JOINT VENTURE

• It is an agreement in which the parties agree

to develop for a finite time, new assets by
contributing equity.
• They exercise control over enterprise and
consequently share revenues, expenses and
assets, technologies.
• In terms of individuals when two or more
persons come together to form a temporary
partnership for the purpose of carrying out a
particular project, such a partnership is called
joint venture and the parties are called joint
co-venturers.
 SUCCESS OF JOINT VENTURES
• Joint ventures are generally small projects.
• Joint venture have more success rate for small
projects especially for starting projects in a
business.
• Joint ventures are generally adopted when
cost is high when both parties can share the
budget.
• In a joint venture both parties must have an
eye on future partnership along with present
progress.
• To achieve a better partnership honesty and
proper communication are important.
Partner selection
• Screening of prospective partners.
• Short listing a set of prospective partners and
some sort of ranking.
• Checking the credentials of the other party.
• Availability of appreciated or depreciated
property contributed to the joint venture.
 COMPANY INCORPORATION
• Foreign investor buying an interest in a local
company.
• Local firm acquiring an interest in an existing
foreign firm.
• Both the foreign and local entrepreneurs
jointly forming a new enterprise.
• Together with public capital and/or bank debt.
 TYPES OF JOINT VENTURES
EQUITY JOINT VENTURE
The partners share profits, losses and risk in
equal proportion to their respective
contributions to the venture's registered
capital.
CO-OPERATIVE JOINT VENTURE
• A Co-operative JV does not have to be a legal
entity.
• The partners in a CJV are allowed to share
profit on an agreed basis, not necessarily in
proportion to capital contribution.
• A CJV could allow negotiated levels of
management and financial control.
 MARKET INFORMATION ON
CONSTRUCTION CONTRACT
CONTRACT DEFINITION
An agreement between two or more
parties representing a promise to be
performed for consideration.
Necessary Parts of a Typical Construction
Contract:
• Parties identified.
• Parties make promises that constitute an offer.
• Both parties sign the contract.
• Both parties receive consideration.
• Parties of the contract must have the legal
authority to negotiate a contract.
Contractual Relationships
• Agreement between the owner and
contractor is the primary construction
contract.
Conditions of the Contract
• Define basic rights, responsibilities, and
relationships of the parties involved in the
construction process in greater detail.
Methods of Contractor Selection
• Competitive Bidding.
• Direct Selection.
Competitive Bidding
• Objective is to ensure that the cost of the project
is reasonable and consistent with existing
conditions in industry.
• Publicly funded projects – owner required to
select lowest bidder.
• Private projects – owner may also consider the
bidders’ qualifications, experience, financial
condition, and performance history.
Direct Selection
• Owner, with advice from the A/E selects
contractor – total price and method of
payment is then negotiated.
• This method is generally not allowed for
public projects.
 3 Decisions Made in Determining
Kind of Contract.
• Number of contracts.
• Contract type.
• Basis of payment.
Number of Contracts
• Single Prime Contract Most common, uses
competitive bidding.
• Multiple Prime Contract Owner divides the
work among several contractors & has
separate contract with each of them.
Example: Paving, foundation.
CONTRACT TYPE
• Design-Bid-Build.
• Design-Negotiate-Build.
• Construction Management.
• Design-Build.
• Owner-Build.
• Construction Subcontracts.
• Total Project Commissioning.
3 Types of Basis of Payment
• Stipulated Sum.
• Unit Price.
• Cost-Plus Fee.
Stipulated Sum
• Simplest method used.
• States that the contract requirements will be
completed for a given amount of money.
Unit Price
• Used when the extent of work or actual
quantities can not be determined when bids
are made (earthwork is such an example).
• Many civil engineering projects use unit price
type of payment.
• With unit price, the owner pays for exactly
what is documented as done after the work
has been completed.
Cost-Plus Fee
• Contractor paid for actual cost of labor plus a
fee for overhead and profit.
• Fee may be a percentage of the labour &
material cost or a fixed amount.
• Cost-Plus Fee agreements may also include
incentives for early completion.