Using Strategic Alliances to Further Your Business

The Louisville-Southern Indiana Ohio River Bridges Project is one of the largest federally funded transportation construction projects in the United States. As such, contract procurement provides opportunities for businesses of many sizes.

 

Within the Kentucky Disadvantaged Business Enterprise (KY DBE) Program, the scopes of work available for sub-contractors are constantly evolving. The KY DBE Program Manager keeps KY DBEs informed through this eNewsletter and other outreach efforts. Part of that support includes making sure that prospective prime contractors understand how to use available resources to identify KY DBE companies for construction and professional services.

 

While there are hundreds of companies willing, ready and able to participate as sub-contractors, many smaller, less experienced companies may not be prepared to work on a project of this size.

 

Community Transportation Solutions’ (CTS) project manager John Sacksteder has helped define strategic partnerships as an alternative for KY DBEs that may be struggling to acquire work on the Project.

 

“Strategic partnerships can enable businesses to gain competitive advantage through access to a partner's resources that can range from capital and bonding to people,” Sacksteder said.

 

KY DBE certified businesses are encouraged to partner with other firms to form these strategic alliances to bid on contracts together. These types of alliances require that at least one partner is a certified DBE and that both partners are prequalified for work with the Kentucky Transportation Cabinet.

 

A strategic alliance is a formal relationship between two or more parties to pursue a set of agreed-upon goals, or to meet a critical business need while remaining independent organizations. Allied firms that remain separate entities mark an important distinction between strategic alliances and firms that establish a new entity through a joint venture.  (In a joint venture the parties agree to create a new entity by both contributing equity and sharing in the revenues, expenses, and control of the enterprise.)

 

Partners may provide the strategic alliance with resources such as products, distribution channels, project funding, capital equipment, knowledge, expertise, or intellectual property.

 

In a strategic alliance, each partner hopes that the benefits from the alliance will be greater than those from individual efforts.

 

Some of the benefits that strategic alliances often offer are:

• Access to partner's equipment/technology 
• Access to partner's capital and/or bonding capacity
• Project management skills

 

In such an alliance, partners often share decision-making responsibilities, achieve strategic goals and acquire value that they could not accomplish on their own. Partners need to clearly understand the goals, benefits and risks of such an alliance.

 

It is very important for business owners to understand what they need to achieve for the alliance to be successful. For example, two or more businesses may be interested in forming a strategic alliance to provide for a higher bonding capacity. In this scenario, it is important that each partner understand what may be required by the insurer to be eligible.

 

KY DBEs should consider as many options as possible when setting a plan for growth; it is always prudent to seek legal advice when considering partnerships and alliances.