Surprisingly, one of the my most popular posts was about creating joint ventures to bid on public projects. Since I wrote that post, it has become more and more common for construction companies to team up to bid on public projects.
When forming a joint venture, it very important to have a written joint-venture agreement between the contractors teaming up to bid on a project. Here are five provisions that should be included in every construction joint-venture agreement.
- Specify the target project(s): Usually, joint ventures are formed to pursue a single project. It may go without saying, but the target project must be specified in the joint-venture agreement. If multiple projects are being pursued, then each of those projects should be specified.
- Interests of the parties in the joint venture: The percentage interests of each joint-venture partner must be specified. This may include the estimated percentage of the work that each joint-venture partner will be responsible for performing.
- Create a management committee: The management committee is typically responsible for making decisions on behalf of the joint venture. Most significant decisions will require unanimous consent, and if the members of the committee cannot agree on something, the parties should specify who will make the tie breaking or deciding vote.
- Insurance: The joint-venture partners should agree on what insurance will be obtained by the joint venture. It should also be specified who will be responsible to pay for any insurance coverage obtained.
- Splitting up the work: It would also be wise to address how the joint-venture partners intend to split up the work for the target project(s). This would include specifying the portions of the work and the estimated values of those items of work for completion of the target project(s).
I could go on with this list for another several thousand words, but the above five items were the first joint-venture agreement provisions that came to mind.
If you only take away one thing from this post, it’s this–always have a written agreement for any joint venture to pursue a construction project. Those agreements are typically fairly detailed and if drafted properly, you can minimize the chances of future litigation over disputes between the joint-venture partners.
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