![]() ![]() This arrangement permits bidding without depending on subcontract bids and can result in certain advantages. If the joint-venture bid is successful, the grading and paving contractor will perform the grading and paving work, while the bridge contractor performs the bridge work. A grading and paving contractor who does not do bridge work may form an item joint venture with a bridge builder who does not do heavy grading and paving. There is still only one joint-venture entity responsible to the owner for the total project, and there is still joint and several liability.Ī common example where item joint ventures are used is a highway construction contract that contains heavy grading and paving work and bridge work. The aforesaid arrangements are internal between the partners. Rather, each accepts the risks and benefits accruing to each separate part of the contract. The partners do not mutually share the risks and benefits of the total contract. ![]() One partner may profit while the other suffers a loss. Each partner constructs that separate part with their own individual field forces according to the contract specifications, incurs separate costs, and retains payment for that part of the work from the owner. In item joint ventures, each partner (usually only two) agrees to be responsible for a separate physical part of the contract work. The cost of providing the field forces and other costs of actual construction are charged to the joint venture. ![]() Usually, in a conventional joint venture, the actual on-site construction work will be performed by the field forces of just one of the partners. In a conventional joint venture, the partners (two or more in number) agree to share benefits and liabilities according to a participation formula, with each partner accepting its specified share of each according to the formula (subject to the previously explained principle of joint and several liability). Two basic types of joint-venture arrangements are common in the construction industry: conventional joint ventures and item joint ventures. Without joint and several liability, owners would not award construction contracts to joint ventures. Joint and several liability means to each partner company that, if the other partners are unable or unwilling to meet their share of joint-venture obligations, each partner company can be held liable, not only for that partner’s share but also for the other partners’ shares as well-for the joint venture’s total obligation. The fundamental principle behind joint-venture agreements is that the partners agree to be jointly and severally liable with respect to the duties, obligations, and liabilities of the joint venture. Usually, the joint-venture agreement will predate the prime contract. Although it refers to the owner and the prime construction contract to which the joint-venture entity and the owner are the parties, it is not a flow-down agreement. This agreement is a contractor’s contract. The subject of this chapter-the joint-venture agreement-is the construction industry document that addresses these concerns. For instance, who is responsible to the owner for contract performance? Who is liable in the event of a default? The partners, in turn, need to decide how liability as well as profits are to be shared between them, where they get their working capital, who will direct the day-by-day activities on the job, who will own the joint venture’s assets, and what will happen if an individual partner cannot or will not meet its obligations to the other partners. When a joint-venture entity submits a successful bid, a series of issues are created that affect both the owner of the project and the joint-venture partner companies. The concept is not unlike that of a partnership between individuals, except that entire companies are involved as partners. ![]() To submit a joint-venture bid, two or more contractors form a new and separate legal entity to submit the bid and, if the joint-venture bid is successful, this entity then executes the ensuing construction contract. Since each partner in a construction joint venture usually prepares an independent cost estimate for the performance of the project, risk is reduced by basing the joint-venture bid on more than a single cost estimate-that is, two (or more) heads are better than one. Joint venturing may make it possible for a single contractor to participate in a bid on a project that would otherwise be too large a risk. Several factors make this practice attractive. Two or more construction contractors sometimes compete for a particular project as a joint venture by pooling their resources and sharing the risk and potential profit. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |