UK: Working With A Joint Venture Or Consortium Contractor: Getting The Best Out Of The Relationship


Joint ventures and consortiums have become increasingly important as a medium through which international contractors can undertake significant projects. As producers, traders and owners seek to expand their infrastructure assets, there has been an increased need to consider engaging or partnering with a joint venture or consortium contractor in order to tap into a particular expertise, or work with companies active within a particular geographical location. This client alert looks at some of the factors to be considered and the risks to be aware of when working with a joint venture contractor or consortium (JVC).

Why consider engaging a JVC?

Where the project and investment is significant, a JVC relationship tends to be the most widely used vehicle through which contractors can establish a presence in a specific jurisdiction for the purposes of undertaking projects or managing business opportunities.

There are a number of commercial benefits to engaging a JVC:

  • Capital intensive: the construction of large energy and infrastructure projects can be too big for a single company to undertake on its own. A JVC allows contractors to pool their capital and assets in order to undertake capital intensive and technically challenging projects without stretching their balance sheet.
  • Risk concentration: the risk profile attached to large projects tends to be such that no single company is prepared to take full exposure.
  • Access to technical expertise: the contractors in a JVC may be leaders in a particular proprietary technology or possess particular expertise which would not ordinarily be found within a single company. Collaboration between complementary skill sets presents a powerful proposition for any owner when considering who to work with on a project.
  • Supply chain efficiencies: the efficiencies of supply chains across long distances may increase by the pooling of assets, know how and networks between the JVC participants.
  • Regulatory requirements: some countries require foreign contractors to partner with local entities if they are to enter into that market. Where local contractors are unable to undertake a project on their own, they are likely to partner with an international contractor with the expertise they do not possess.

Choosing the right JVC

A significant contributor to the success or failure of engaging a JVC on a project is not only its relationship to the owner, but the relationship between the participants within the JVC. Therefore, choosing the right JVC to engage is not only about expertise, size and location of the participants, but also financial strength, legal structure, internal management and control, and corporate culture.

Financial strength

Whilst an initial due diligence of the JVC may reveal a strong financial position, it is necessary to test this against a future position. The risk here is that the aggregation of commitments on a large long term project, or across a portfolio of smaller projects, could stretch their financial resources, thereby hindering their ability to meet their obligations.

Internal management and control

One of the key areas of risk with engaging a JVC is the nature of the relationship between its participants and the level of control each of them wield. The JVC must have strong internal processes and a verifiable track record regarding its ability to deliver projects. A JVC made up of participants with strong corporate governance and a proven track record will have a greater ability to deliver projects on time and within budget. Furthermore, participants with a good reputation may be more concerned with the risk of adverse reputational damage consequent upon a failure to perform.

Prior to engaging a JVC, it is therefore necessary to understand the nature of the agreement between the individual participants. In this regard, it is advisable to request a copy of all JVC and/or co-operating agreements between the participants at the tender stage of the project. Where there are areas which may present risks to an owner, these can be addressed. For example, there may be risks involved where a JVC will be sub-contracting some of its work or engaging key suppliers. In this case, owners should consider whether they want to place certain restrictions upon the ability of the JVC to award contracts to third parties for the performance of the works (e.g. the need for prior owner consent). The aim here is to provide some oversight into the award of contracts and ensure such contracts are let on a transparent basis to the best qualified and most cost effective third party. In circumstances where there are many third party contracts to be awarded and where approval of each award is impractical, provision may be made for owner approval to be required only where the price of the contract award is over a defined value or related to a key element of the project.

Legal structure

The manner in which a JVC operates and is managed depends to a large extent on its legal structure and the depth of integration between participants. Whilst shallow integration may cover a marketing alliance or a joint operating agreement, the in-depth integration approach may (but is less likely to) involve participants transferring businesses and assets to a newly formed project company in exchange for shareholdings, or transferring assets to an existing company in exchange for shares.

Owners should ensure they are provided with sufficient information in order to understand the nature of the agreement between the participants in the JVC. Normally, vis-à-vis the owner, the participants in the JVC will be jointly and severally liable for the performance of the construction contract. The practical effect of this is that an owner may proceed against any one or more of the participants in the JVC for full performance of the project contract (or alternatively, for all its loss or damage arising from a breach or failure by any one of them to perform), irrespective of which of them caused the breach.

A corollary of this is that full performance by one of the participants discharges the liability of the others as against the owner. In such a situation, the participants will normally have rights of recovery against each other.

Sale, transfer or changes within the JVC

The profile of the participants in a JVC may be varied, and can often be made up of industry or technical specialists, suppliers, funders and even government entities. It is not always the case that the departure of one participant spells the end of the collaboration. Where a sale, transfer of interest or other change takes place, the joint venture or co-operating agreements must ensure this can be done smoothly, with minimal disruption to the project. For example, confidentiality agreements vis-à-vis the owner and the JVC or as between the participants themselves must on the one hand protect the commercially sensitive information of the owner, whilst on the other hand facilitate the disclosure of information a would-be entrant would require in order to perform commercial and legal due diligence on the JVC. In circumstances where a sale or transfer may take place between participants, provisions may exist which give the owner the right to question or to block any sale or transfer. However, it is imperative that owners exercise care when using such rights and avoid stifling the internal decision making of the JVC (which may be motivated by genuine commercial or technical factors) or otherwise contribute to destabilising the JVC's ability to fulfil its obligations.

Bait and switch

Where such controls may be useful is in 'bait and switch' situations. In such situations, leading international contractors may collaborate with smaller and less well known companies to bid for a project. The mix of expertise, reputation and experience may induce an owner into choosing this JVC over others. Once the contract is awarded, the leading contractor will take a minimal role while the less well known contractor will take the lead. The bait is the world renowned international contractor leading the project. The switch is the less well known contractor taking the lead once the contract has been awarded.

The main reason for this can be profit. Whilst an owner may be prepared to pay a premium for the involvement of leading expertise, such a premium may not be paid where the contractor is less well known. Once the premium price contract has been awarded, the leading contractor will take a percentage of the premium price and a less prominent role, while the less well known contractor executes the majority of the works for a cheaper price.

In such situations, an owner should have full disclosure of any internal changes of the JVC. Such disclosure should be accompanied by the power to block changes which resemble a 'bait and switch' situation and/or to review the continuation of the contract.

Performance and payment

Working with a JVC contractor comprising a number of participant companies should not affect the owner's important rights and obligations concerning payment and performance security typically found in the construction agreement.

Owners should resist requests for multiple bonds and guarantees being provided by the individual participants in the JVC, especially when the same are to be provided by different banks, on different terms from different (home) jurisdictions.

Owners should require just one bond or guarantee to the required full value from a recognised bank on terms and from a jurisdiction which respects the nature of the security provided by such instruments.

On the same basis, owners should resist requests for separate payments to be made to the JVC participants in respect of the works and services provided. All payments under the construction agreement should be made to one named and nominated bank account of the JVC.

It is the JVC itself that should administer how bonds and guarantees are to be procured on behalf of the participants and the mechanics of how any counter security is given to the issuing banks and in what proportions. The JVC should also be responsible for administering the receipt and disbursement of payments made by the owner to the JVC under the terms of the construction agreement.


JVC's undertaking large construction projects are becoming common place in international contracting. Such commercial relationships are a useful way of gaining the benefits of collaboration between a range of experience and expertise whilst avoiding the risk concentration of reliance on a single company.

However, owners need to be aware of how they might need to adjust the manner in which they approach the project management of a contract in order to address some of the risks associated with working with a JVC. The key to success is:

  • Working with a JVC comprising companies who represent a true blend of necessary expertise and who have a common goal of excellence in project delivery, perhaps based on a long track record of working together.
  • Ensuring the owner is aware of the legal structure and obligations that exist between the JVC participant companies, including their respective work scopes and how the JVC will manage the project and any risks that arise.
  • Ensuring the JVC participant companies are jointly and severally liable for the performance of the construction contract.
  • Ensuring a level of transparency and control in relation to any proposed changes to the make up of, and participants in, or commitment to the JVC.
  • Ensuring, notwithstanding the use of a JVC, clear lines of communication with the JVC for the management of the project, the payment of monies to the JVC for the works undertaken and the provision of the performance security covering the JVC's obligations to deliver the project in accordance with the construction contract.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.