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CIdb Joint Ventures

HomeCIdb Joint Ventures

CIDB JOINT VENTURE AGREEMENTS

The CIDB as well as other government entities recognize that a number of companies can join to form a joint venture for a number of reasons.

Some of the reasons cited include but are not limited to the following

  • In instances whereby the advertised tender stipulates that a joint venture must be formed.
  • In situations whereby a joint venture shall lead to a higher CIDB rating.
  • Also in circumstances whereby the contract is too large or too complex for one company and that the various specializations and resources will be needed.
  • And lastly but not least, in scenarios whereby the resources of one contractor are insufficient and as a result, they shall be better off if they pool financial & skills resources together.

However, in all incidences, a sound written joint venture agreement must be in place at all times and this is what forms the basis of this article.

JOINT VENTURES FORMED SPECIFICALLY BY TENDER REQUIREMENTS

These are the most common type found within the industry.

They are in fact regulated by the SANS 1914 for the participation of targeted individuals and enterprises.

Joint venture agreements entered into by this agreement must be developed by a professional who understands both the legal & the technical aspects of the SANS 1914.

Employers are interested in looking at the terms & conditions placed within these agreements to determine compliance with preferential as well as targeted participation of enterprises and individuals.

Employers shall scrutinize the contents and pay special attention to the managerial and financial contributions, benefits as well as the liabilities of the targeted individuals and enterprises.

Therefore, with this type of joint venture agreement, it is advisable that a professional who understands the legalities surrounding the construction industry must draft this kind of joint venture agreements.

Failure to do so might lead to a tender disqualification based entirely on the explicit terms contained within.

JOINT VENTURES ENTERED INTO TO SOLVE A COMPLEX PROJECT

The third type of joint venture discussed here is the least popular. It involves the combination of companies in order to pull financial or skills resources together.

However, in my opinion, this objective can also be pulled off with a sub contractor agreement so I see no point in getting into this type of agreement.

Most contractors get into this type of agreement with the objective of bringing in specialists or entities that are better equipped to deal with a specific component of the contract.

For example, the contract might require a company that specializes in demolitions as a specific component whereas the main contractor does not qualify for this line of work.

This type of joint venture agreement can prove valuable and impressive to the employer should it be produced at the bidding phase.

But as I said before, with all joint venture agreements, a written and legally sound document must be produced at all times in line with SAFCEC standards.

Templates of approved contracts can be found by following the link here.

JOINT VENTURES CREATED TO SECURE A HIGHER CIDB GRADE

This is the second most common type of joint venture agreement.

Most companies get into this agreement with companies that are already existing on the CIDB’s database. By using the CIDB’s joint venture combinations calculator , one can determine the potential CIDB level that they can qualify for should they embark on a joint venture agreement of this kind.

For example 3 companies on a grade 2 can form a joint venture to bid on a grade 3 tender. The CIDB does list examples of joint venture agreements that can be formed to yield a higher cidb grade score.

These combinations can be found on their website, under the heading of joint venture agreements.

With these type of agreements, normally government procurement officials shall not be interested in the intricate details of the joint venture agreement, however, its still imperative for the parties to the agreement to develop a joint venture agreement that is in line with the business laws.

The terms in the joint venture agreements must be fair and developed along the lines of the South African Federation of construction and engineering contracts or the international business of construction contracts.

Failure to comply with these minimum requirements might land you in hot waters should a dispute arise between you and the parties to the contract.

The CIDB itself also provides a list of templates which can be used to customize your joint venture agreements.

You can view these resources by clicking here

JOINT VENTURES FORMED TO POOL FINANCIAL RESOURCES

This arrangement also forms part of the least common type of  joint venture agreement.

It also has similarities to a sub contract agreement, however, the main difference is that, in a sub contractor agreement, the risks and rewards of successfully completing the project is born by the main contractor and in most cases, the sub contractor normally brings 100% of his capital resources with the hope that he or she will get paid at the end of a successful job.

In this type of joint venture agreement, financial, skills & other capital resources are pulled together with a speculation in a profit share. Whereas in a sub contractor agreement, the sub contractor may not share in the losses, but in a joint venture agreement, all parties in the agreement might fairly share in the losses as well as the liabilities that might be incurred at the end of the project.

WHAT TO WATCH OUT FOR IN A JOINT VENTURE AGREEMENT

Which ever way you wanna look at it, a joint venture agreement must be in place at all times and all parties must understand the terms and conditions of the agreement.

The agreement must state in full, the financial contributions of each member, the managerial skills as well as labor to be brought by each member.

In addition to this, it must also state the distribution of profits, losses as well as liabilities that might be incurred in the execution of the contract.

Joint venture agreements required by government tender must be entered into in terms of the regulations as contained in the SANS1914.

Other contracts, since the employer does not get involved nor get interested in, can be completed by gentleman’s agreements, however, caution must be exercised properly so that members to the contract are cognizant of the terms and conditions.

But still, they must remain in writing.

WHERE TO FIND COMPANIES WILLING TO GET INTO A JOINT VENTURE?

At Fixonate, we have over 5,000 construction companies willing to get into joint ventures. You can send us an email, to director@fixonate.co.za and we shall be able to send you a list of companies that meet your joint venture arrangement requirements to select from for free.

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