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Business Excellence-Enhancing
Project Returns : Financial andProject Management
Strategies
By Dr Punit Sethi, PhD
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Excellence in Strategies/PM(continuous stream of successfully managed)
Time
Cost/ROI
Performance
Customer Relation
Internal
Internal Metrics
Culture
Work Flow
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5Ms
Men
Material
Machine
Money
Minutes
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Value Engineering
Reduce Cost
Improving Function (improving
functionalities & performance)
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Joint Ventures as Financial & PM
Strategies
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Joint ventures (JV)
to carry out a specific project or simply to
assist with the growth and continuation of
a business.For success and enlarging Business.
To meet Technical and Financial
Qualification.
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JV
Business Agreement for finite time, a new
entity & new asset-contributing equity.
Good JV- Comprehensive Map of duties &
obligations; minimizes complications.
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Consideration for JV
What is being achieved
Exclusive Negotiation
Confidentiality (Undertaking) ?
Limitations of Territory
What consents, approvals, licenses and permits are
necessary for JV to operate?
If cross border whos jurisdiction?
Laws of foreign ownership and investment.
Exchange controls, Relevant Taxes and Duties
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Funding
Own Resources
External Resources
Parties payment in cash or payment in kind such as expertiseand resources
Must agree to percentage (%) of benefit for JV.
Working Capital requirement.
Any losses.
Expansion Costs.
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Advantages : JV
For new products and latest technology enteringinto market, R & D of others
joint venture allows two competitors to join forces,
increase their market exposure, and compete at ahigher level against other, more powerful
companies in the same industry.
It also allows two connected businesses to
cooperate on a joint project in a certain market.
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Advantages : JV
In India, going for JV has become essential for most of the
Indian Companies as per Government norms/rule position
even for Pre-Qualification for qualifying to go to next stage of
bidding. Desires technical experience forces IndianCompanies to go for JV e.g Technical Capacity for purpose of
evaluation (Project experience /Construction Experience on
Eligible Projects in Highways Sector (Highways, Expressways,
Bridges, Tunnels and Airfields) or Core Sector (Power,
Telecom, Ports, Airports, Railways, Metro Rail, Industrial
Parks/estates, logistics parks, pipelines, irrigation, water
supply, sewerage and real estate development).
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Disadvantages : JV
Negotiating a joint venture can be complex and time
consuming. It involves thorough research of the
market and territory in which the products will besold or the project will be organized.
Joint ventures can be expensive to set up initially.
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Action Checklist
Study any joint venture you might set up carefully.
Obtain as much information from as many sources as you can
before committing to an expensive joint-venture agreement.
Plan it carefully and set up a realistic business plan with your
business partner.
Know your market and make sure that you have analyzed the
consequences for your own business of entering into a joint-
venture agreement.
Economize by negotiating a reasonable rate with your legal
advisers, but remember that it is better to incur costs by
obtaining legal advice than to enter into a joint venture under
terms that you do not understand.
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Dos and Donts
Do
Choose your partner in the joint venture carefully, as
you will be legally bound for a set period of time,
under obligations that will prove costly if they are not
successfully performed.
* Involve your solicitors in the evaluation of both
the risks and potential benefits of entering into a joint
venture.
* Negotiate your rates and make a contingency
plan for any cost over-run. Plan carefully how
the joint-venture will operate, how the profits will bedistributed and who will take res onsibilit for what.
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Dos and Donts
Do
* Remember to have appropriate stake in JV to getyour experience considered on your own for next
Project. (like NHAI says minimum equity of 26% for
any earlier projects to be in eligible category to claim
experience).
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Dont
Dont make the mistake of being attracted by
the idea of a joint venture that has not been
thoroughly planned and thought through.
* Dont overlook the importance ofsetting
up a contingency plan in case the jointventure will not work and the relationship
breaks down.
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FIDIC for Financial& PM Strategies
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Knowledge of FIDIC
(e.g especially International Bidding; Model Concessionaire
Agreement)Knowledge of FIDIC. The acronym FIDIC stands for
Fdration Internationale Des Ingnieurs-Conseils, French for
the International Federation of Consulting Engineers.
The founding member countries of the FIDIC were Belgium,
France and Switzerland Located at the World Trade Center in
Geneva, Switzerland, FIDIC aims to represent globally the
consulting engineering industry by promoting the business
interests of firms supplying technology-based intellectualservices for the built and natural environment. FIDIC is well
known in the consulting engineering industry for its work in
defining Conditions of Contract for the Construction Industry
worldwide; code of ethics-fair, unbiased, impartial.
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FIDIC
* Companies and organizations belonging toFIDIC national member associations are
encouraged to announce themselves as FIDIC
members and use the FIDIC logo. The use of thelogo is strictly controlled, and all FIDIC products
and services are protected by the FIDIC
trademark.
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The backbone of the body of FIDIC's publications is FIDIC's selection of contracts andagreements.
FIDIC publishes conditions of contract for:
EPC/Turnkey Projects
Plant and Design Build Contract (updates Yellow Book and Orange Book)
The Short Form
Construction Contract (updates the Red Book)
Works of Civil Engineering Construction (The Red Book)
Electrical & Mechanical Works (The Yellow Book)
Design-Build and Turnkey (The Orange Book)
In 1999, a suite of three new conditions of contract was published by FIDIC, followingthe basic structure and wording harmonised and updated around the previous FIDICDesign-Build and Turnkey Contract (the 1992 Orange Book).
These conditions, known as the FIDIC rainbow, were the Conditions of Con- tract for:
l Construction, the so-called Red Book, for works designed by the Employer lPlant and Design-Build, the so-called Yellow Book, for works designed by the
Contractor l EPC/Turnkey Projects, the so-called Silver Book, for worksdesigned by the
Contractor
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Red Construction Civil Engr EmployerYellow Plant D & B E & M Contractor
(Orange)
Silver EPC T/K ------- EmployerGreen Short ------- Employer
Gold DBO/Long ------- Contactor
White E & C ------- EmployerBlue Dredging & recla ------ Employer
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