Joint ventures (JVs) can bring significant benefits to all involved – if they are set up for the right reasons, in the right way and with the right parties.
As local government evolves and the need to generate additional income and savings continues to grow, alternative delivery models are becoming a more
prominent approach. It is pivotal, however, that authorities choose the right model for their objectives.
Our recent report – Better together: Building a successful joint venture company – researched a range of JVs to provide inspiration and insight for local authorities and other stakeholders. Below we’ve extracted some of the key highlights for you to consider when deciding on, setting up or implementing such a joint venture. Each section is also more fully explored in the report, which you can download as a PDF [ 2399 kb ].
Deciding to set up a JV
Joint ventures are the right model for when the council doesn’t have the experience to achieve the particular objectives alone but wants to maintain an element of control and contribution, which outsourcing may not allow. Where JVs have been successful they have supported councils to improve service delivery, reduce costs, bring in investment and expertise, and generate income.
Before going ahead, there are a number of areas to consider so that you can ensure the JV will be as successful as possible:
- services being provided
- structure of the JV
- objectives, outcomes and ambitions
- due diligence
- people and pensions.
Setting up a JV
Once a joint venture has been identified as the best option for the council and its particular objectives, the focus now turns to the finding the right partner and the procurement process.
Here are some of the key things for the council to consider when setting up a JV and building a good foundation:
- select the right procurement process
- set the right criteria
- review objectives
- make an investment decision
- the partner should bring something new
- share profit and risk
- build in flexibility
- tax implications
- support service costs.
Factoring in these issues will help avoid unexpected surprises and ensure that the partnership has the strongest base on which to build a successful joint venture.
Making the JV successful
Having selected the most appropriate and beneficial partner, it is important to keep working on this partnership throughout the JV to make sure that it does not revert to a contract-led joint venture.
In order to do so, the new arrangement must:
- create a culture of trust
- put the right leadership in place for the JV
- focus on the key outcomes
- allow the JV to operate independently
- ensure appropriate corporate structure and governance arrangements
- take into consideration the local politics
- get the right level of performance management
- plan the exit (when it comes to that stage).
Good and effective communication between both parties will be pivotal in ensuring the success of the joint venture, meaning it does not become a relationship based on a contractual agreement alone. Regularly refocusing on the initial aim and objectives of the partnership will ensure that both parties remain in sync, meaning delivery of services and commercial success are as effective as possible.