, joint ventures become advantageous in the procurement process.
The main procurement arrangement in Ghana is the traditional competitive bidding, as
Anvuur (2002) had long foreseen. The clients, upon taken a decision to build, calls on the
chief consultant, usually, the Architect and the other consultants. They provide professional
advice to the government during the briefing stage. They then provide design, appoint the
qualified contractor, supervise the execution and advice for payment and finally, conclude the
project. The table below shows the process, where * indicates stakeholder with no active role:
Stakeholder First Action Second Action Third Action Fourth Action Fifth Action
Client Conceptualise Initilise ******* ******* Use the product
Practitioners
(Consultants)
******* Design clients
concept
Manage the
project
Manage the
Project
*******
Contractor ******* ******* Execute the
Project
Complete the
Project
*******
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Table 4.3 Ghanaian Public Construction Project Procurement (Source: Ahiaga-Dagbui, 2010)
This has meant that after the initialization stage the client’s role is often limited to expecting
the finished product. The consultants, led by their team leader (usually, the Architect,
Quantity Surveyor or Civil Engineer depending on the project, or project manager where
applicable) traditionally become not only the managers of the project ensuring that the right
thing is done by the contractor but also the sole judge assessing and giving the verdict as to
the state of performance and satisfaction of the project to the client (Ahiaga-Dagbui, 2010).
4.5.3. Skills Development
To a large extent, the technical and managerial competencies of many of the Ghanaian
contractors remain doubtful manifesting very often in poor quality product delivery
(Agyakwa-Baah, 2009). It is by that therefore that the government of Ghana has created a
most conducive environment for entrepreneurships of all types to successfully operate in the
country (Assibey-Mensah, 2009). The author further explains that this however, has not
positive affected those operating in the construction industry as they cannot effectively
compete with foreign firms because they lack the vital or crucial capabilities (e.g., money,
equipment, managerial know-how, etc.) required to be successful contract bidders. As a result
of this and the procurement laws that are in place, the foreign contractors needed to joint
venture with local contractors in order to attain work. This, as a result, has aided the local
contractors in that they have effectively gained from the foreign contractors as many of the
skills they lacked have been developed through or in the course of the various joint ventures
embarked. In Laryea’s (2010) findings, one contractor was quoted saying that “a Ghanaian
contractor who wants to increase and build their capacity should approach foreign firms who
might like to sublet some of their work. This would help the local contractor in developing
capacity, learning and transferring knowledge.”
4.5.4. Technology transfer
According to Laryea (2010) technology transfer is one the primary challenges that face local
Ghanaian contractors. Laryea further suggests that although technology transfer may be
viewed as a challenge, it can, on the other hand, equally be viewed as an opportunity. This is
the case as the opportunity is availed to foreign contractors to educate and train the local
65
contractors on various technological advances that are at their disposal which they too can
utilize. Through joint ventures, such technological advances can be easily transferred and
thereby ensuring growth to local Ghanaian contractors.
4.5.5. Improved Profitability
Joint ventures are said to improve profitability as the foreign contractor have the primary task
of completing the project as fast as possible, in order to optimize profits (Ahiaga-Dagbui et
al, 2011).
4.5.6. Inter-organizational learning
It was mentioned earlier that Ahiaga-Dagbui (2011) found that foreign contractors found it
challenging penetrating and surviving in markets which they were unfamiliar with the
culture. In undertaking a joint venture with a local contractor, the organizations can learn
various aspects from one another. With the foreign contractor learning the culture and nature
of the market, the local contractor may glean on essential technical, managerial and other
associated skills that, they lack, which will not only add value but will also enable them to
take a step closer into finding independence (Assibey-Mensah, 2009).
4.5.7. Improved productivity
According to Butcher and Sheehan (2009) joint ventures are said to improve productivity and
contractor performance on site. The authors attribute this factor the competitive environment
that this form of project delivery system naturally creates among the parties to the joint
venture. Furthermore, joint ventures usually have rewards for early project completion and
more often than not, contractors advocate for the financial reward and thus ensure maximum
output from the workforce.
4.6. Factors of success
Before any attempts are made in highlighting and outlining the factors that contribute to
successfulness of joint ventures in the Ghanaian industry, the author of this research deemed
it essential to review certain aspects first. Such aspects include among others the primary
form of management that joint ventures usually adopt in order to ensure success, the
measures that are put in place in order to ensure minimal or no disputes throughout the course
66
of the joint venture as well as giving a few examples of some of the projects which were
undertaken under the joint venture umbrella in Ghana.
Although no distinct evidence outlining the primary form of management utilized in joint
ventures was found in literature, the author of this study however, concluded, through the
findings of Todeva and Knoke (2005), that the primary mode or form of management that
joint ventures adopt is the hybrid form.
The question that arises though is what exactly is a hybrid form of management? According
to Borys and Jemison (1989), hybrids are organizational arrangements that use resources
and/or governance structures from more than one existing organization. These authors further
elaborate, explaining that hybrid form of management helps alleviate problems such as
operational inefficiency, resource scarcity, lack of facilities to take advantage of economies
of scale, as it offers a wide range of solutions to these problems through drawing upon the
capabilities of multiple and independent organizations.
It is also notable that according to Auster (1994) and Olk (1999), analysts widely recognize
that alliances are hybrid organizational forms or hybrid arrangements between firms are
increasingly formed. Furthermore, they encompass both short-term project-based, and long
term equity-based, cooperation between firms with varying degrees of vertical integration and
interdependence.
When it comes to the measures that are put in place in order to ensure minimal or no disputes
throughout the course of the joint venture, the joint venture agreement is usually the first
reflection point. This can be said to be the case as the parties to the joint venture need to
agree and sign a method of resolving any disputes, should they arise through the course of the
project. In more recent times however, Holman Fenwick Willan (HFW) (2011), an Australian
based company, has since found that security in the form of performance bonds, letters of
credit or guarantees and adjudication go some way to achieving swift results for resolving
building disputes. HFW further suggests that although alternative dispute resolutions
(ADR’s) are widely used, the above mentioned interventions have seen minimal disputes
arise in contractor joint ventures in Australia. The company does however indicate that the
parties to the joint venture should take extreme caution when agreeing the terms of the joint
venture.
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On the joint venture success factors’ end of things, it must be said that many authors in
various countries (especially China) have dwelled vastly into some of the factors that lead to
the success of such projects. The same unfortunately, cannot be said for Ghanaian authors as
literature reveals limited evidence of research work undertaken in this particular area.
Perhaps such can be attributed to the “perceived” limitation of successful joint ventures
undertaken in Ghana; however the views of some of the other authors will be extracted for
the purpose of the study.
According to Phua (2004), there are diverse objectives of stakeholders that make it difficult
even to agree upon a single comprehensive list of success factors. It must therefore be
mentioned that for the purpose of this research study, the success of the joint venture is said
to be the attainment of the set objectives for the joint venture within the various constraints
outlined at the onset of the project (Lim and Mohamed, 1999). Although objectives may be
amended through the course of the joint venture, yet the agreement of the parties to the joint
venture on the amended objectives forms the basis on which success will be determined.
In identifying the factors that lead to the success of a joint venture project, the following
factors were the most elemental, these are (in no particular order):
1. Trust among the partners
2. Commitment and competence of the parties
3. Partner selection
4. Distinct communication channels
5. Organized management structure
6. Transparency
7. Sharing of information timeously
8. Adequate allocation of resources
9. Conducting regular reviews to assure and verify progress on project
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According to Girmscheid and Brockmann (2006), trust reduces complexity and the individual
workload for a contractors as it minimizes the energy required for controls as well as helps
build up a team. These authors further elaborate, emphasizing that trust is extremely
important and that if any party doesn’t have trust, the joint venture has difficulties to operate
because the whole time too much energy and effort is spend on watching what each partner is
doing and not devoting it to the outcome of the project.
Although commitment and competence are independent, yet it can be argued that one can
never really impact without the other. Indeed it is essential for the parties to the joint venture
to be committed; however it is equally as important that the parties are also competent
(Adnan, Chong & Morledge, 2011; Nguyen et al, 2004). This factor not only alleviates
constant monitoring of one party on the other but enables both parties to go about their
activities freely and more productively.
More often than not, the selection of a partner for the undertaking of a given joint venture
will play a significant role in determining whether or not the venture fails or succeeds
(Nguyen et al., 2004). It is by this therefore that the joint venture partners need to understand
each other and assess the suitability of engaging on a possible joint venture with each other.
Moreover, the agreement on the appropriate terms will also play a huge role.
According to Adnan et al (2011), relationships are formed early on in a joint venture and are
nourished by clear communication. Clear and thorough channels of communication are
therefore essential in the success of a joint venture. It is also crucial that the parties to the
joint venture should meet at least once a month to review the progress of the project.
According to Nguyen et al. (2004), the allocation of adequate resources to any given joint
venture project is paramount to that projects success. The author expresses that allocating
inadequate resources to the project may hinder the completion time of that project. By the
same token, over resourcing a project may also hinder the feasibility of the budget as the cost
may exceed the allowable.
The constant monitoring and reviewing of progress such as to determine the progress of the
joint venture is a factor that is crucial to the success of any joint venture (Nguyen, et al.,
2004). This not only allows for corrective measures to be put in place if and when progress is
69
not adequate but it also ensures early detection of any issues that may arise in the cause of the
joint venture project.
4.7. Sustainability
Assibey-Mensah (2009) proposed that the government should formulate a much-needed
framework for developing, nurturing, and sustaining their operational infrastructure with the
view to preparing local Ghanaian contractors to compete effectively with foreign businesses,
particularly for lucrative public-construction contracts in Ghana.
Although many large infrastructure projects are undertaken as joint ventures in Ghana, yet it
is very difficult to conclude on whether or not joint ventures are a sustainable practice in this
region. This is primarily because there is no framework that is put in place that enables
parties to review progress achieved, in terms of local partner development, through the cause
of the venture joint venture against set objectives and time frames. Ultimately, the local
Ghanaian contractors are left exploited by their foreign partners as they struggle to find
independence even after a number of joint ventures with large foreign contractors.
4.8. Projects
Completed projects - Construction of 6 primary electricity sub-stations in Kumasi and Accra
were completed under the Distribution Improvement Project.
Ongoing Projects - The expansion works at the Akosombo and Mami Water depots
commenced with the construction of additional 10,000 cubic meter storage tanks.
• Small towns‟ water system at South Dampong in Asante Akim was completed
• 85 percent of Afigya Kwabre, Ankase, Ejuratia and Mpobi water systems was
completed
• Wiamoase small town‟s water system was also extended to improve water supply
to Okomfo Anokye Senior High School.
• Phase I and II of Koforidua water supply project was completed while phase 3 of
the project is ongoing;
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• Konongo-Kumawu-Kwahu Ridge Water Project is about 30 percent complete;
• The Esakyire Water Project is also about 30 percent complete.
• Laying of pipelines and construction of 3 reservoirs and 2 treatment plants under
the ATMA Rural Water Supply Project are almost completed.
• The rehabilitation and extension of the Accra-Tema sub-urban railway line from
Tema Harbour to Japan Motors (Community 1) is about 60 per cent complete.
• The contract for Lot 1 of the Bus Rapid Transit (BRT) project involving the
expansion of the Odaw Bridge and construction of flyover bridges on the Graphic
Road is 40 per cent complete and evaluation report for Lot 2 has been completed.
• Government completed the following major road projects: Bamboi-Tinga,
Sogakope-Adidome-Ho, Kumasi-Techiman (ph2), Nsawam Bypass (Kumasi
bound), Akatsi-Dodze-Akanu (Lot1), Akatsi-Dzodze section, Akatsi-Aflao Road
(Lot 1) and Akatsi-Agbozume section.
• A total of 14,938km of routine and periodic maintenance works were completed
and 103km of spot improvements were also completed. In addition 382km of
upgrading and rehabilitation works were undertaken.
• The contract for Anyaa to Pokuase Section of the Awoshie- Pokuase road project
has been awarded.
4. 9. Conclusion
Having reviewed relevant literature that is in place, with regard to joint ventures in the
Ghanaian construction industry, it is clear that the Government of Ghana (GoG) has thrived
in creating the most conducive environment to encourage joint ventures among contractors.
Furthermore, the GoG also enforced the procurement act, which enforces foreign contractors
to joint venture with indigenous Ghanaian contractors in undertaking large public
infrastructure projects.
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With Ghana said to be the fastest growing economy in the world for 2011 (International
Monetary Fund, 2011), the government’s efforts for improving and upgrading infrastructure
have been realized. Indeed challenges are in place, which among others include the high
import and shortage of materials, however the GCI is not moved by this.
Numerous benefits were identified and these included access to new or foreign markets,
procurement advantages, skills development, technology transfer, improved productivity,
inter-organizational learning and increased profitability. Although these are the benefits that
are discussed in this study, it must be said that there are other benefits that were found to be
in play however those were not deemed suitable for the purpose of this study.
In addition, it must be said that in identifying the factors that lead to the success of a joint
venture project, limited literature on GCI joint venture success factors was found. The
following factors were however correlated to the success of joint ventures throughout
construction industries and these were the most elemental factors which included trust among
the partners, commitment and competence of the parties. Furthermore, partner selection,
distinct communication channels, organized management structure, transparency, sharing of
information timeously, adequate allocation of resources, conducting regular reviews to assure
and verify progress on project were also success factors that were distinct.
Lastly, it was proposed that the government should formulate a much-needed framework for
developing, nurturing, and sustaining their operational infrastructure with the view to
preparing local Ghanaian contractors to compete effectively with foreign businesses,
particularly for lucrative public-construction contracts in Ghana. It was also mentioned that
this could be attained through the introduction of a monitoring body (an industry
development board of sort) that would continually monitor and ensure that set objectives are
achieved on given joint venture projects.
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Chapter 5 – South African Literature
5.1 Introduction
This chapter serves to focus on contractor joint venture initiatives in the South African
construction industry, with its emphasis on the causes of such contractor joint ventures. In
understanding the causes, the chapter attempts to understand the history and background of
the countries construction industry as a point of departure. Furthermore, legislation that is in
place, together with the benefits attributed by joint ventures is reviewed. Moreover, the
factors that contribute to the success of contractor joint ventures in South Africa are also
reviewed. Lastly, the chapter reflects back on the literature reviewed in the various countries
through the study. A summary of lessons learnt from international and South African
literature is undertaken through comparing the differences and similarities found in the above
mentioned.
It is perhaps appropriate to note that according to Dalle and Potts (1999), joint ventures are
not the easiest to manage and operate. It is by this therefore that these authors posit that there
must be compelling reasons why parties to a construction contract resort to the formation of a
joint venture in contrast to the conventional contractor and subcontractor relationship.
It is through Nkado & Falkof’s (1997) findings that we clearly realise what compels
contractor joint venture initiatives in South Africa. These authors found that contractor joint
ventures in the South African building industry are one’s that can be said to primarily involve
large construction companies and small, or emerging, contractors working together on
projects whereby each partner can contribute their expertise in a certain field, and can, at the
same time, learn from the other partner.
The primary cause of joint ventures in South Africa is because of the historical exclusion of
black South Africans from participating freely in the economy in the apartheid government
resulted in a society marked by vast discrepancies and disparities. Any attempt to progress
towards a shared economy that could meet the needs of all people of South Africa required
the gap between Blacks and Whites, in terms of skills and opportunities, to be reduced in as
short a time as possible (Council for Scientific and Industrial Research, 2004).
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Phaladi & Thwala (2009) further suggest through their findings that the challenges faced by
small and medium contractors can be distinguished between those that affect small-scale
contractors and those that affect medium-sized contractors in South Africa. These authors
continue to express that small and medium contractors are facing increased competition due
to the long-term real decline in demand, while the larger contractors have also responded by
moving into the international market.
Furthermore, Phaladi & Thwala (2009) continue articulating that small local contractors,
particularly in South Africa, are subject to volatilities due to the geographic distribution of
construction and the peak workloads that characterize construction projects, which has further
reduced their ability to build capacity. It was also established that both emerging and small
contractors are subject to the same market forces described above and as a result emerging
contractor development policies had to be created with the intention of black economic
empowerment.
In South African, contractors in the building industry can be categorised into two main
groups: the established firms, mostly white owned, which have a track record of project
delivery in the cities and suburbs and the small and emerging contractors, mostly black
owned, which have built mainly in township areas or are subcontractors to the established
firms (Nkado & Falkof, 1997). According to Phaladi & Thwala (2009), these emerging
contractors have been aided and empowered primarily by government small contracts in
order to sustain them, however the saturation of the market in which these contractors has
since seen these efforts undermined.
It is as a result of this that the basis of joint venture projects in South Africa is not only to
yield growth within the small or emerging contractors but to also serve multiple functions
such as mentoring, exposure of the emerging contractor to large scale projects and the
obvious aspects of developing of essential managerial and other relevant technical skills.
These are all but a few of the aspects that joint venture projects yield in the South African
construction industry.
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5.2 History of the South African construction industry.
The former apartheid government system excluded many black entrepreneurs from the
mainstream business activity in the republic of South Africa, and especially from the
construction industry, which has traditionally been dominated by a few large conglomerates
in the industry (Nkado et al, 1997).
Ayindibu (2010) further elaborates that apartheid caused segregation and inequality in
technical and managerial skills in all sectors in South Africa. As a result of the above factors
and the unsatisfactory skills level in South Africa, the author explains that the post-apartheid
government decided to use the construction sector as one of the ways of providing
development for sustainability and redistribution of wealth.
Nkado et al (1997) further attests that the problem with black contractors is that they have
been disadvantaged in the formal areas of management partly because they have had little
exposure to the methods and techniques commonly employed in industry by largely the
established contactors.
Having mentioned above that the apartheid systematically and purposefully restricted the
majority of South Africans from meaningful participation in the economy. The Department of
Trade and industry (2004), further reiterate that the assets of millions of people were directly
and indirectly destroyed and access to skills and to self-employment was racially restricted. It
can also be said that the accumulation process under apartheid confined the creation of wealth
to a racial minority and imposed underdevelopment on black communities.
It is also noted that According to the DTI (2004), the result is an economic structure that
today still excludes the vast majority of South Africans. The department goes on to say that it
is crucial to understand the magnitude of what took place in our past in order to understand
why we need to act together as a nation to bring about an economic transformation in the
interest of all.
With the above in mind, Nkado et al (1997) suggested that one route to access the
conventional contracting styles and building industry methods is to create a joint venture
between the emerging contractors and the established partner who knows the principles of
75
major construction projects. The authors further suggest that the established contractor must
be willing to share his experience with the emerging contractors. Moreover, these authors
anticipated that these type of joint ventures were likely to feature prominently as the need for
a more widespread distribution of skills and knowledge in the industry is widely recognised.
It must also be highlighted that with the above mentioned brief history of the South African
construction industry, it is evident that the indispensability for joint ventures in the building
industry stems from the political transformations in the country and the express intention of
all relevant stakeholders to eliminate the inequalities that prevailed in the historic South
African society (Nkado et al, 1997).
It is also essential to understand the rationale for joint ventures in the South African building
industry and Nkado et al (1997) again assist in this regard, outlining that contractors in the
country can be categorised into two main groups. These groups are the established firms,
which is predominantly white owned with track records of project delivery in the cities and
suburbs and the emerging contractors which are, on the other hand, mostly black owned and
build mainly in township areas or subsequently subcontract to the established firms.
Jones (1994) indicated that the joint venture approach was one the strategies that the five
largest contractors in South Africa stated they would be adopting as the consensus is that
joint ventures are an effective means of exposure of the building process to emerging
contractors who are mostly inexperienced on large scale developments. This then forms the
means for the effectiveness of training of the contractors in both technical and managerial
arenas.
Although gradual change is starting to be envisaged in the South African construction
industry, joint ventures between large and small contractors became prominent post the
apartheid regime due to a general desire to facilitate black empowerment in the construction
industry, whilst providing the emerging contractors access to formal methods and styles of
construction management as Nkado et al (1997) elaborates.
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5.3 Legislation on joint ventures in South Africa
It is no surprise that any practice, with or without the willingness and participation of the
parties involved, that is not regulated or enforced and supported by legislation provides a
platform for exploitation.
According to the DTI (2004), the first democratic government of South Africa, in 1994,
inherited an economy in deep structural crisis, which was entrapped by low growth
equilibrium, economic exclusion and underdevelopment. The DTI further emphasises that
although the government was elected into office with a clear mandate to redress the
inequalities of the past every sphere; namely: political, social and economic, the attainment of
such was never one that was neither simple nor straight forward. It is however enlightening
that the legislation that has been enacted as well as the policies and programmes introduced
and implemented since taking office, has sought to fulfil this mandate.
Moreover, the interventions set about in the democratic regime of South African construction
industry include among others the Reconstruction and Development Program (RDP),
Competition Act, Broad Based Black Economic Empowerment (BBBEE), Preferential
Procurement Act, Urban Renewal Program, Affirmative Action (AA), Emerging Contractor
Development Programs (ECDP), Contractor Incubator Programme (CIP), Contractor Contact
Centre (CCC), Expanded Public Works Programme (EPWP) and Construction Industry
Development Board.
In exploring and briefly overviewing some of the above mentioned interventions, the purpose
of this is to merely glance at the interventions intention and intended role in the industry.
According to the DTI (2004) every piece of legislation enacted, every policy and programme
introduced and implemented since nineteen ninety four (1994) has sought to redress the
legacy of apartheid. It is therefore clear that the purpose of all the above mentioned
interventions is to redress or partly contribute to the eradication of racism, sexism, apartheid
and oppressive labour policies in the industry and country at large.
According to Ayandibu (2010) and the DTI (2004), the Reconstruction and Development
Programme, which was set up by the African National Congress (ANC) in nineteen ninety
four (1994), set out a comprehensive plan that was an integral and clear socio-economic
77
policy framework. This framework seeks to mobilize South Africans and the nation’s
resources towards the final eradication of the apartheid and the building of a democratic, non-
racial and non- sexist society and economy.
These authors further highlight that preferential procurement Act was introduced in the year
two thousand (2000). This Act was brought about by the development and promotion of
small business in South Africa, resulting in the consequent National Small Business Act. The
preferential procurement act was equally stimulated by the green paper on public sector
procurement reform, as discussed by the DTI (2004). The DTI further emphasises that the
this policy document recognised that government had the responsibility to leverage
purchasing power in support of its economic policy objectives of black economic
empowerment, small enterprise development and labour – intensive construction.
Another interventions to be explored or discussed is that of the Expanded Public Works
Programme (EPWP). According to Ayandibu (2010), the EPWP was set up in nineteen ninety
four and is aimed at providing poverty and income relief through temporary work for the
unemployed to carry out socially useful activities. The author continues, expressing that the
EPWP has required the various tiers and departments of government to embark on labour –
intensive projects and insists that labour – intensive methods be considered on the major
projects.
According to Ayandibu (2010), who elaborates that if the quality of the end product of the
labour-intensive method of construction can match up with conventional machine-intensive
methods, considering that time and costs are also reasonable, it is preferable to go for the
labour-intensive method of construction. This can be said to be, generally, the concept and
basis of the EPWP.
5.4 Contractor Development Programmes (CPD)
In expanding on the above mentioned brief review of contractor development programmes,
the appropriate point of departure would be defining what is meant by contractor
development. According to the CIDB (2009), contractor development refers to the process of
identifying and removing the constraints affecting the development and performance of
construction firms. The board continues to clarify, stating that in South Africa the National
78
Contractor Development Programme (NCDP) Framework recognises that contractor’s
developmental needs are different at different stages of their growth and life cycles and
proposes interventions accordingly.
Based on studies in literature and consultation with practitioners, CIDB (2009) proposed that
such interventions include learner contractor development and skills development for smaller
contractors; enterprise development and performance improvement for more established
contractors; and contractor performance enhancement for established contractors.
5.4.1 Reasons and aims of Contractor Development Programmes
In understanding the basis and cause of Contractor Development Programmes (CDP), there
are a number of reasons why these programmes were established. Such reasons, among
others include the improving of the overall performance of contractors in a region or
province, while at the same time improving the ability of local established contractors to
compete with international construction firms (Dlungwana & Rwelamila, 2004).
Furthermore, it must be noted that the CIDB (2009) also enforces that growing emerging
contracting enterprises and provide opportunities for them is also one of the reasons for
establishing CDPs. In addition, the programmes strive to promote and improve the use of
efficient labour intensive methods as well as provide opportunities for growing contracting
enterprises owned by affirmative action target groups.
Moreover, CDP are further aimed at addressing the typical challenges facing contractors such
as skills shortages, financial constraints and limited access to funding. According to the
CIDB (2009), the programmes also aims at mitigating late payments by clients, high skilled
workers turnover, short term and fluctuating workloads. The Department of Public Works
(2005) indicated that contractor development programmes are designated to attempt to
overcome challenges with complicated contract procedures, intense competition among
emerging contractors, lack of sufficient resources and capital equipment as well as difficulty
ensuring regular materials supply.
The National Contractor Development Programme (NCDP), through the CIDB (2009) report,
identifies contractor development as comprising of development through the following:
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• Improved access to work opportunities
• Improved construction business environments e.g. payment cycles
• Offering training and advisory services
• Promoting technology transfer and use
• Facilitating networking, joint venture and sub-contracting opportunities
• The unbundling of large contracts and the adoption of appropriate procurement
strategies
In reviewing the progress attained by NCDPD, despite their good intentions, several
impediments towards their success have been encountered over their time of inception. The
baseline study of contractor development programmes outlines these typically as the selection
of inappropriate entrants such as those with insufficient basic skills or those with motives not
necessarily prioritising their development; inadequate or inappropriate training/skills
development; lack of work opportunities to sustain the contractors; contractors being
hampered by lack of access to finance; and the difficult industry environment even for
established contractors (CIDB, 2009). It is further noted by the CIDB that most of the
contractor development programmes also lack the proper monitoring and evaluation
processes that would identify and address constraints such as the ones above.
5.4.2 Overview of some Contractor Development Programme undertaken
Having briefly discussed some of the programmes conducted by the NCDP above, other
programmes within the CDP’s scope include the following:
→ Vukuzakhe CDP
→ The SEDA Construction Incubator (SCI) Programme
→ The Polokwane Local Municipality CDP
→ The Mpumalanga DPW, Roads & Transport Programme (Sakh’abakhi CDP)
→ Masakhe CDP (KwaZulu-Natal DPW)
→ The Free State Department of Public Works and Rural Development Programme
→ The Western Cape Department of Transport and DPW Siyanyuka Contractor
Enhancement Programme
→ Expanded Public Works Programme (EPWP) Vuk’uphile Learnership Programme.
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→ Northern Cape Department of Roads and Public Works CDP
5.4.3 Challenges faced on South Africa’s National Contractor Development Programme
Some interesting findings were established in the CIDB (2009) status quo report with regard
to some of the challenges faced on South Africa’s CDP and these were found to include the
following:
� Most programmes in South Africa have become job-creation initiatives with short
term impact and have not had long-term sustainable development impacts on
contracting enterprises.
� There are no uniformly accepted industry performance standards for contractors,
(especially those informed by a sound construction market analysis).
� There was little alignment between institutional capacity and business processes and
the objectives of contractor development.
� There was little preferential procurement in place to support contractor development,
� Most programmes did not have not comprehensive inclusion criteria and entry level
requirements for contractors
� Contractors shared little risk in the enterprise development process.
� The quality of mentoring and training provided to contractors within programmes was
erratic
� Most programmes did not place sufficient emphasis on supply side initiatives.
� There was little or no support to contractors after exiting the programme.
With the above in mind and also being mindful of the intentions that contractor development
programmes envisaged, it is clear that a lot remains to be done to achieve the objects.
Notwithstanding the challenges highlighted above and the efforts ventured into the
programmes since realisation of the challenges, the efforts expressed in the CIDB’s 2011
annual report not only indicate glimpses of hope but also signs that CDP are still alive.
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5.5 Construction Industry Development Board (CIDB)
5.5.1 What is CIDB and what is it role in the South African construction industry?
According to the South African government gazette (2000), the CIDB board is a Schedule 3
(a) public entity, established to provide leadership to stakeholders and to stimulate
sustainable growth, reform and improvement of the construction sector for effective delivery
and the industry's enhanced role in the country's economy.
In terms of the Public Finance Management Act (PFMA) (South African Department of
Finance, 2004), the CIDB is an accounting authority that is responsible to the Minister of
Public Works as the executive authority. It must further be noted that it is a requirement for
the board to submit its annual business plan and report to the Minister.
5.5.2 Background and history of Construction Industry Development Board
It comes as no surprise that the CIDB (2011) highlights that the construction industry plays a
pivotal role in South Africa’s economic and social development. The board further outlines
that the construction industry provides the physical infrastructure and backbone for economic
activity, as most industries directly rely on infrastructure development to expand and support
their operations.
On the other hand, the earlier argument and discussion of the role that the legacy of
Apartheid plays within the industry cannot go unnoticed. It is as a direct result of the
apartheid era that the South African construction industry is faced with a numerous
development and transformation challenges. In an attempt to preview these challenges, the
CIDB (2011) unveils that these challenges include among others:
• Improving effectiveness of public sector spending on physical infrastructure
development and maintenance.
• Improving labour absorption, labour relations and job stability.
• Accelerating sustainable transformation through access to opportunity, finance and
training.
• Reducing the impact of HIV and AIDS in construction
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• Ensuring international competitiveness.
5.5.3 Mandate of the construction industry development board
It is without a doubt that every statutory board has a mandate and the CIDB is no different to
that. In assessing the mandate of the CIDB, it must be understood its mandate is as
highlighted out in the CIDB Act 38 of 2000, which mandates the CIDB board to:
• Establish a national register of contractors and of construction projects to
systematically regulate, monitor and promote the performance of the industry for
sustainable growth, delivery and empowerment.
• Promote improved delivery management capacity and the uniform application of
procurement policy throughout all spheres of government.
• Promote improved performance and best practice of public and private sector clients,
contractors and other participants in the construction delivery process.
• Promote sustainable participation of the emerging sector.
• Provide strategic direction and develop effective partnerships for growth, reform and
improvement of the construction sector.
5.5.4 Register of Contractors
The CIDB is further required by the Construction Industry Development Board Act of 2000
to establish a Register of Contractors. According to the Act, the Register grades and
categorizes contractors according to their work and financial capability. Contractors must
further be register with CIDB in order to be awarded contracts with the public sector.
Moreover, the Act clearly defines the role of the Register of Contractors and pronounces that
it has been established to:
• Support risk management in the tendering process.
• Reduce the administrative burden associated with the awarding of contracts.
• Reduce tendering costs to both clients and contractors.
• Enable effective access by the emerging sector to available work, as well as
developmental opportunities.
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• Assess the performance of contractors in the execution of contracts and thus provide a
record of performance for contractors.
• Promote minimum standards and best practice of contractors.
• Store and provide data on the size and distribution of contractors operating within the
industry, and on the performance and development of contractors and target groups.
In light of the above mentioned, according to the CIDB (2010) contractor grading designation
is determined by the following factors:
• The contractors’ financial capability and works capability, where the financial
capability relates to the financial history (turnover), and the amount of working
capital the contractor can muster to sustain a contract, i.e. available capital. The
amount of available capital is determined from the liquid cash resources available to
the contractor, be it through loans that may be leveraged and any financial
sponsorships attained.
• The contractors’ works capability is determined by the largest contract that the
contractor may have undertaken and completed in the class of construction works, the
number of registered professionals it has employed, and its fulfilment of relevant
statutory requirements.
It must also be mentioned that the CIDB allows for contractors across the board in the
construction industry. These contractors include civil engineering contractors, mechanical
engineering contractors, electrical engineering contractors (both building and infrastructure),
general building contractors and specialist works contractors. These contractors are then
graded from grades one to nine, depending on their financial capacity, works capability and
number of registered professions within the company. The grades indicate the bounds or
work value that the contractor can undertake.
Grade Upper Limit of Tender
Value Range
Current Values
Largest Contract
Reduced Values of
Largest Contract
2 R 650 000 R 150 000 R130 000
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3 R 2 000 000 R 500 000 R 450 000
4 R 4 000 000 R 1 000 000 R 900 000
5 R 6 500 000 R 1 600 000 R 1 500 000
6 R 13 000 000 R 3 250 000 R 3 000 000
7 R 40 000 000 R 10 000 000 R 9 000 000
8 R 130 000 000 R32 500 000 R 30 000 000
9 R 400 000 000 R 100 000 000 R90 000 000
Table 5.1 (CIDB Annual Report 2011/12)
5.6 Women in Construction
In a quick glance of reviewing women in construction, with the focus of women contractors
within the South African construction industry, according to Statistics South Africa (2008),
women in construction represent approximately ten percent (10%) of the total employment in
the construction industry. The growing concern also arises from the Podges (2009) who
outlines that in terms of gender, females constitute fifty two percent (52%) whereas males
merely constitute forty eight percent (48%) of the national population in South Africa.
Even with organisations and initiatives such as the South African Women in construction
(SAWiC) initiative, which was founded in 1997 to empower women to gain access to
contracts, training, finance and networks in the construction Industry (SAWiC, 2008), the
margin of women is still far out-numbered by that of males.
The CIDB is further required by the Construction Industry Development Board Act of 2000
to establish a Register of Contractors. According to the Act, the Register grades and
categorizes contractors according to their work and financial capability. Contractors must
further be register with CIDB in order to be awarded contracts with the public sector.
Moreover, the Act clearly defines the role of the Register of Contractors and pronounces that
it has been established to:
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• Support risk management in the tendering process.
• Reduce the administrative burden associated with the awarding of contracts.
• Reduce tendering costs to both clients and contractors.
• Enable effective access by the emerging sector to available work, as well as
developmental opportunities.
• Assess the performance of contractors in the execution of contracts and thus provide a
record of performance for contractors.
• Promote minimum standards and best practice of contractors.
• Store and provide data on the size and distribution of contractors operating within the
industry, and on the performance and development of contractors and target groups.
Another challenge that is noted for women in construction is the issue of women owned
contractors in the industry. The CIDB (2011) states that although significant progress has
been achieved in this regard, women owned contractors are still less than those of male
owned contractors, especially in grades seven to nine. The illustration below is extracted
from the CIDB annual report 2011/12, and it clearly depicts the number and percentage,
thereof, of the women owned contractors in the country.
Table 5.2 (Source: CIDB annual report 2011/12)
5.7 Reasons for Joint Ventures
It was earlier mentioned that some of the reasons for contractor joint ventures in the South
African building industry are the historical exclusion of black South Africans from
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participating freely in the economy in the apartheid government resulted in a society marked
by vast discrepancies and disparities.
It must also be said that Nkado et al’s (1997) findings that joint ventures between established
and emerging contractors could do much to foster harmonious relations between communities
and the building industry as the industry relies on the community for the protection to the
workers and non-sabotage of the works. This enforces the basis for community acceptance of
the established contractors in the townships and this can be attained by establishing joint
ventures with emerging community – based contractors and the employment of local
unskilled labour.
Another reason for the joint venture formations in the South African construction industry is
that of securing financial support from financial institutions. The partnering up of the
emerging contractors with the established contractors allows the financial institutions to
attain the surety that they require, which emerging contractors cannot provide as they lack the
necessary collateral (Nkado et al). This then affords the emerging contractor the financial
leverage that they require to expand and operate successful businesses.
Other reasons for companies that is evident in literature for the embarking of contractors on
joint ventures in the building industry include access to inaccessible markets, compliance to
legislation, clients obligation to redress past injustices and transformational purposes,
exchange of skills, experience and resources, development towards independence for
emerging contractors, increasing knowledge, improving its capabilities, socio-economic
purposes and equipping the building industry with the necessary skill level to undertake
complex and challenging projects (Gwala, 1995; Nkado et al, 1997; DTI, 2004; EPWP 2005;
Egbeonu, 2006 and Ayandibu, 2010).
5.8 Benefits of Joint Ventures
Benefits of joint ventures in the South African construction industry may be said to be two
fold. This may be regarded as the case as both small and medium contractors, herein referred
to as the emerging contractors, and also the large contractors, herein referred to as the
established contractor, benefit from such initiatives. The CIDB (2007) through the
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Construction Contact Centre (CCC) assists in identifying some of the benefits for the
emerging contractor and suggests that they include:
• Access to information on financial assistance offered by various financial
institutions
• Access to information on materials, suppliers, pricing, etc
• Business to business linkage enabling contractors to contact each other and
find appropriate partners and skills
• Facilitate limited access to technology - computers, website facilities,
software relevant to contracting, tendering, safety and quality management
• Development of essential managerial skills through access to training,
workshops and seminars.
• Potential sub-contracting opportunities.
• Exposure to large scale projects
• Development of critical technical skills through close working relations
with experienced established contractors.
Contractor Contact Centre (CCC) points out that access to information on financial assistance
offered by various financial institutions is not always available to emerging contractors.
Perhaps some of the logical conclusions that one may draw from this relate to issues of
security in the form of secured mortgages, when it comes to banks. Absa (2010) also
indicates that banks are reluctant to issue out loans to emerging contractor entrepreneurs as
they are high risk candidates. Furthermore, the lack of security such as fixed contracts does
not aid their cause.
It can also be said that access to information on suppliers of material who can often offer
better or cheaper prices on products is not always available to emerging contractors. This can
also said to be the case as they do not have the luxury of buying in bulk, for obvious reasons
that is. Moreover, business to business linkage which enables contractors to contact each
other and find appropriate partners and skills are among other benefits.
The facilitating of limited access to technology through computers, website facilities,
software relevant to contracting, tendering, safety and quality management are all benefits
that emerging contractors may yield from joint ventures. The last aspect of access to training,
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workshops and seminars and also potential prolonged sub-contracting opportunities to the
established contractor will all be aspects that the emerging contractor will have to make full
use of as this is one of the most important benefits that joint ventures bring about.
Emerging contractors are however not the only beneficiaries of joint venture initiatives as
established contractors also benefits from such ventures. The primary benefits that may be
associated with established contractors according to the CCC may be said to include:
• Sourcing of sub-contractors
• Joint Venture opportunities
• Facilitate implementation of the construction charter
• Supports in growing the construction industry.
These are all but a few of the benefits that may be yielded from joint venture initiatives in the
South African construction industry. Lastly, companies that embark on joint venture projects
are inevitably given preference over those that are reluctant on partaking in such ventures,
essentially on government projects.
5.9 Success Factors of Joint Ventures
The success of joint ventures depends on the willingness of the parties (contractors) to make
them work, as if either party is not prepared to invest the effort required, the joint venture will
be doomed (Nkado & Falkof, 1997). When one member has a hidden agenda contrary to the
purported ideals of the joint venture, the arrangement will suffer from manipulation and
underhand actions.
Nkado et al. (1997) further emphasizes that it is imperative that the members are all fully
acquainted with and have fully investigated their business partners in every sense. Moreover,
believes that the real success of a joint venture of the type studied should be measured in
terms other than monetary, but rather on the basis of:
1. A productive continuity of working relations
2. The resolution of problems and difficulties encountered
3. Enhanced contracting knowledge and experience for all parties
4. The access to new markets and areas of development
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5. The development of the smaller partner into an independent, experienced
contractor.
Nkado et al. (1997) brings about essential elements that may be used to evaluate the success
of joint ventures in the South African (SA) construction industry and as a result of the
limitations of the literature on the success factors on SA joint ventures, these authors’
indicators and ideas will have to stand.
According to Moody-Stuart (2005), partnerships succeed or fail on the strength of
relationships between individuals. As a result of this, joint ventures are just as prone to
misconceptions, misunderstandings and unchallenged assumptions as any other social
connection. The author further elaborates that joint venture partners should before embarking
on joint venture, be as open and transparent as possible about every aspect of the planned
collaboration, including motivations, capacity to deliver, success factors, time commitment
and leadership support.
Moodey- Stuart continues to emphasize that although there is no simple checklist or blueprint
for successful partnership building, seven factors for the successful execution of a joint
venture can be used as a guide upon venturing on such initiatives and these are:
1. Openness, transparency and clear communication to build trust and mutual
understanding;
2. Clarity of roles, responsibilities, goals and ground rules
3. Commitment of core organizational competencies
4. Application of the same professional rigour and discipline focused on achieving
targets deliverables, that would be applied to governing, managing and evaluating
other types of business alliances;
5. Respect for differences in approach, competence, timeframes and objectives of
different partners;
6. Focus on achieving mutual benefit in a manner that enables the partners to meet
their own objectives as well as common goals;
7. Understanding the needs of local partners and beneficiaries, with a focus on
building their own capacity and capability rather than creating dependence.
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5.10 Conclusion
In conclusion, joint ventures are and have been a viable solution to the South African
construction industry as enforced and implemented by the post – apartheid government
(Nkado et al 1997).these authors further suggests that joint ventures not only allow for black
upliftment and empowerment, but further facilitate the development of new market sectors
and new capable contractors in the areas where development of the country is sorely needed.
Having understood the history of the South African construction industry, the reasons for
joint ventures in the industry become obvious. It must also be mentioned that joint venture
projects in the building industry assist in the alleviation of some of the challenges faced by
the emerging contractors in the construction industry as more often than not the challenges
tend to be the benefits that joint ventures output.
The above is evident in the findings of Phaladi & Thwala (2009) as they highlight that the
challenges faced by contractors lead to the problems which include inadequate finance and
inability to get credit from suppliers; inability to employ competent workers; poor pricing,
tendering, and contract documentation skills; poor mentoring; fronting for established
contractors; lack of entrepreneurial skills; lack of proper training; lack of resources for either
large or complex construction work; lack of technical, financial, contractual, and managerial
skills; and late payment for the work done.
Of the above mentioned problems, the benefits of joint ventures can alleviate the challenges
faced in the inability to get credit as the established contractor will provide collateral.
Moreover, the poor pricing, tendering and contract documentation skills together with
technical skills will be improved as emerging contractors will learn the effective systems of
the established contractor. The lack of resources the undertaking of large and complex work
will be reduced as exposure to this sphere will be provided by the established contractor. In
addition, managerial skills for the contractor may also be enhanced through joint ventures,
while at the same time collapsing of emerging contractor due to late payments from the client
will be eliminated as the established contractor may provide the funds to sustain the emerging
contractor.
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5.11 Lesson learnt from International and South African literature
5.11.1 Differences
It can be said that vast differences have been established when it comes to the reasons or
causes of why countries, South Africa and other countries, initiate contractor joint ventures.
The study reviewed literature from four countries in various continents ad these are Malyasia,
Europe, Ghana and South Africa.
In an attempt to compare “apples with apples”, Malaysia was reviewed as the country’s
economy as well as its construction industry which can both be directly compared with that
of South Africa. The comparison of the two countries, for the purpose of this research, is one
that was concluded primarily on the basis of both size and expenditure spent on infrastructure
development in the two countries. Moreover, Malaysia, just like South Africa, can be said to
be an emerging market in the global economy as both these countries are still third world
countries.
The UK construction industry was reviewed as the industry is far more developed than the
South African construction industry. Moreover it must be said that joint ventures or
partnering in the UK has been a practice that has been on-going for many years. It comes as
no surprise therefore that UK construction industry boasts an annual turnover of more than
one hundred billion pounds [£100 billion] (Strategic Forum for construction, 2009) and
accounts for almost ten percent (10%) of the UK Gross Domestic Product (GDP).
Furthermore, the forum continues to elaborate, stating that the UK construction industry
employs some two million people in more than two hundred and fifty thousand (250 000)
different companies.
Ahadzie (2010) assists in unfolding the predicament of the Ghanaian construction industry on
as even after 50 years of independence typical rural construction practices remain virtually
unchanged from what pertained in colonial times. The author continues to emphasize that
even while urban construction has integrated into modern beliefs, the form of construction
practices still appears relatively very elementary technologically unsophisticated and
outmoded. It is by this therefore that when current standards are examined within the context
of contemporary global construction practices. The review of Ghana completes the literature
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reviews as the literature of a lesser state, similar state and advanced state have all been
reviewed. The three states from which the literature reviewed are herewith referred to as
international literature.
On the international front, the primary causes of contractor joint venture were found to be the
injection of foreign currency which was primarily initiated through government regulation.
The second aspect was that of adding value to the company’s shareholdings through
increased profits. Thirdly, another cause of contractor joint ventures is the idea of expanding
contracting opportunities through increasing market share, and the penetration of new
markets as well as technology transfers. These may be summarized as the primary causes of
contractor joint ventures on the international front.
In comparing the international reasons for joint venture initiatives to those of the South
African construction industry, it is clear that vast differences are evident in this sphere. The
differences may be linked to the historic evolution of the various states and the development
thereof upon the attainment of freedom, in the case of Ghana and South Africa. These
differences are reinforced upon consideration that contractor joint ventures in the South
African building industry emerge from the historic exclusion of black South Africans from
participating freely in the economy in the apartheid government, and hence resulted in a
society marked by vast discrepancies and disparities.
5.11.2 Similarities
In assessing the similarities, it is must be mentioned that although logic would prevail in
assuming that the benefits yielded from the contractor joint ventures would also differ,
evidence from literature proves otherwise to some degree. This is seen as international
literature articulates its benefits to be access to new or foreign markets, procurement
advantages, skills development, technology transfer, improved productivity, inter-
organizational learning and increased profitability, all but to mention a few.
On the South African front, benefits have emerged as Access to information on financial
assistance offered by various financial institutions, access to information on materials and
suppliers, business to business linkage enabling contractors to contact each other and find
appropriate partners and skills, facilitate limited access to technology - computers, website
facilities, software relevant to contracting, tendering, safety and quality management,
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development of essential managerial skills through access to training, potential sub-
contracting opportunities, exposure to large scale projects and development of critical
technical skills through close working relations with experienced established contractors.
In comparing the above benefits, it is evident that contractors throughout the world yield
access to restricted arenas, development of sector skills, knowledge transfer and procurement
advantages through the utilization of joint ventures in the construction industry.
In addition, success factors were slightly different but similarities were evident at certain
instances, the base elements of communication, comprehension and commitment to be
specific. Trust and thorough selection of the partner was seen as a similarity within literature
from the different countries.
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Chapter 6 - Methodology
6.1 Introduction
An essential aspect of any research is the methodology and data entailed in the actual study.
It is therefore no surprise that various methods, techniques and strategies of collecting data
exist. The focus of this study is therefore to explore the various methodologies in order to
arrive at the process to be followed for this particular study. In this chapter, the first aspect
that is brought about is that of the methodology or design of the research. This issue not only
tackles the various methods of collecting data but further enforces why the particular methods
utilised for this research study were selected. Secondly, the issue of sampling and the various
forms or methods in which sampling can be undertaken is also highlighted. In addition, a
conclusion is further unveiled as to which sampling method will be utilised to collect the
primary data.
Lastly, literature in relation to the methodology and the questionnaire are also among other
factors that this chapter will entail. Details as to the particular factors of how the data was
collected, from whom it was collected and why it was collect from the people whom it was
collected from, were all be questions answered in the study.
With all of these aspects in mind and further considering the essential aspect of the research
instruments used in the study, the chapter yielded substantial outcomes.
6.2 Where the research was undertaken
The research study will be undertaken in the province of Gauteng within its entire
jurisdiction. A total of one hundred and twelve (112) questionnaires were distribution in
Gauteng to both emerging and established contractors with some form of joint venture project
experience. Various construction joint venture sites and known company head offices with,
joint venture, experience will be visited such as to obtain the required data.
Below a brief overview of Gauteng is provided, with certain elements ranging from its
municipalities to its brief history and various changes in name, general information on
population and some statistics as well as its economic overview.
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6.2.1 Municipalities within Gauteng
Figure 6.1 (Source: www.map of the municipalities of Gauteng.co.za)
The Gauteng province is divided into three (3) metropolitan municipalities, and three (3)
district municipalities which are further divided into 9 local municipalities as depicted above.
� The three metropolitan municipalities are those of the City of Johannesburg, City of
Tshwane and City of Ekurhuleni.
� The three district municipalities are West Rand, Sedibeng and Metsweing
� The nine local municipalities include District Management Area (DMA), Mogale
city, Randfontein, Westonaria, Emfuleni, Midvaal, Lesedi, Kungwini, Nokeng Tsa
Taemane.
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6.2.2 Brief history and various name changes of Gauteng
Today, Gauteng is one of the nine provinces of South Africa. The name Gauteng comes from
the Sesotho word meaning “Place of Gold”, the historical Sesotho name for Johannesburg
and surrounding areas. This referred to the thriving gold industry in the province following
the 1886 discovery of gold in Johannesburg. Gauteng was formed from part of the old
Transvaal Province after South Africa's first all-race elections on 27 April 1994. It was
initially named Pretoria-Witwatersrand-Vereeniging (or PWV) and was renamed 'Gauteng' in
December 1994. In digging deeper into the history of the Gauteng province, it is evident that
before the province was named as PWV, it was known as the Transvaal after the end of the
Anglo-Boer War that ended in 1902. Before that, it was known as the Zuid-Afrikaansche
Republiek and was independent from the British Empire. The country became independent
from Britain in 1961 but remained in the British Commonwealth, although not for long. The
National Party who won the elections of 1948 started implementing apartheid laws from the
early 1950s into the 1960s.
6.2.3 Post-Apartheid political background
Politically, Gauteng has been dominated by the ANC throughout its post-apartheid history,
with Tokyo Sexwale elected as the first premier of the province. In 1999, Tokyo was replaced
by Mbhazima Shilowa as premier until Shilowa resigned in protest against the decision by the
ANC national executive committee (NEC) to remove former president Thabo Mbeki from
office. This decision then created room for Paul Mashatile, the former provincial minister of
finance and economic affairs and the current provincial chairman of ANC in the Gauteng
Province, to commence duties as from 7 October 2008 until the election of Nomvula
Mokonyane on 6 May 2009. Since then, Gauteng has been under the reign of premier
Nomvula Mokonyane.
6.2.4 General information on Gauteng
As of 2007, Gauteng had a population of nearly 10.5 million, making it the most populous
province in South Africa with over 20% of the population to date. Having mentioned above
that the name Gauteng was derived from a word meaning “Place of Gold”, it should therefore
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be relatively obvious that the city is famous for the discovery of gold. Gauteng’s extensive
wealth comes mostly from mining and since the discoveries of gold in 1886 as well as one of
the world’s largest diamond in Cullinan in 1905, the province has developed into an
economic powerhouse.
6.2.5 Economy of Gauteng
Situated in the heart of the Highveld, Gauteng is the smallest province in South Africa, with
only 1.4% of the land area, but it is the most highly urbanized and wealthiest province,
containing the cities of Johannesburg, Tshwane and Ekurhuleni. Although Gauteng is the
smallest province in South Africa, it contributes 33.9% of its gross domestic product (GDP).
Indeed Gauteng generates 10% of the GDP of the entire African continent. It therefore comes
as no surprise that Gauteng is considered the economic hub of South Africa as contributes
heavily in the financial, manufacturing, transport, technology and telecommunications
sectors, amongst others. It also plays host to a large number of overseas companies requiring
a commercial base in and gateway to Africa.
6.3 Methodology
Having briefly touched on the essence of the methodology or design of the research in the
introduction, it is further crucial to establish what exactly is meant by research methodology.
In so doing, various views from different authors were found, however the definition by
Welman, Kruger & Mitchell was found to be satisfactory and they described it as stated
below:
Welman, Kruger & Mitchell (2005) explain research design as a plan that when utilised
accordingly may obtain research participants and further collect information from them.
Moreover, these authors continue to elaborate, emphasising how the sampling requirements
tie in with the research design.
Research methodology considers and explains the logic behind the research methods and
techniques that are utilised within a research study. Fellows & Lui (2008) enforce that are
four primary methods that may be utilised for research design or methodology and these
methods may be said to be:
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1. Descriptive survey methods
2. Historical methods
3. Analytical method
4. The experimental method
6.3.1. Descriptive survey method
Thwala (2010) explains this method, emphasizing that the descriptive survey method or
normative survey method, is a method appropriate for data derived from simple observations,
be it through actual physical observations through benefit of questionnaire or poll techniques.
The descriptive survey method is inclined to utilising a more qualitative approach rather than
that of a qualitative approach.
6.3.2. Historical method
Thwala (2010) explains historical method as a method that is more appropriate for those data
that are primarily documentary in nature or literary in form. The historical method may also
be said to be one that utilises a more qualitative approach.
6.3.3. Analytical survey method
Surveys operate on the basis of statistical sampling as it is very rare that full population
surveys are undertaken, simply because they are neither possible nor practical (Fellows &
Lui, 2008). Thwala (2010) adds to these findings explaining that analytical survey method is
appropriate for data that are quantitative in nature and that need statistical assistance to
extract their meaning.
6.3.4. The experimental method
The experimental method is an appropriate method for data derived from an experimental
control situation or a pretest-posttest design in which two separate groups, or one group from
data are derived at two separate intervals in involved. (Thwala, 2010).
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6.3.5. The chosen research method
The research method that has been selected for the purpose of this study is that of the
descriptive survey method. The uniqueness of this method to look with intense accuracy at
the phenomena of the moment and thereafter describe precisely what the researcher sees,
according to Thwala (2010), not only makes it ideal for this study but also suitable for its
purpose.
Moreover, the purpose of the study is also not far from the characteristics of this study, even
though it may be said that differences are evident, ever so slightly. Although the study
acknowledges observation as a form of gathering primary data, however a questionnaire was
found to be more suitable for various reasons. The population was however, carefully chosen
and clearly defined such as to limit and set precise parameters for ensuring that the study is
bound to its limitations.
6.4 Quantitative and Qualitative research methods
There are two distinctive types of research methods or approaches and these are explained
below.
6.4.1. Quantitative research method
The quantitative approach or positivist approach to research is an approached based on a
philosophical approach known as logical positivism (Welman, Kruger & Mitchell, 2005). The
quantitative approach analyses data that have features that can be measured in a more or less
accurately manner (Walliman, 2004). Welman, Kruger & Mitchell (2005) further elaborate,
emphasizing that the quantitative approach arrives at measurements that imply some form of
magnitude which is usually expressed in numbers and ranges from extremely simple
mathematical procedures such as percentages to complex or sophisticated statistical tests or
mathematical models.
Moreover, Fellows & Lui (2008) believes that quantitative approaches adopt a scientific
method in which initial study of theory and literature yields precise aims and objectives with
propositions. Lapan & Quartaroli (2009) on the other hand explains quantitative approach as
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one that seeks to develop quantitative data through scores, counts, values and ratings that are
recorded and can be transferred into numbers.
In simple terms, it is clear that quantitative data is built on previous work which has
developed principles, laws and theories to help decide on the data requirements of a particular
research project. It may furthermore be added that in quantitative approaches, a considerable
amount of preconception in deciding what data are to be collected, how they will be collected
and what analyses will be done (Fellows & Lui, 2008).
In addition, it can also be said that researchers generally agree that throughout the
quantitative studies, the research must be unaffected by the beliefs and values of the
researcher or researchers.
Crano and Brewer (2002) enforce that in conducting quantitative research, three approaches
are employed and can be listed as follow:
1. Asking questions of respondents by questionnaires
2. Carrying out experiments
3. Library or desk research using data collected by other authors
Lastly, because quantitative approach strives for reliable and valid results, it focuses heavily
on data that are consistent or stable in order to indicate the researchers’ ability to replicate the
findings (Thwala, 2010).
6.4.2. Qualitative research method
Qualitative data connot be accurately measured and counted, and are therefore generally
expressed in words rather than numbers (Walliman, 2004). Welman, Kruger & Mitchell
(2005) adds to Wallimans’ findings, expressing that qualitative research approach, also
known as the anti-positivist approach, opposes the natural scientific method as it finds is
inappropriate to follow strict natural scientific methods when collecting and interpreting data.
These authors, Welman et al (2005), further enforce that qualitative approach is not
applicable to the phenomena being studied in the human behavioural sciences, and should
rather be utilised studying molecules or organisms. The study of human beings and their
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societies and cultures requires many observations to be made that are to do with identifying,
understanding and interpreting ideas, customs, beliefs and other human attributes and beliefs
as these cannot be pinned down and measured in any exact way (Walliman, 2004).
In addition, it can be stated that the aim of qualitative research approach is to establish the
socially constructed nature of reality, to stress the relationship between the researcher and the
object of the study, as well as to emphasise the value-laden nature of the enquiry (Welman et
al, 2005).
In literature it was also found that quantitative researchers follow a flexible research design
based on their data collection and analysis. Moreover, the researchers are viewed as
craftsman as they are encouraged to be their own methodologists. This is said to be the case
as the researcher is neither a slave nor a follow of procedures and specific techniques but is
guided more by personal views and opinions on his or her analysis and findings. It was also
found that in the quantitative form or approach of analysis, researchers are at times found to
empathize with their study population.
6.4.3 Selected research method
Based on the in depth explanations any factors alluded to above on both quantitative and
qualitative research methods, it was found that the quantitative research method is the best
suited method for the purpose of this study. This decision was enforced by the advantages
that the quantitative method brings to foe. Furthermore, the size of the study is also limited
and therefore the analysis mechanisms that this form of research method bring about will
strengthen and bring substance regardless of the sample size as most aspects will be
percentage based.
6.5 Sampling
In understanding what sampling is, it is essential that we are to first clarify two terms that are
often integrated and used continuously in sampling, and these are population and a sample. A
population may be said to be a collective term used to describe any group that is the subject
of research interest, as per the findings of Clark & Creswell (2008).
A sample on the other hand is explained by Thwala (2010) as a smaller case a researcher
selects from a larger pool and generalises to the population. The sample must however be
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representative of some form of the population and the degree of representation will on the
sample frame, the sample size and the specific design of selection procedures. Fowler (2002)
believes that the way to evaluate a sample is not by the results, the characteristics of the
sample, but by examining the process by which the sample was selected.
Moreover, there are two main streams of sampling as discussed by Welman, Kruger &
Mitchell (2005) and they are Probability and Non-probability sampling. Walliman (2004) on
the other hand takes about a different turn in saying that there are basically two sampling
procedures. Walliman further elaborates stating that the two procedures are the random and
non-random procedures. Though these authors word these sampling procedures or techniques
differently, it was found that these two aspects are one in the same thing as random sampling
classifies or lists the probability samples and similarly with the non-random sampling listing
the non-probability sampling.
Having briefly introduced the two sampling methods, it can be deduced that the methods vary
in their techniques as one is based on random sampling and the other on non-random
sampling.
6.5.1 Probability sampling
• Simple random sampling
• Systematic sampling
• Stratified sampling
• Cluster sampling
• Random-Digit dialling sampling
• Hidden Population sampling
Simple random sampling is said to be the least sophisticated of all the sampling procedures
and is often used when the population has a similar characteristic in all cases as everyone
within the sample stands an equal opportunity of being selected and included in the sample
(Walliman, 2004). Welman, Kruger & Mitchell (2005) further add that the equalization
process of the simple random sampling ensures proper balance among all the elements of the
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population in proportion to their relative significance. Thwala (2010) also agrees and
supports these authors.
Systematic sampling is a variation of the simple random sample, according to Fowler (2002).
This is said to be the case as systematic sampling is the selection of certain items in a series
from a predetermined sequence (Thwala, 2010). Walliman (2004) further explains,
expressing that a systematic sample is often used when the population is very large even
though the sample size is known. Welman, Kruger & Mitchell (2005) also add on saying that
in this approach the size of the sample is divided by the total eligible population in order to
determine the sample fraction. A number within that fraction is then randomly drawn and
thereafter the sample fraction is added to that to determine the next number. The sequence
then carries on until the last number is selected from the population and the sample is
determined.
Stratified sampling uses the stratification technique which involves dividing the population
into theoretically meaningful or empirically important strata before the sample is drawn
(Crano & Brewer, 2002). Walliman (2004) elaborates on stratified sampling enforcing that an
equally sized randomized sample is obtained from each stratum separately to ensure that each
is equally represented. The samples are then combined from all the various stratums to form a
complete sample from the population. The stratified sampling approach may be proportional
stratified or simple stratified. The difference between the two is that the later utilises known
proportions of the population, say for example that in a university, 40 percent of the students
study arts and the other 60 percent study science.
Cluster sampling or area sampling uses natural segments or cases in the population to form
clusters which are used as the sampling units (Crano & Brewer, 2002). Thwala (2010)
emphasizes that it is essential that each cluster be as similar to the other clusters as possible
and that within the cluster the individual be heterogeneous. It is at this stage therefore that
from all the clusters, a random selection of specific clusters is made as the centre from which
the sample population is eventually derived again by random selection.
The random digit dialling sampling method is one that was developed to overcome the
sample frame deficiency of unlisted numbers in the telephone directory (Walliman, 2004).
Furthermore, the technique of random digit dialling has been developed for the telephone
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survey sampling purposes. Researchers also suggest that the simplest random digit dialling
approach calls for use of a random number generator to develop lists of telephone numbers
where those who answer their phones constitute the sample. There is however an alternative
method in this approach which makes use of the list of all published numbers in combination
with a randomization. The numbers are randomly selected from a telephone directory and
thereafter the last two digits of each of those numbers are deleted and replaced by random
numbers, according to Walliman’s (2004) explanation.
6.5.2 Non-probability Sampling
Non-probability sampling occurs as it is not always possible to undertake probability
samples, for various reasons that it. Thwala (2010) suggests that the costs involved in the
selection of a probability sample might not justify the effort and it may further be added that
accurate representation of the population is not always possible. It is in such instance
therefore that non-probability samples are utilised and also when the research is a qualitative
research study where statistical analysis, representation and generalisation are often not the
issue. Non probability sampling methods may be listed as follows:
• Accidental sampling
• Haphazardly or Convenience sampling
• Quota sampling
• Theoretical sampling
• Snowball sampling
• Deviant case sampling
• Sequential sampling
• Purposive or Judgemental sampling
• Self selection sampling
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An accidental sample is the most convenient collection of members of the population that are
near and readily available for research purposes (Welman, Kruger & Mitchell, 2005). It can
furthermore be added that an accidental sampling method involves only what is immediately
available and since there is no ways of checking to see if this kind of sample is in any way
representative of others of its kind, the results of the study can only be applied to that sample
(Walliman, 2004).
Haphazardly sampling involves selecting randomly any cases from the population that are
easiest to obtain for the sample (Walliman, 2004). The sample selection process is continued
until the required sample size is reached. This method, like the accidental and quota methods
are prone to bias and influence that is beyond the control of the researcher due to the fact that
the cases are included in the sample simply because they were easy to find.
Quota sampling is a sampling method that is used regularly by reporters interviewing people
on the streets as it attempts to balance the sample interviewed by selecting responses from the
equal numbers of different respondents (Walliman, 2004). Furthermore, this form of
sampling method is unregulated as there is no knowledge whether or not the respondents are
bias in their interviews.
Theoretical sampling is a sampling method that is often used to get information from a
sample of the population that is believed to know most about a particular subject (Fellows &
Lui, 2008). The theoretical approach is most commonly used in qualitative research where
statistical inference is not required.
Snowball sampling is a sampling method in which a few individuals from the relevant
population are approached and thereafter these individuals then act as informants as they
assist in identifying or referring other members from the same population for the inclusion in
the sample (Welman, Kruger & Mitchell, 2005). The latter may, in turn, identify a further set
of relevant individuals so that the sample grows in size, just like a snowball, until it is
saturated. The disadvantage of snowball sampling however, is the fact that the respondents
may not be able to refer the researcher to any other respondents, regardless after how few
respondents have been reached. On the other hand, the snowball can keep on recurring non-
stop and the researcher may too large a sample, which is not a bad thing.
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Purposive sampling is the most important type of non-probability sampling as researchers
rely on their experience, ingenuity and previous research findings to deliberately obtain units
of analysis in such a manner that the sample they obtain may be regarded as being
representative of the relevant population (Welman, Kruger & Mitchell, 2005). These authors
however express themselves, saying that the problem with this kind of sampling is that the
researchers may proceed in different ways to obtain their sample and it is therefore
impossible to evaluate the extent to which such samples are representative of the relevant
population.
Self-selection sampling occurs when researchers allow an individual to identify their desire to
partake in the research undertaken (Welman, Kruger & Mitchell, 2005). Such a conclusion
may be brought about through publicly advertising through the appropriate media and
thereafter the data from the respondents. Such respondents may be found to be those who
have genuine concern about the research or those who are concerned about the stated
objectives of the research (Welman, Kruger & Mitchell, 2005).
6.5.3 The sample size
As mentioned earlier, the sample size of the research study was one hundred and twelve. The
questionnaires were issued to parties or respondents who had all taken part in a joint venture
project, be it through them being the emerging or established contractor, as defined in the
earlier chapters.
Of the one hundred and twelve questionnaires issued, eighty nine questionnaires were
returned form the respondents. The return rate therefore for the study was seventy nine
percent (79%). Although the anticipated target of eighty percent (80%) was not met, the
return rate was one percent off the target and thus the achieved rate is deemed acceptable.
6.6 Variables
A variable can be defined, according to McBurney (2001), as some aspect of testing
condition that can change or take on different characteristics with different conditions. This
author further elaborates that reducing a study to given variables focuses the researchers’
attention on specific events out of the many that may be related to the phenomenon. The
types of variables that are found in literature may be reduced to the following:
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1. Dependant and Independent Variables
2. Confounded Variables
3. Quantitative or Categorical Variables
4. Continuous or Discrete Variables
Dependant and independent variables are the most basic distinction among all the types of
variables. The dependent variable is a measure of the behaviour of the subject that reflect the
effect of the independent variable, whereas the independent variable is one that is believed to
cause some change in the dependent variable (McBurney, 2001). The dependent variable
therefore depends on the value of another variable, unlike the independent variable which is
independent regardless of the value of other variables.
On the other hand, a confounded variable is one that varies with the independent variable.
Furthermore, the quantitative variable is one that varies in amount, whereas the categorical
variables vary in kind. The two, quantitative and categorical variables are, however, closely
related and correlated and hence why they are continually grouped together (McBurney,
2001).
Lastly, continuous variables are one that fall along a continuum and are not limited to a
certain number of values, whereas discrete variables are one which fall into distinct bins with
no intermediate values possible (McBurney, 2001).
6.6.1 Validity and Reliability
According to Fellows and Lui (2008) validity refers to the potential of the design or
instrument to achieve or to measure what it is supposed to achieve or measure. Reliability on
the other hand is the property of consistency of measurement that gives the same result on
different occasions. One of the strategies to ensure validity, the parties or participants of the
survey must all be entities that have partaken in a joint venture initiative, either currently or
in past years. The outcome of this will then ensure that the study is not only reliable but also
valid on the grounds of accuracy and precision. The above mentioned aspects become crucial
in the study as reliability often pertains to the accuracy and consistency of measures.
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Basically the same instrument utilised must be able to produce the same data at a later stage,
even if a different researcher were to analyse the findings of the same study.
According to McBurney (2001), the validity of measurement can be categorised into four
types, namely:
• Construct validity – the construct validity of a test is the property of a test that
the measurements actually measure the constructs they are designed to measure
and no others.
• Face validity – is the idea that a test should appear to any person to be tested of
what it is suppose to test.
• Content validity – deals with the idea that a test should sample the range of
behaviour represented by the theoretical concept being tested.
• Criterion validity – is the idea that a test should closely relate or correlate to
other measures of the same theoretical construct.
6.7 Sample size and Process to be followed
The study includes a questionnaire that consists of both open and closed questions, even
though the majority of the questions are closed questions. The essence of the closed questions
is to simplify analysis of the questionnaire, while at the same time classifying the responses
into the predetermined categories. It is therefore evident that various advantages and
disadvantages are in place for both open and closed questions.
Moreover, a total of one hundred and twelve (112) questionnaires were distribution in
Gauteng to both emerging and established contractors with some form of joint venture project
experience. The questionnaires were administered by post, physical hand delivering and also
by email to the various respondents who were predetermined. These respondents or particular
individuals who have partaken in joint venture initiatives were weighted or extended equally
in relation to large and small and medium contractors. Furthermore, it may also be said that
the questions put forth to respondents intended to find facts, knowledge and opinions based
on their experience on joint venture projects.
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6.8 Conclusion
Having defined methodology and also identifying the various types of methodologies that
come into play in a research study as well as identifying the chosen methodology for this
study, it is clear why the selected methodology was selected. Furthermore, having elaborated
and differentiated between quantitative and qualitative research methods or approaches, it
was further highlighted which approach this study will utilise and why.
In addition, the various sampling techniques or methods were extensively discussed and
explained such as to enable one to differentiate between the various methods that are
available in literature. Also, the sampling technique utilised in the study was also brought
about and identified. The sample size and its limitations were also referred to and clarity was
brought forth on the eligibility of parties who may be incorporated within the sample of this
study.
Furthermore, a discussion on variables and the various variables that are in place in literature
were also alluded to and briefly explained. The various types of variables were distinguished
and the differences among some of the variables were also brought up. Additionally, the
validity and reliability of a study were also highlighted. In highlighting them, the various
types were identified and brief explanations of each type were provided. A specific type
regarding the reliability and validity of the study was not selected, however, an explanation
on how the reliability and validity aspects would be achieved in this study were also stated.
Lastly, a relatively in depth brief on the questionnaire was given and the chapter was
therefore concluded in so doing.
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Chapter 7 - Research Analysis and Findings
7.1 Introduction
This chapter presents, analyses and discusses the research findings of the study. The primary
data was collected through a field study of survey questionnaires from respondents in the
Gauteng region of the South African construction industry.
The results are based on the questionnaire and it thereby no surprise that the results are
subsequently divided into three sections. The first section deals with biographic and
background information of the respondents, as the questions look at aspects like the
respondents’ gender, ethnicity, experience, the contractors Construction Industry
Development Board (CIDB) grading and current number of projects. The second section of
the study explores contractor joint venture projects in detail through both closed and open-
ended questions.
7.2 Demographic data
In analysing the demographic data of the study, the biographic and background information
of the respondents is presented and analysed such that the distribution of the respondents can
be compared. As highlighted above, the distribution in this section includes that of the
respondents’ gender, ethnicity, position held in the company, contractor’s CIDB grading,
number of projects and the experience of the respondents on construction joint ventures. The
data will be presented through graphical illustrations and tabulated forms. Interpretation and
discussion of the fore mentioned forms will then follow as the data is presented.
7.2.1. Gender
Figure 7.1
Males 80%
Females 20%
Gender
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The findings on the gender ratio, figure 1, within the construction industry affirm the general
impression of the dominance of the male specie within the industry. It must however be
mention that although gradual development is attained, yet the graph above can be said to
indicate the degree of effort that still needs to be instilled to neutralise the industry.
7.2.2 Ethnicity
Ethnicity Percentage
African 51 %
White 36 %
Coloured 9 %
Indian or Asian 4 %
Total 100.0
Table 7.1
The ethnicity table above indicates that the South African construction industry is dominated
by African with fifty one percentage occupancy. The data further highlights that whites
occupy a percentage of thirty six percent within the joint venture contractors in the
construction industry. The coloureds, Indians and Asians occupy a minority share within the
above mentioned sector, thus a collective percentage of thirteen percent.
7.3. Current position in the company
Current position in the company? Percentage
Contracts Director 6%
Construction Project Manager 10%
Contracts Manager 11%
General Foreman 18%
Site Manager 17%
Quantity Surveyor 30%
Other 8%
Table 7.2
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From the questionnaires collected, the data reveals that only three percent of the respondents
were contract directors, with ten percent certified construction project managers. A further
eleven percent of the respondents were contracts managers, with general foremen and site
managers each eighteen and seventeen percent respectively. The bulk of the respondents that
add value to the study classified themselves as quantity surveyors. These respondents
formulated thirsty percent of the total respondents of the study.
Having reviewed both the ethnicity and current positions held by the respondents of the
study, the author found it interesting to undertake a cross tabulation between the above
mentioned two areas. In undertaking the cross tabulation of the on the Ethnicity and Current
position in the company, it can be revealed that although the industry is said to be dominated
by Africans, yet the positions at which they sit on are far lower than those of the whites. The
African were mostly found to be General foremen, Quantity Surveyors and very few Site and
Contract Managers.
7.4 CIDB Grading
Figure 7.2
Having discussed and explained the role and function of the CIDB in the South African
construction industry in chapter five, the above table reflects the contractor grades from
which the data was collected. As seen in the graph above, it is clear that the data was
collected from grade three to grade nine contractors.
7%9%
13%
17%
11%
19%
24%
0%
5%
10%
15%
20%
25%
30%
Grade 3 Grade 4 Grade 5 Grade 6 Grade 7 Grade 8 Grade 9
Pe
rce
nta
ge
s
Grades
CIDB Gradings
Grade 3
Grade 4
Grade 5
Grade 6
Grade 7
Grade 8
Grade 9
113
It must also be noted that it is no surprise that grade one and two contractors are not covered
by the data collected as the work restriction or tender value that these are restricted to is less
than six hundred and fifty thousand rand. It is also clear therefore that other contractors are
either not willing to take the risk of joint venturing with these contractors, or as often spelled
out by the respondents, these are mostly sub-contractors.
7.5 Number of current projects
Number of current projects Percentage
1 8%
2 17%
3 25%
4 11%
5 11%
6 5%
7 8%
8 5%
10 or more 10%
Table 7.3
The effects of the recession are still evident in the South African construction industry.
Although it is said that the industry is recovering, yet the data reveals that almost seventy five
percent (75%) of contractors have five or less projects currently running. These projects are
those inclusive of projects that are undertaken by the contractors as an individual and joint
venture basis.
Moreover, it must be noted that the ten percent (10%) of the contractors that had ten or more
projects were primarily those that had utilised joint venture initiatives as a tool of obtaining
and undertaking their said projects. This, according to the contractors, not only sustained the
business through the tough times but also aided them in strengthening their relationships with
the joint venture partners and clients respectively.
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7.6 Number of joint venture projects out of current projects
Having mentioned above that the bulk of the joint venture projects were evident within the
contractors who had close to ten projects on-going. In analysing the number of joint venture
projects, the projects were grouped to contractors who had zero to three JV projects and those
who had five to seven.
It was therefore established that the bulk of the contractors had less than three projects that
were joint ventures currently. It must also be said that these constituted a total of ninety four
percent of the overall number of JV projects. The graph below clearly illustrates these
findings.
Figure 7.3
In undertaking a cross tabulation between the number of current projects that the companies
had against the number of those projects that were joint ventures, it was established that the
South African construction industry is still recovery from the effects of the global recession.
It therefore comes as no surprise that when it came to the number of project that companies
had, the companies that had more projects were generally found to be those who were willing
to undertake joint venture projects.
In assessing the graph below, it is clear that the bulk of the contractors had less than three
project that were joint ventures and of that of the contractors that had ten or more projects,
only ten percent (10%) of these were undertaken as joint venture projects.
0.0
50.0
100.0
0 - 3
5 - 7
94.2
5.8
Pe
rce
nta
ge
No. of JV Projects
Number of JV projects
0 - 3
5 - 7
115
Figure 7.4
7.7 Main reasons participating in joint ventures
0%
10%
20%
30%
40%
50%
1 - 3 4 - 6 7 - 10 11 - 20
50%
27%
16%
7%Pe
rce
nta
ge
s
Number of Projects
Proportion of JV projects to current
projects
Current projects
JV projects
Main Reason for JVs Percentage
Additional capacity /Partnering for skills. 20%
Client specification and requirement. 27%
For BBBEE requirements and to meet
local employment requirements.
57%
For future joint venture opportunities 37%
It has high tendering opportunities, equal
profit sharing advantages, networking
purposes
25%
Exposure to large and complex projects 43%
Shared expertise and resources. Partnering
provides access to valuable relationships.
40%
Speed up project duration. 17%
Access to valuable knowledge of supplier
database in various locations.
23%
The scope of the project is very big so the
reason for the joint venture was to share
22%
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Table 7.4
The above question drew responses from sixty (60) respondents and percentages are
calculated on frequencies over respondents. With the question being open ended, there were
vast differences and reasons why contractors embarked participated in joint venture projects.
Table 7.5 lists and details some of the reasons that were found to be common among the
respondents. Although the list is not restricted to the above table, the summary of items on
the table is deemed most appropriate for the study.
The reasons that stood out the most can be said to be Broad Based Black Economic
Empowerment (BBBEE), exposure to large and complex projects, sharing of risk, future joint
venture opportunities, sourcing of suppliers, learning and sharing of various technical
expertise as well as different management skills.
7.8 Please give the main reasons you DO NOT participate in joint venture projects
Reason for NOT undertaking JV Projects Percentage
Poor workmanship 40%
Contractors depend on each other there are
always conflicts among contractors
63%
Cultural differences within the companies 48%
Different management styles 28%
Unwillingness of the joint venture parties to
compromise and agree on decisions.
20%
Unreliability and lack of commitment of parties 30%
the risk
To gain new capacity and technical
expertise.
30%
To get assistance from large contractors
regarding materials and resources.
33%
To learn different management skills to be
well recognised.
32%
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Reputation may be impaired due to non-
performance of one of the joint venture partners
78%
Table 7.5
Similarly as above, the above question drew responses from fourty (40) respondents and
percentages are calculated on frequencies over respondents. With the question being open
ended, there were vast differences and reasons why contractors embarked participated in joint
venture projects.
The main reasons as to why contractors are reluctant to venture into joint ventures that were
found to be common among the respondents include poor workmanship, contractors
dependency, conflicts among contractors and cultural differences within the companies.
Furthermore, contractors identified that the difference in management styles and
unwillingness of the joint venture parties to compromise are among the key factors that add
to the reluctance. Lastly, established contractors noted that certain emerging contractors were
unreliable and had no commitment and they opt not to joint venture with them as their
reputation may be impaired due to non-performance of the joint venture partner.
7.9 How many years of experience do you have in construction joint venture projects?
The aim of the above question was to establish the number of years of experience that the
contractors had on joint venture projects. Although it must be noted that the question is
inevitably limited in that if respondents have a few number of years of experience, then the
number of years of experience in joint ventures will also be limited to maximum of the
equivalent of the former. Figure 4 below illustrates the findings of the above question.
118
Figure 7.5
7.10 Are there any preconditions that are required before engaging on a joint venture?
In an attempt to establish whether or not there were any preconditions required before
venturing into a joint venture, the respondents believed that yes preconditions exist. This is
indicated on the illustration below, figure 5, where the number of respondents is used and not
the percentages.
Figure 7.6
63%
24%
13%
Number of years of Experience in JV
projects
Less than 5 years
Between 6-10
years
More than 11
years
9
50
30
0
10
20
30
40
50
60
No Response Yes No
Nu
mb
er
of
resp
on
de
nts
Responses
JV preconditions
No Response
Yes
No
119
7.10.1 If yes, what are these preconditions required?
Precondition Percentage
All parties agree to a business model that is sustainable
throughout the project administrative logistics
10%
Appropriate contractual agreement documents 30%
Company profile and details of completed projects 56%
Financial stability and status of the companies 38%
Competency and management experience 24%
Resource availability 16%
Capacity of each joint venture partner 26%
Scope and risk analysis and agreement ownership of
responsibilities.
26%
Time for completion of the project, management skills, supply of
materials and workmanship.
32%
Table 7.6
Table 7.6 tabulates the primary preconditions that the respondents noted as a requirement
before venturing into a joint venture. It was also observed that although the questions were
open ended, respondents seemed to have common responses. It is found therefore that the
company profile and details of completed projects as well as the financial stability were
found to be the most important preconditions, whilst the business model and administrative
structure to be used and resource availability were the least important preconditions.
The percentages of the above table are calculated on the total number of respondents who
noted that they believe preconditions are necessary before venturing into a joint venture. The
percentages are arrived at by taking the frequency and dividing it by the total number of
respondents to the question.
7.11 Do you believe that joint venture initiatives lead to better project success?
On a quest of determining whether or not it is believed that joint venture initiatives lead to
better project success, it was found that seventy percent (70%) of people who have
120
undertaken joint venture projects affirm that yes, joint ventures do lead to better project
success.
Figure 7.7
7.12 In general, how would you rate joint venture projects based on your experience or
knowledge?
The figure below addressed the perception perceived on joint ventures projects as
respondents were requested to rate joint venture projects in comparison to the traditional way
of undertaking projects. Much to most people’s surprise, the respondents indicated that they
advocate for undertaking projects under the JV banner as most of them indicated that joint
ventures are good initiatives. Although a close contest between good and neutral can be seen
on figure 8, only ten percent (10%) rated joint ventures as poor. Indeed, a lot can be drawn
from this as it can be concluded that contractors who have partaken in joint ventures are
inclined to undertake them again if and when the opportunity arises.
70%
30%
Do JV's lead to better project success?
Yes
No
121
Figure 7.8
7.13 Mean Item Score (MIS)
A 5-point Likert type scale was used to determine the success factors and benefits of
contractor joint ventures with regard to the identified factors from the questionnaires. The
adopted scale read as follows, 1= To no extent, 2= To small extent, 3= Moderate, 4= To large
extent, and 5= To Very large extent. It must however be mentioned that the adopted scale is
adjusted at times to suit the criterion of the questions depending on the indices. The five-point
scale was transformed to a Mean Item Score (MIS) for each of the success factor and benefits
as assessed by the respondents. The indices were then used to determine the rank of each
item. These rankings made it possible to cross compare the relative importance of the items
as perceived by the respondents. The MIS was based on the previous studies as conducted by
Aibinu and Jagboro (2002), Ayodele and Alabi (2011) and Kometa et al. (1995) that used the
‘Mean Item Score index’ method in rating their study criterions. This method was also
adopted to analyze the data collected from the questionnaire survey.
The computation of the MIS was calculated from the total of all weighted responses and then
relating it to the total responses on a particular aspect. This was based on the principle that
respondents’ scores on all the selected criteria, considered together, are the empirically
determined indices of relative importance. The index of MIS of a particular factor is the sum
of the respondents’ actual scores (on the 5-point scale) given by all the respondents’ as a
proportion of the sum of all maximum possible scores on the 5-point scale that all the
10%
15%
35%37%
12%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Very poor Poor Neutral Good Excellent
Pe
rce
nta
ge
Rating
Rating of joint venture projects
Very poor
Poor
Neutral
Good
Excellent
122
respondents could give to that criterion. Weighting were assigned to each responses ranging
from one to five for the responses of ‘strongly disagree’ to ‘strongly agree’. This is expressed
mathematically below. The MIS index (MIS) was calculated for each item as follows, after
Lim and Alum (1995):
MIS = �������������������������
��
Where;
α 1 = number of respondents for no extent;…….……………....
α 2 = number of respondents for small extent……….…………
α 3 = number of respondents for moderate;…………………….
α 4 = number of respondents for large extent;………………….
α 5 = number of respondents for very large extent;…………….
�α = Total number of respondents
Following the mathematical computations, the criteria are then ranked in descending order of
their MIS (from the highest to the lowest). The next section of the article presents the
findings of the survey and some discussion.
7.14 Indicate to what degree EACH of the following forms of joint venture are used in
construction?
By the following question was assessed using the above formula, Mean Iteam Score. As
mentioned above, the MIS assisted in transforming the in five-point scale to indices that were
used to determine the rank of each item. These rankings made it possible to cross compare
the relative importance of the items as perceived by the respondents. The table below, table
7.7, reveals the findings.
Form of JV Standard Deviation Ranking
Joint venture agreement 3.56 1
123
Project-based joint ventures 3.33 2
Public Private Partnerships (PPP) 3.30 3
Strategic alliancing (joint ventures) 3.2 4
Consortiums 2.41 5
Table 7.7
The above table indicate the outcome of the degree to which joint venture agreements, project
based JV’s, PPP’s, strategic alliancing and consortiums are used in the construction industry.
From the table, it is clear that the bulk of contractors who undertake joint ventures prefer the
use of joint venture agreement. In South Africa, the CIDB has a recommended JV agreement
that can be utilised upon undertaking joint ventures.
On the other hand, consortiums were viewed to be the least used in the construction industry,
however it must be noted that this view is limited to the fact that the contractors or
respondents may well be emerging contractors whose views are restricted by financial bounds
that do not allow them to venture into such initiatives.
7.15 Indicate the degree to which each of the following barriers has been encountered
when undertaking a joint venture?
Similarly to the above, the MIS formula is utilised for the assessing of the below table,
however in this instance the formula is as follows:
MIS = ���������������������
��
Where:
(1) = Never, (2) = Rarely, (3) = Often, (4) = Always
α = Number of Responses
�α=Total number of responses
124
Barriers Standard Deviation Ranking
Difference between company cultures 2.91 1
Conflict among joint venture parties 2.86 2
Incompatible management system 2.62 3
High degree of instability 2.33 4
Poor performance 2.29 5
Table 7.9
In undertaking any joint ventures, contractors are bounded by multiple challenges and
barriers. In an attempt to understand such barriers, the difference between company cultures,
conflict among joint venture parties, incompatible management systems, high degree of
instability and poor performance were some of the barriers that assessed.
The findings reveal that the contractors are of the opinion that the cultural differences that the
different companies have is the highest ranked barrier. This, together with the conflict that
arises between joint venture partners were the two highly ranked barriers, respectively. The
least ranked barrier was that of the poor performance between the partners.
7.16 Are there any benefits that arise from joint ventures?
Figure 7.9
0
10
20
30
40
50
60
Yes No
Pe
rce
nta
ge
Joint venture benefits
Emerging contractors
Established contractors
125
The above figure, figure nine, illustrates the views of the respondents. In assessing these
views, it is clear that more than fifty percent (50%) of both established and emerging
contractors feel that joint venture projects are beneficial to both them and the industry at
large. It is therefore only logical to follow on and venture into establishing what these
benefits are.
7.16.1 Benefits of joint ventures for emerging contractors
Figure 7.10
On the benefits of the emerging contractors, it comes as no surprise that access to financial
assistance and an increased database of potential financing institutions is seen to be of the
most benefits. The findings also reveal that joint venture projects for emerging contractors
enhances their people management skills as well as the due development of critical technical
skills.
Furthermore, it is observed that the development of administrative skills, safety and quality
management was not that much of a critical benefit for the emerging contractors as this was
the least ranked benefit on their list. It must be said though that this is somewhat of a concern
however, as more often than not studies tend to question the quality management of small and
medium enterprises, yet they are of the opinion that this is the least important benefit of their
joint venture projects.
77%
58% 61%66%
51%
63%
48%
61%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Financial
assistance
Access to
materials,
suppliers,
pricing
Potential
subcontracting
opportunities
in future with
the
established
contractor
People’s
management
skills
Development
of essential
managerial
skills
Development
of critical
technical skills
Development
of
administrative
skills, safety
and quality
management
Exposure to
large scale
projects
Pe
rce
nta
ge
s
Benefits
Benefits for Emerging contractors
126
7.16.2 Benefits of joint ventures for established contactors
As the study advocated establishing the benefits of contractor joint ventures, it was only
logical to establish what these benefits are viewed to be. The established contractors indicated
on the graph below, figure 7.11, that the primary benefit that they yielded from joint venture
projects is the opportunities that are created for future projects of a similar or even larger
scale.
Figure 7.11
Moreover, it must be highlighted that joint venture projects are as said to improve established
contractor’s reputation in the eyes of both existing and potential clients. This aspect was
deemed as one of the most critical factors, in light of the economic crunch trouncing the
South African construction industry. One established contractor commented “…one needs to
utilise whatever instrument at their disposal to secure projects these days and joint ventures
seem to be what clients are looking for.”
With the above said however, it is sad to mention that the established contractors revealed
that the least of their benefits was that of undertaking joint venture projects in order to
facilitate the implementation of the construction charter.
49%
73%
26%
65%
59%
41%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Sourcing of sub-
contractors
Future joint
venture
opportunities
Facilitates
implementation
of the
construction
charter
Improves its
reputation to
potential clients
Supports in
growing the
construction
industry
Helps company
achieve
government
contracts
Pe
rce
nta
ge
s
Benefits
Benefits for Established contractor
127
7.17. Are there any procurement advantages for joint ventures?
The graph below, figure 7.12, indicates that the contractors feel that joint ventures do not bear
significant procurement benefits. This conclusion is drawn from the fact that sixty four (64%)
of the responds indicated that joint ventures do not have procurement benefits.
On the other hand, it must be said however that thirty six percent of the respondents felt that
joint ventures do assist them in ease of procurement. The bulk of the emerging contractors
felt that although joint ventures do not assist them with acquiring joint venture partners, it
does to an extent aid them on winning of projects once tendering. On the same note,
established contractors strongly responded that joint ventures assist in attaining of
government projects as government advocated for the utilization of joint venture initiatives
among established and emerging contractors.
Figure 7.12
7. 18. Success factor of contractor joint ventures
In analysing and assessing the significance of each success factor of a joint venture project,
the Mean Item Score (MIS) was used. The findings are illustrated on the graph below, table
7.10. These factors are measured to various given extents as illustrated by the key, with the
standard deviations used to assist with the ranking of the succes factors.
36%
64%
Procurement benefits
Yes
No
128
The below formula was used to assess these factors and the formula is as follows:
MIS = �������������������������
��
(1) = To no extent, (2) = To small extent, (3) = Moderate, (4) = To large extent,
(5) = To Very large extent
α = Number of Responses
�α=Total number of responses
Success Factor Standard Deviation Ranking
Efficient project planning 4.09 1
Commitment 3.92 2
Comprehension (Clear desion making) 3.86 3
Trust 3.79 4
Communication 3.77 5
Good Estimating 3.77 5
Motivation 3.70 7
Competence 3.69 8
Cultural understanding 3.21 9
Organisational success 3.05 10
Location of the project 3.00 11
Political stability 2.70 12
Table 7.9
From the above table, it is clear that the contractors believe that efficient planning,
commitment, comprehension or the sound ability of making clear decisions, trust and
communication are the most critical factors that lead to the success of a joint venture.
129
It can also be interpreted from the above table that an individual company’s organisational
success does not guarantee that a joint venture projects between contractors will be
successful. Furthermore, the location of the project and the political stability were the least
noted factor that aid in the successful undertaking of a joint venture project.
7.19. Essence of learning certain fields of expertise for emerging contractor
Another aspect that was incorporated in the study was that of establishing the current
expertise as well as the level of importance of learning certain fields of expertise for
emerging contractor. The respondents then indicated the level of importance of each field of
the above, ranging from very poor to excellent for the current level. Furthermore, the level of
importance of learning the fields of expertised also ranged from totally not important to very
important, as per the likert scale of 1-4 respectively. The table below uses the MIS to analyse
the responses in a statistical method in this question in assessing the level of importance of
each field of expertise and is explained as follows:
MIS = ���������������������
��
(1) = Totally unimportant, (2) = Unimportant, (3) = Important, (4) = Very
Important
α = Number of Responses
�α=Total number of responses
Field of Expertise for emerging contractors Standard Deviation Ranking
1. Construction Management experience 3.087 1
2. Budgeting experience 3.000 2
3. Financial Management experience 3.000 2
4. Project management experience 3.000 2
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5. Contract management experience 2.944 3
6. Site Management experience 2.943 4
7. Health and Safety experience 2.924 5
8. Cost estimating experience 2.915 6
9. Tendering experience 2.886 7
Table 7.10
7.20. To what extent do contractor joint ventures contribute to the development of skills
in the construction industry?
In understanding the role that joint ventures play with regard to the development of critical
skills in the industry and country at large, the question attempted to establish the views and
extent that this initiative played. This was achieved by initially assessing which discipline
yielded the most benefit from the category.
The Mean Item Score (MIS) was used to analyse the responses in a statistical method in this
question and is explained as follows:
MIS = �������������������������
��
(1) = To no extent, (2) = To small extent, (3) = Moderate, (4) = To large extent,
(5) = To Very large extent
α = Number of Responses
�α=Total number of responses
JV contribution to skills development Standard Deviation Ranking
Senior management (Contract Managers/ Contract
Directors) 3.965 1
131
Professional skills or Middle management (Site
engineers/ site agents) 3.698 2
Skilled Labour (section leaders/ artisans/ charge hands) 3.523 3
Technical skills (Foremen/ General Foremen) 3.376 4
Semi- skilled Labour (Shutter hands/concrete hands) 3.267 5
Table 7.11
From the findings, the above graph clearly shows that the contactor’s senior management,
namely their contracts managers and directors, skills and expertise are the most developed
from in undertaking joint venture projects. It must also be mentioned that the findings from
the contractors reveal that joint venture initiatives play a pivotal role in the development of
skilled labour as both established and emerging contractors share and transfer these skills
within the project.
The technical expertise that the foremen and general foremen gain from each other must also
be said to be of value. The contractors also noted out that although the general labour benefit
from skills development in the course of undertaking joint venture projects, the bulk of these
skills are generally lost nearing the completion of a project as these individuals are usually
employed through contracts of limited duration.
7.21. What is the most successful form of joint venture used in your opinion and why?
On the open ended questions, an array of views and opinions were raised by the respondents.
Although not all of these ideas could be highlighted, the most frequent of these findings are
highlighted and this was found to be joint venture agreement. The contractors indicated that
the agreement possessed good intentions and clearly aided in identifying channels of
communication throughout the project. The agreement further indicated the contractor’s
commitment as the risk is generally apportioned accordingly.
It was also emphasized that through the agreement management skills were improved for the
parties to the joint venture. Furthermore, other views noted that this form of joint venture
132
aided in ensuring that the contractors adhere to the set policy, rules and regulations that were
agreed on the onset of the joint venture.
7.22. What factors would you use to measure the success of contractor joint ventures?
On measuring the success of a joint venture project, it was mentioned that although the
primary measure needs to be that of measuring the attainment of the project objectives, yet
the development of the emerging contractor to be able to stand alone is one of great
significance. It was further found that the achieved profit margin against the anticipated is
also a measure that is used by some contractor’s.
The traditional measure of succes of completion of the project within required time, cost and
quality was also a factor highlighted by most contractors. Both the established and emerging
contractors also noted that the development of a productive continuity of working relations
not only eases the undertaking of future joint ventures but is also a measure that can be utilisd
to assess the success of a project.
The last factor however that all of the contractors seemed to emphasize was that of all the
measures that can be used to assess the success of a joint venture, the client’s satisfaction
with regard to delivered end product is one that can not be compromised at all.
7.23. Are contractor joint ventures a sustainable initiative in construction and why?
With the above factors in mind, the sustainability of joint ventures was said to be something
that is dependent on multiple factors. Contractors were of the view that although joint
ventures can generally be classified as a sustainable initiative, yet the manner in which both
industry and client perceive it can easily swag this in either direction. The bulk of the
contractors however noted that yes, joint ventures are a sustainable initiative and that
regardless of the experiences that they had, and they would continue undertaking joint
venture projects with the right partner.
7.24. Conclusion
In concluding the findings of the primary data, it is essential to not only conclude on the
revelations of the above chapter but to further review the findings of literature in a brief
comparison to the primary data findings. In undertaking this quest, the author embarks on this
133
through identifying key similarities between primary and secondary data, similarly to the
comparison undertaken in chapter five. The summarized similarities and difference found in
the chapter five, for secondary data, will be used for the comparison against the primary data
findings unveiled above.
In assessing the judgments shown in the literature reviews, the primary data also iterates and
confirms the scarcity or limited involvement of women within contractors and the
construction industry at large. The findings of Statistics South Africa (2008), which identified
that only about ten percent of women are actively involved in the construction industry and
these are affirmed by the gender ratio, 7.2 of this chapter, that illustrates the male dominance
of eighty (80%) males to twenty (20%) women.
It is interesting that the findings of arrived at in this chapter correlate to those found in
literatures. In a brief glimpse at this, two are reviewed and these are the benefits and success
factors of joint ventures. It was earlier noted in chapter five that multiple similarities were
found in across literature from all the countries and these were summarised. In utilizing this
summary as a basis for the cross check being attempted by the author, the conclusions drawn
can be presented as follow:
• Literature revealed that contractors throughout the world yield access to restricted
arenas, development of sector skills, knowledge transfer and procurement advantages
through the utilization of joint ventures in the construction industry.
The findings of this chapter reveal that access to financial assistance and an increased
database of potential financing institutions as well as the enhancing of people management
and critical technical skills were among the main benefits for emerging contractors.
Furthermore access to restricted markets through future joint ventures was also among the
highly rated benefits of joint ventures for the established contractor.
• Literature further revealed that the base elements of communication, comprehension,
commitment, trust and thorough selection of the partner were the most influential
success factors.
The findings of this chapter reveal that the top six most critical success factors were efficient
project planning, commitment, commitment, trust, communication and good estimating
134
respectively. In comparing these to literature, three of the four success factors were found to
the same, namely those of communication, commitment and trust. Although other similarities
were found, the author deems these are the most important, according to the rankings above.
In concluding the analysis and findings of the study, it is clear that the trends illustrated by
these findings are not only similar to those of literature but are further the same at most
critical intervals. The intervals referred to are those the study focused on, namely the benefits,
success factors and sustainability of contractor joint ventures. The findings presented above
are not merely clear but are also relevant to the thinking and findings of researchers in
various facets of the globe.
135
Chapter 8 – Conclusion and Recommendations
8.1 Introduction
This chapter, being the last chapter of the study, not only serves to enforce the findings from
literature, while concluding as well as recommending future research that can be undertaken
in this regard, but it also brings about the phased completion of this study.
In reviewing the journey that the study brought about, this chapter commences by
overviewing the research objectives relative to the study’s findings, in order to highlight the
relationship found between the proposal made at the onset, literature and the findings
established.
Furthermore, this chapter explores the conclusions and key findings that literature
emphasized as critical through a difference and similarity preview, as elaborated on in
chapter five. The study then wraps about by recommended grey areas where possible research
studies can be either continued or initiated.
The last part of this chapter is a summary of the entire study where the author browses
through each chapter in order to showcase its essence and fitment into the research study.
8.2 Review of the research objectives
As mentioned in the analysis and findings chapter, the objectives of the research were
successfully addressed as these were answered as follows:
8.2.1 Objective 1- Main benefits of joint ventures for emerging and established
contractors
The following were found to be the main benefits for emerging contractors undertaking joint
ventures:
1. Financial assistsnce and support
2. People management skills
3. Critical development of skills
4. Exposure to large scale projects
5. Potential subcontracting opportunities in the future
136
Similarly for established contractors, the following were found to be the main benefits
yielded from contractor joint ventures:
1. Future joint venture opportunities
2. Improving its relationship with its potential clients
3. Supports in growing the construction industry
4. Sourcing and obtaining of subcontractors
5. Improved chances of attaining government projects
It must be said that in chapter five, it was outlined that literature revealed that contractors
throughout the world yield access to restricted arenas, development of sector skills,
knowledge transfer and procurement advantages through the utilization of joint ventures in
the construction industry. The findings from chapter seven revealed that access to financial
assistance and an increased database of potential financing institutions as well as the
enhancing of people management and critical technical skills were among the main benefits
for emerging contractors. It was also noted that access to restricted markets through future
joint ventures was also among the highly rated benefits of joint ventures for the established
contractor.
8.2.2 Objective 2 - List the main elements that contribute to the success of a joint
venture
The findings revealed that the following factors are the primary factors that contribute to the
contractors succes in a joint venture
Success Factor Standard Deviation Ranking
Efficient project planning 4.09 1
Commitment 3.92 2
Comprehension (Clear desion making) 3.86 3
Trust 3.79 4
Communication 3.77 5
Good Estimating 3.77 5
137
Motivation 3.70 7
Competence 3.69 8
Cultural understanding 3.21 9
Organisational success 3.05 10
Location of the project 3.00 11
Table 8.1
Literature further revealed that the base elements of communication, comprehension,
commitment, trust and thorough selection of the partner were the most influential success
factors. The findings of chapter seven revealed that the top six most critical success factors
were efficient project planning, commitment, commitment, trust, communication and good
estimating respectively. These were then compared to literature, it was found that three of the
four success factors were found to the same, namely those of communication, commitment
and trust. It was further mentioned that although other similarities were found, the author
deems these are the most important, according to the rankings above.
8.2.3 Objective 3 - Factors used to measure the success of a joint venture
It was also established through literature that the following factors could be used to measure
the success of contractor joint ventures. This was then further confirmed through the
literature collected in the questionnaires, that the following factors could indeed be used as a
criteria for measuring the success of joint ventures among contractors.
• Development of the emerging contractor to be able to stand alone
• Completion of the project within required time, cost and quality
• Development of a productive continuity of working relations
• Client satisfaction with regard to delivered end product
Having proposed an investigation into the benefits and success factors of contractor joint
ventures in the construction industry, the above mentioned aspects not only clear confines the
answers to these but further outlines, through putting forth factors that can be utilized to
measure the success of a joint venture, consequently addressing the sustainability of such
138
initiatives. The above mentioned measures not only correspond to Nkado’s et al (1997)
findings but also those that emerging and established operating contractors in 2012, in the
Gauteng region, expressed as primary.
8.3 Conclusion
Although the focus of the study was on the investigation of the benefits and success factors of
contractor joint ventures in South Africa, the scarcity of literature relating to this particular
type of joint venture was limited. In order to bring about complete, a broader scope which
incorporated the understanding of the causes and need for the success of contractor joint
ventures in the country was required. In exploring this, it became imperative to unfold the
history of the South African construction industry and country at large.
In comparing the international reasons for joint venture initiatives to those of the South
African construction industry, it is clear that vast differences are evident in this sphere.
Although similarities may be linked to the historic evolution of the various states and the
development thereof upon the attainment of freedom, in the case of Ghana and South Africa,
the UK and Malaysia primarily embark on joint ventures for access into new and foreign
markets. This coupled with the interest of direct foreign investment, in the case of Ghana,
formulate some of the reasoning as to why these countries embark on construction joint
ventures at times.
The above differences are further widely deepened upon consideration that contractor joint
ventures in the South African building industry emerge from the historic exclusion of black
South Africans from participating freely in the economy in the apartheid government, and
hence resulted in a society marked by vast discrepancies and disparities.
In comparing the benefits of contractor joint ventures across the various countries, it is
evident that contractors throughout the world yield access to restricted arenas, development
of sector skills, knowledge transfer and procurement advantages through the utilization of
joint ventures in the construction industry. In addition, success factors were slightly different
but similarities were evident at certain instances, the base elements of communication,
comprehension and commitment to be specific. Trust and thorough selection of the partner
was seen as a similarity within literature from the different countries.
139
With the above mentioned however, it must be outlined that although thorough comparisons
are presented and explained, the international literature on joint ventures in the construction
industry, especially among contractors, is far more advanced than that of South Africa. In
addition, this study forms a basis for the continuation of investigations, explorations and
empirical studies into topics of a similar nature in the country.
It is also clear from the review of literature that joint ventures among contractors in the
construction industry do yield benefits. The vast improvement in the identified spheres not
only attributes to the alleviation of some of the challenges put forth by the authors but further,
to whatever degree, assists in bridges the vast economic differences, as highlighted by Nkado
et al (1997).
8.4 Recommendations
Notwithstanding the significant contributions made by authors cited and reference in the
study, it is evident that there are voids in literature when it comes to the benefits and success
factors brought about by contactors in the South African construction industry.
1. It is therefore recommended that researchers explore spheres of emerging
contractor development through the use of joint ventures in the South African
construction industry.
An opportunity for such as study is realized as the South African construction industry
research seems to primarily deepen its roots on various facets of small and micro and medium
enterprise development.
2. Likewise, it is recommended that the benefits of joint ventures as a tool to
combat some of the challenges faced by emerging contractors, with an
observation of case studies of failure patterns when this is undertaken.
Bearing in mind that before mentioned observations can either indicate an increase or decline
in the failure patterns, the above mentioned area remains somewhat of an unexplored arena as
very little literature, that focuses on this particular area, seems to be available.
3. Furthermore, it is recommended that studies encouraging the facilitation of
enforcement of legislation on the use of joint ventures to attain the initial
140
intention of economic transformation, sector skills development, managerial,
technical and technological skills transfer, be initiated.
4. It is also recommended that studies pertaining to emerging contractor failures
after joint ventures of such contractors with established contractors be
considered.
5. Lastly, it is recommended that research case studies relating to the tracking of
emerging contractor development upon undertaking joint ventures such as to
ascertain time frames relating to growth patterns, as per CIDB grading, of the
contractor.
With the above mentioned however, it must be outlined that although thorough comparisons
are presented and explained, the international literature on joint ventures in the construction
industry, especially among contractors, is far more advanced than that of South Africa. In
addition, this study forms a basis for the continuation of investigations, explorations and
empirical studies into topics of a similar nature in the country, of which some have been
proposed above.
8.5 Summary of the study
The first chapter of the study, the research proposal, formed the basis of what the study aimed
at achieving. In this chapter, the problem was presented and objectives of the study set.
Moreover, the chapter also indicated limitations that were foreseen as well as the study’s
possible contribution to the limited body of knowledge on benefits and success factors of
contractor joint ventures in South Africa.
Chapter two of this research brought an in depth study of the literature that is in place in
Malaysia. In this chapter, the definition, for the purpose of this research was defined. The
chapter reviewed and recognized secondary data that is in place for the Malaysian
construction industry which assisted the author in formulating his argument and viewpoints.
Chapter two also set about a structure to be followed by the other chapters of incorporating
four major sections, namely: The causes of contractor joint ventures, the type of joint
ventures mostly utilised, the benefits of contractor joint ventures and the success factors that
contributed to the contractor joint ventures.
141
Chapter three of this research study continued to strengthen the study as it brought about
reasoning of the joint venture initiatives in an established economy, through the review of
literature that is in place in the United Kingdom (UK). This chapter, just like chapter two,
will acknowledge and recognize literature and authors who have contributed in formulating
literature that in place in the UK, which is relative to the focus of this study. Moreover, this
chapter reviewed and recognized secondary data collected and utilised in the UK.
Similarly, the chapter incorporated four major sections, namely: The causes of contractor
joint ventures in the UK, the benefits of contractor joint ventures, the success factors that
contributed to the contractor joint ventures and lastly reflect on the relationships that the joint
ventures created between the contractors to the undertaken joint venture.
Chapter four of the study reviewed literature that is in place in Ghana. The chapter not only
aid in contributing to the understanding of the Ghanaian construction industry but also why
that industry is still developing at a gradual rate. With the chapter adopting a similar format,
which eased the comparisons between the various countries, it was established that of all the
reviewed countries, the Ghanaian construction industry was found to be the least developed
industry.
The fifth chapter of the study reviewed the literature that is in play in the South African
construction industry. Although this chapter conformed to the structure set about in chapter
two, the last section to the chapter conducted a comparison between major differences and
similarities of literature which is in place in Malaysia, the UK, Ghanian and South African
construction industries. A conclusion which summarises the chapter then ensured the
completion of chapter five.
Chapter six focused on analysis of the various forms of methodologies that can be utilized in
conducting a research study and further supported this by comprehensive reasoning as to why
the chosen methodology was chosen for this particular study. The design of the questionnaire
for extracting of the primary data will be undertaken in this chapter, followed by the actual
data collection itself. The methodology utilised for the research was that of a survey method
for the compiling of the primary data.
142
The seventh chapter of the study brought about the analysis and findings of the data collected
through the questionnaires. The data was analysed through the use of various forms of
analysis ranging from graphs to the likert scales and other forms of quantitative and statistical
analysis. From this chapter, the findings were established and the objectives addressed.
Chapter eight of this research study focused on the conclusion and recommendations that the
study managed to unveil. The purpose of this chapter was to conclude, while bringing about
solutions and recommendations to the initially thought objectives and the problem statement.
Furthermore, chapter eight also established, through its’ recommendations, other aspects and
areas of improvement for further research purposes. In completion of this last chapter the
problem statement and the objectives set out in the first chapter was successfully addressed.
A logical link of all the chapters tied up the study through the conclusion and
recommendations chapter. Having undertaken the above, the journey embarked upon on the
study of the assessment of the success factors and benefits of joint venture projects in the SA
construction industry was hereby completed.
8.6 Future Research
In light of some of the avenues that the study narrowed itself from and purposefully shied
focus on or incorporate, the below mentioned areas have been identified as potential areas for
future research. In undertaking the above mentioned, the author not only hopes to propose
studies that may aid in bridging the vast shortfalls identified in literature, where limited
material was found. These avenues, among others are:
1. Contractor joint ventures undertaken by women owed contractors only
2. Understanding whether or not women-to-women contractor joint ventures are
more inclined to have a higher success rate that ordinary joint ventures, where
ordinary refers to no consideration of the gender.
3. Barriers and challenges encountered during joint ventures and how these are
managed through the course of a construction joint venture project.
4. Comparison of differences in the undertaking of contractor joint ventures to
professionals (consultants) undertaking joint ventures in the construction
industry.
5. Joint ventures as a mentoring tool
143
6. Risk management role in the determining the success of a joint venture
7. Preference of companies to use joint ventures in undertaking their projects
8. Difference in strategies deployed in the management of emerging-to-
established contractor joint venture, to those of an established-to-established
contractor joint venture.
144
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Appendix A - Questionnaire
Title: An Assessment of success factors and benefits of joint venture
projects in the South African Construction Industry
PLEASE ANSWER THE FOLLOWING QUESTIONS BY CROSSING (�) THE
RELEVANT BLOCK OR WRITING DOWN YOUR ANSWER IN THE SPACE
PROVIDED.
EXAMPLE OF HOW TO COMPLETE THIS QUESTIONNAIRE:
Your gender ?
If you are female:
Male 1
Female 2
Section A – Background information
This section of the questionnaire refers to background or biographical information. Although
we are aware of the sensitivity of the questions in this section, the information will allow us
to compare groups of respondents. Once again, we assure you that your response will remain
anonymous. Your co-operation is appreciated.
1. Gender
Male 1
160
Female 2
2. Ethnicity
African 1
White 2
Coloured 3
Indian or Asian 4
3. What is your current position in the company?
Managing Director 1
Contracts Director 2
Construction Project Manager 3
Contracts Manager 4
General Foreman 5
Site Manager 6
Quantity Surveyor 7
Other, please specify 8
5. What is your contractor Construction Industry Development Board (CIDB)
grading?
Grade 1 1
161
Grade 2 2
Grade 3 3
Grade 4 4
Grade 5 5
Grade 6 6
Grade 7 7
Grade 8 8
Grade 9 9
6. How many projects do you have running at this point in time?
7. Out of the above mentioned projects, how many of these projects are joint venture
projects?
8. Please give the main reasons you participate in joint venture projects?
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
9. Please give the main reasons you DO NOT participate in joint venture projects?
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
162
10. How many years of experience do you have in construction joint venture projects?
Less than 3 years 1
Between 3-5 years 2
Between 6-10 years 3
Between 11-15 years 4
More than 15 years 5
11. Are there any preconditions that are required before engaging on a joint venture?
Yes 1
No 2
11b. If yes, what are these pre-conditions?
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
12. Do you believe that joint venture initiatives lead to better project success?
Yes 1
No 2
13. In general, how would you rate joint venture projects based on your experience or
knowledge?
163
Very poor 1
Poor 2
Neutral 3
Good 4
Excellent 5
Section B
This section of the questionnaire explores joint venture projects in detail.
14. Indicate to what degree EACH of the following forms of joint venture are used in
construction?
Form of joint venture Scale
To no
extent
To small
extent
Moderate
extent
To large
extent
To very
large extent
Joint venture agreement 1 2 3 4 5
Project-based joint ventures 1 2 3 4 5
Strategic alliancing (joint ventures) 1 2 3 4 5
Public Private Partnerships (PPP) 1 2 3 4 5
Consortiums 1 2 3 4 5
15. Indicate the degree to which each of the following barriers has been encountered when
you have undertaken a joint venture project?
164
Barriers of joint venture projects Never Rarely Often Always
High degree of instability 1 2 3 4
Poor performance 1 2 3 4
Conflict among joint venture parties 1 2 3 4
Incompatible management system 1 2 3 4
Difference between company cultures 1 2 3 4
16. Are there any benefits that arise from joint ventures for emerging and established
contractors?
Yes No
Emerging contractors 1 2
Established contractors 1 2
17. If yes for the emerging contractors, then what would you say the benefits are? (Mark all
applicable)
Benefits for emerging contractors
Financial assistance 1
Access to materials, suppliers, pricing 2
Potential subcontracting opportunities in future with
the established contractor
3
165
People’s management skills 4
Development of essential managerial skills 5
Development of critical technical skills 6
Development of administrative skills, safety and
quality management
7
Exposure to large scale projects 8
Other, please specify 9
18. If you think there are benefits from joint ventures for established contractors what are
these? (Mark all applicable)
Benefits for Established Contractors
Sourcing of sub-contractors 1
Future joint venture opportunities 2
Facilitates implementation of the
construction charter
3
Improves its reputation to potential clients 4
Supports in growing the construction
industry
5
Helps company achieve government
contracts
6
166
19. Are there any procurement advantages that arise for contractors when tendering for work
as a joint ventures?
Yes 1
No 2
20. If yes, what are these procurement advantages?
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Section C
21. In your experience? To what extent do the following factors contribute to the success of a
joint venture? Please indicate your answer using the following 5- point scale where
To no
extent
To small
extent
Moderate To large
extent
To very
large
extent
Communication among
contractors
1 2 3 4 5
Competence in undertaking the
work
1 2 3 4 5
Commitment to the joint
venture project
1 2 3 4 5
Clear decision-making? 1 2 3 4 5
Trust of participants abilities 1 2 3 4 5
Motivation to complete the
project
1 2 3 4 5
167
Location of the project 1 2 3 4 5
Organisationals independent
success
1 2 3 4 5
Political stability (nationally) 1 2 3 4 5
Cultural understanding between
participants?
1 2 3 4 5
Good project estimating 1 2 3 4 5
Efficient project planning 1 2 3 4 5
21. The table below contains a list of fields of expertise. For each field indicate (a) the current
level of experience in emerging contractor businesses and (b) how important is it for
emerging contractors to learn each field of expertise to significantly grow and/or become
independent?
(a) Current level (b) Level of importance
Very
po
or
Po
or
Go
od
Ex
cellent
To
tally
un
imp
ortan
t
Un
imp
ortan
t Imp
ortan
t
Very
imp
ortan
t
Contract management experience 1 2 3 4
Site management experience 1 2 3 4
Tendering experience 1 2 3 4
Cost estimating experience 1 2 3 4
Project management experience 1 2 3 4
168
22. To what extent do contractor joint ventures contribute to the development of skills in
the construction industry? Please indicate by using the following 5-point scale where.
To no
extent
To
small
extent
Moderate To
large
extent
To very
large extent
Semi- skilled Labour (Shutter
hands/concrete hands)
1 2 3 4 5
Skilled Labour (section leaders/ artisans/
charge hands)
1 2 3 4 5
Techical skills (Foremen/ General
Foremen)
1 2 3 4 5
Professional skills or Middle management
(Site engineers/ site agents)
1 2 3 4 5
Senior management (Contract Managers/
Contract Directors)
1 2 3 4 5
Section D
23. What is the most successful form of joint venture used in your opinion and why?
Budgeting experience 1 2 3 4
Financial management experience 1 2 3 4
Health and Safety experience 1 2 3 4
Construction management experience 1 2 3 4
169
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24. What factors would you use to measure the success of a joint venture?
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25. Is joint venturing a sustainable initiative in the construction industry and why?
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……………...………………………………………………………………………………
26. What measures can be used to assess sustainability of contractor joint ventures?
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Thank you for your co-operation in completing this questionnaire.
