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Countersign joint venture agreement

hello I'm Adam Harrison today I'm going to briefly discuss bidding through the use of joint venture agreements with current economic conditions forcing contractors to think outside the box to procure new projects I am frequently asked to review and draft joint venture agreements to facilitate an arrangement where two contractors will team up for one or more bid submissions usually I am told that one contractor has the business contact but does not have the bonding capacity or manpower while the other contractor does have bonding capacity or other resources to make the joint approach effective joint venture agreements can be a very effective approach to bid an otherwise unobtainable project however various issues and risks must first be considered and allocated to assure that each contractor is protected for example decisions must be made regarding the formation of the joint ventures legal entity contrary to what many think a new joint venture can be a new company but the joint venture need not be a new company a joint venture can simply be an agreement between two existing companies and given any name that the joint venturers so choose this avoids the requirement of drafting and filing new corporate documents with the state and also avoids the necessity of obtaining new tax identification numbers from the state and the Internal Revenue Service generally speaking if the joint venture is formed to pursue a single job a new JV corporate entity is not required on the other hand to contractors that intend to pursue multiple jobs well into the future they may want to start a new separate company that can be beneficial to start the joint venture as an independent legal entity regardless of the form of joint venture utilized its the risks and responsibilities that each joint venture must address for example consider these issues what will be the degrees of participation by each joint venture er both with respect to overall management and project management which entity will handle the requisition process in cash flow both upstream to the general contractor or owner and downstream two subcontractors and other vendors well a separate bank account be open if not how will funds be tracked and accounted how will the joint venture be capitalized how will requisition payments be allocated in other words what are the priorities of payment both with respect to vendors and between general venture partners especially when requisitions are cut by upstream parties how will profits and losses be distributed and allocated between joint venture partners what are the indemnification provisions what if there is a hit on the payment bond that's posted by only one joint venture partner what about insurance and who provides it and how is that allocated and what are the dispute mechanism vehicles in the event of a conflict all of the above issues should be addressed in a well drafted joint venture agreement one final point worth mentioning is governmental limitations on joint ventures for example this can occur on small business set-aside projects one joint venture may be eligible to bid a small business set-aside project but may not have the resources to handle the project by itself while the other joint venture or does have the resources but is ineligible for the set-aside due to the size of its company the rules and regulations involving so-called affiliation rules can be very technical confusing even to legal counsel for the purpose of this video contractors should be aware of the limitations and requirements associated with joint venture agreements on governmental projects especially when small business set-asides are concerned as always competent legal counsel can assist with the formation of a joint venture agreement and can explain the limitations associated with these types of agreements on governmental projects if you have any questions you can contact me through our website at www.opm.gov/tribalprograms