Large Value Tenders

In the government procurement marketplace, business is often pursued by teams, rather than single businesses. This is particularly the case for more complex, larger value tenders.

Small businesses interested in competing for government procurement opportunities often establish strategic business partnerships. These partnerships can take a number of forms. For example, businesses can establish consortiums to pool resources and submit joint bids. Alternatively, small businesses can sub-contract their services to larger firms that act as primary contractors. You can use the BC Bid website to identify businesses that have won tenders.

	Joint Ventures and Partnering
	Joint Venture Agreement Checklist

Joint Ventures and Partnering

Joint ventures involve two or more businesses pooling their resources and expertise to achieve a particular goal. The risks and rewards of the enterprise are shared.

Your business may have strong potential for growth, and you may have innovative ideas and products. However, a joint venture could offer you more potential, including:

• More resources
• Greater capacity
• Increased technical expertise
• Access to established markets and distribution channels

One option for entering into a joint venture is to agree to co-operate with another business in a limited and specific way. For example, a small business may wish to sell its product through a larger company's distribution network.

Alternatively, you might want to set up a separate joint venture business, possibly a new company to handle a particular contract. A joint venture company like this can be a flexible option. The partners each own shares in the company, and agree how it should be managed.

Partnering has risks as well as rewards. Before entering into a joint agreement, make sure you understand all aspects of your partnership to ensure it works in your best interest.

It is important to obtain proper legal advice on how to develop a joint venture.

Developing a joint venture agreement is a good way to clarify rights, duties and obligations of businesses that decide to work together on large procurement tenders. The nature, size, and complexity of the project will determine the level of detail.

Joint Venture Agreement Checklist
- Points to remember when developing a Joint Venture Agreement -

Agreements

Joint Venture Agreements can play an important role in the formation and implementation of a joint venture. They legally create joint ventures through the process of contract, and identify the major rights, duties and obligations of the participants of the joint venture.

A Joint Venture Agreement identifies:

• the project or object of the joint venture;
• the contribution, role and involvement of each co-venture;
• the terms or duration for which the joint venture will exist;
• the provisions for management and performance of joint venture obligations; and
• allocation of revenues and expenses from the project.

Checklist

The following is a list of points to include and/or consider in developing a Joint Agreement.

• The date the agreement is established and executed.
• Names, addresses and identification of the parties, including the type of business of each member of the joint venture.
• Name under which the joint venture will do business.
• Principal place of business of the joint venture.
• Purpose of the joint venture. If the purpose is to access a specific project, a full description of that project is required.
• Terms of the joint venture: when and how the joint venture is terminated; and, how such items as guarantees, defects, and insurance will be handled after termination.
• A statement that the parties are actually co-ventures for the project whether or not the contract is in the name of all members.
• A declaration that the organization is a joint venture, not a partnership.
• The establishment of a fund by the parties to finance the work, together with the amounts to be contributed by each party, with the fund being deposited in a special bank account under dual control and all progress payments and other revenues being deposited in such account.
• A clause providing that, if additional working capital is required, the parties will proportionally contribute additional funds, as needed and naming the penalty for failure to contribute.
• A declaration of the participation of the parties and percentage in which profits and losses are shared. Usually these percentages are proportional to the contributions to the working fund, but the amount of contribution of funds by parties can be increased or decreased depending on the contributions of equipment or expertise which also must be considered.
• Payment of any fee to the controlling co-venturer or sponsor should be specified; whether a share of the profits in excess of that contemplated is given to the controlling manager or a flat dollar sum is paid.
• If equipment is involved, a specific clause should be inserted especially where the parties contribute varying amounts of equipment.
• The parties to the joint venture should agree to sign all necessary documents relating to the contract, bank loans, bonds, indemnity agreements and the like.
• Control management committee may be determined. A management committee may be established with provision for remuneration. Alternatively one of the co-venturers should be designated as general manger of the project, with authority to bind the joint venture. A provision to clearly define not only the management duties, but all other duties of the co-venturers and procedures to be followed in dealing with unusual situations or problems that may develop.
• A regular meeting schedule should be considered.
• A financial and periodic joint venture and progress reporting procedure should be implemented.
• Establishment of a joint venture bank account, and the appointment of a chartered accountant and lawyer.
• The possibility of the death, bankruptcy or insolvency of a member must be handled.
• The acquisition of equipment and materials by the joint venture and the disposal of such equipment and material either by sale with the proceeds treated as ordinary revenues, or by distributing the funds to the co-venturers on a pro-rata basis.
• Provide for the acquisition of licenses in the name of the joint venture or each co-venturer as required.
• Specify the type of insurance carried by the joint venture and clearly define the liabilities that are to be insured against by each participant.
• Define items which are to be considered as costs to the joint venture for the purpose of determining profit or loss and describe those items which are not reimbursable to members of the joint venture.
• A clause should be included respecting the confidentiality of trade information passed between the co-venturers.
• Ownership or retention of patents, technology, and consultant reports should be addressed.
• Establish the performance security requirements of the project and the bonding obligations of the co-ventures.
• State that undivided pro-rata interests are held by the co-venturers on all assets of the joint venture.
• Restrictions should be considered regarding assignment of co-venturers undivided pro-rata interests in assets of the joint venture.
• Indemnification.
• Substitution or addition of co-venturers.
• Payout of funds.
• Disputes arbitration clause.
• Winding up, final performance and financial statements for the joint venture.
• Notice clause.
• The applicable jurisdiction of the Agreement should be stated.

The nature, size and complexity of the project together with the sophistication of the parties will determine the detail in which the Joint Venture Agreement is prepared and how these components are dealt with. This checklist is meant only as a guide to putting a Joint Venture Agreement together. Appropriate professional services, such as legal counsel, should be utilized.

Talk to our experts: Contact us by phone at (250) 387-7300 or toll-free at 1-800-663-7867 and ask for Procurement and Supply Services OR by email: purchasing@gov.bc.ca.