Contractors May Benefit By Taking Equity In The Project They Are Constructing

Contractors may benefit in making a small equity investment in the projects they construct. The financial benefit can arise from the investment itself and from improved understanding and communication with the owner during construction itself.

In the past, it was not unusual for construction companies to make small equity investments in the projects they worked on. For example, a construction company building a power plant would take a 5% equity interest in the project. By taking a financial stake in the project, contractors planned to protect their business interest in the project. That was the theory, anyway. Many of these investments did not provide the good returns; often-times the return was negative. While the construction company's management was great at operating the construction business, it was not so great when it came to the financing business. So the idea went out of fashion.