Joint venture for construction
A joint venture (JV) is a commercial alliance between two or more separate entities that enables them to share risk and reward. A new business is created to which each party contributes resources such as land, capital, intellectual property, skills, credentials or equipment.
Joint ventures are commonly used to:
- Enable smaller companies to deliver large projects by combining their expertise and resources.
- Enable a larger company to acquire new resources or expertise from a smaller company.
- Enable a smaller company to benefit from the credibility and financial stability of a larger company.
- Gain local knowledge in overseas markets.
- To share risks and costs.
Joint ventures are becoming more common, encouraged by initiatives such as PF2 (the most recent iteration of the private finance initiative) and the emergence of very large projects in the Middle East and Asia.
- Limited liability company: creates an entirely separate legal identity from shareholders.
- Partnership: equity is owned by two or more parties who are jointly and separately liable for all of the debts of the business.
- Limited liability partnership: liability for debts is limited to the amount of the investment.
- Contractual agreement.
It is important in structuring a joint venture to properly consider tax issues, particularly on a project such as an institutional Public Private Partnership (PPP) where a joint venture is established by a public authority and a private company which will have very different tax profiles.
In 2012, a report by EC Harris warned that one in five UK construction joint ventures ends in a dispute between the parties (Global Construction Disputes: A Longer Resolution). This was mainly as a result of:
- 'Failure to properly administer the contract.
- Failure to understand and / or comply with its contractual obligations by the Employer / Contractor / Subcontractor.
- Employer imposed change.
- Conflicting party interests.
- Incomplete and / or unsubstantiated claims.'
For joint ventures to function effectively, it is important that:
- There is a shared vision and ethos.
- The structure, resourcing and governance is clear from the outset.
- Efforts are made to build relationships between staff.
- Collaborative practices are in place, and ideally a collaborative contract type.
- The parties adopt common technology platforms.
 Related articles on Designing Buildings Wiki
- Business administration.
- Business model.
- Collaborative practices.
- Company acquisitions in construction.
- Construction organisation design.
- Construction organisations and strategy.
- Partnering and joint ventures
- Special purpose vehicles.
- Types of construction organisations.
 External references
- Construction Manager, Joint ventures, when twos better than one. 2013.
- Conject blog, One in five UK construction joint ventures ends in dispute – what can be done to prevent this?. 2013.
- EC Harris, Global Construction Disputes: A Longer Resolution. 2012.
Featured articles and news
Do you know all the various types of defects in brickwork?
US museum reveals plans for an installation made entirely of paper tubes.
Review of a book looking at how contemporary architecture found its expression within neoliberal capitalism.
The Great Mosque of Djenne, the largest mud-brick building in the world.
Amanda Clack, RICS President offers recommendations to government on Brexit and the construction skills shortage.
Tired of the commute? This architecture firm believes the best solution is to take cars underground.
Why do so many women leave engineering? Probably not for the reason you’re thinking.
For over 30 years David Trench was one of the UK's leading project managers. Read about his career through some of his most famous projects.
Leading institutes join forces calling for property flood resilience measures to help householders avoid repeat flooding.
CITB publish new report calling for the development of new skills standards for offsite construction.
Residents of neighbouring building go to High Court claiming viewing platform infringes their human rights.
If only Easter eggs came as large as this one in a Japanese bird sanctuary.