Joint Venture Agreement (JVA)

A Joint Venture Agreement (JVA) is the internal contract among two or more companies that have formed a joint venture to pursue and execute a procurement contract together, governing each partner's rights, obligations, financial contributions, scope share, and decision-making authority within the JV.

What is a Joint Venture Agreement (JVA)?

A joint venture in procurement brings together companies to bid as a single entity where no one company has all the technical, financial, or geographic capability the buyer requires. The JVA is the private agreement among those companies that structures the collaboration. It defines the lead partner (who signs the contract with the buyer and takes primary liability), the participation shares of each partner, how JV decisions are made (often by a management committee with defined voting thresholds), how costs and revenues are shared, and what happens if a partner defaults or becomes insolvent during the project.

Development banks including the World Bank and ADB explicitly permit JVs in their procurement frameworks. Standard Bidding Documents require JV members to submit a JVA with the bid, or at least a letter of intent to form a JV if the bid succeeds, along with a power of attorney authorising the lead partner to act on behalf of all members. JV members are typically jointly and severally liable to the buyer for the full contract, meaning the buyer can recover against any member for the full obligation regardless of the internal JV shares.

JVAs are distinct from consortium-agreements: a JV typically involves a deeper integration with joint management, pooled resources, and joint liability; a consortium is sometimes a looser arrangement where each member retains separate contractual roles. The epc and ppp sectors routinely require JVs for large package bids because individual firms rarely have the full breadth of capability required.

Why JVAs matter for bidders

Poorly drafted JVAs create costly disputes during project execution. Partners should define clearly who controls which work package, who manages client communications, and how disputes among JV members are resolved (separately from disputes with the client). The JVA should also address the exit of a partner mid-project, including whether the remaining partners can continue, what buy-out rights apply, and how the client must be notified. MDB-financed contracts typically require client consent before any change in JV membership after award.

FAQ

What does "jointly and severally liable" mean for a JV?

It means the buyer can hold any individual JV member responsible for the full contract obligation, not just their share. If one partner fails, the others must cover the gap, which is why partner due diligence before forming a JV is critical.

Can a JV be formed after contract award?

Generally yes, but development bank rules and most standard bidding documents require the JV structure to be declared at bid submission, and any post-award changes in membership require the buyer's and often the bank's prior approval.

Does the JVA need to be submitted with the bid?

Under most MDB and international bidding procedures, a signed JVA or a letter of intent to enter a JVA (if the bid succeeds) must be included in the bid, and the final JVA is required before contract signature.