{"id":30206,"date":"2025-04-30T04:11:19","date_gmt":"2025-04-30T11:11:19","guid":{"rendered":"https:\/\/essential.construction\/news\/how-contractors-can-mitigate-the-risks-of-joint-ventures\/"},"modified":"2025-04-30T04:11:19","modified_gmt":"2025-04-30T11:11:19","slug":"how-contractors-can-mitigate-the-risks-of-joint-ventures","status":"publish","type":"post","link":"https:\/\/essential.construction\/news\/how-contractors-can-mitigate-the-risks-of-joint-ventures\/","title":{"rendered":"How contractors can mitigate the risks of joint ventures"},"content":{"rendered":"<p> [ad_1]<br \/>\n<\/p>\n<div>\n<div class=\"text-to-speech\">\n    <button class=\"text-to-speech__button button\"><\/p>\n<p>            <img decoding=\"async\" class=\"text-to-speech__button__icon\" src=\"https:\/\/www.constructiondive.com\/static\/images\/audio_icon.svg?482016190122\" alt=\"-\"><\/p>\n<p>        Listen to the article<br \/>\n        <span class=\"text-to-speech__button__audio-length\">6 min<\/span><br \/>\n    <\/button><\/p>\n<div class=\"text-to-speech__controls\">\n        <audio controls=\"\" class=\"js-text-to-speech\" preload=\"none\"><source src=\"https:\/\/res.cloudinary.com\/dmgi9movl\/video\/upload\/q_1\/v1745944261\/news\/text_to_speech\/contractors-mitigate-risk-joint-ventures_jzcvaj.wav\" type=\"audio\/mp3\"><\/source><\/audio><\/p>\n<div class=\"text-to-speech__controls__text\">\n            This audio is auto-generated. Please let us know if you have <a rel=\"nofollow noopener\" href=\"https:\/\/www.constructiondive.com\/contact\/\" target=\"_blank\">feedback<\/a>.\n        <\/div>\n<\/p><\/div>\n<\/div>\n<p><em>This feature is a part of \u201cThe Dotted Line\u201d series, which takes an in-depth look at the complex legal landscape of the construction industry. To view the entire series,\u00a0<\/em><a rel=\"nofollow noopener\" href=\"https:\/\/www.constructiondive.com\/news\/the-dotted-line-everything-you-need-to-know-about-construction-contracts\/566539\/\" target=\"_blank\"><em>click here<\/em><\/a><em>.<\/em><\/p>\n<p><span><span><span><span><span><span>Crews placed the final steel beam atop the <\/span><\/span><\/span><\/span><\/span><\/span><a rel=\"nofollow noopener\" href=\"https:\/\/www.constructiondive.com\/news\/buffalo-bills-stadium-top-out\/744701\/\" target=\"_blank\"><span><span><span><span><span><span><span>$2.1 billion Buffalo Bills stadium<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/a><span><span><span><span><span><span> in Orchard Park, New York, last month, a project overseen by a joint venture between Gilbane and Turner. In Los Angeles, a JV led by Stacy and Witbeck, Flatiron West and Modern Railway Systems also recently broke ground on the<\/span><\/span><\/span><\/span><\/span><\/span><a rel=\"nofollow noopener\" href=\"https:\/\/www.constructiondive.com\/news\/la-breaks-ground-g-line-busway\/744370\/\" target=\"_blank\"><span><span><span><span><span><span><span> $668 million G Line busway overhaul<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/a><span><span><span><span><span><span>.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>These two projects are just the latest examples of how joint ventures are being used to deliver complex, multibillion-dollar projects across the country. By forming a JV, firms can combine resources to take on a single project together.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>That allows the partners to pool bonding capacity, manpower and technical expertise. Such collaboration is gaining traction as project size and complexity continue to grow, said Mason Hester, attorney at Dallas-based Munsch Hardt.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<figure class=\"inside_story\">\n<div class=\"figure_content\">\n<div><img decoding=\"async\" alt=\"Aerial view of construction workers and equipment starting work on the G Line bus rapid transit line in Los Angeles.\" data-imagemodel=\"177004\" src=\"https:\/\/imgproxy.divecdn.com\/yTazYhiC5kB5K1rpL57Vsq6qoaVQQ-GbEZJB0q3Plr4\/g:ce\/rs:fit:1600:0\/Z3M6Ly9kaXZlc2l0ZS1zdG9yYWdlL2RpdmVpbWFnZS9ESklfMDE5NS5KUEc=.webp\"\/><\/div>\n<\/div><figcaption class=\"inside_story_caption\">\n<p>Crews with Valley Transit Partners, a joint venture, start construction on the G Line busway overhaul project in the San Fernando Valley on March 28, 2025, in Los Angeles, Calif.<\/p>\n<p>Courtesy of LA Metro<\/p>\n<p>\u00a0<\/p>\n<\/figcaption><\/figure>\n<p><span><span><span><span><span><span>\u201cAs one example I\u2019ve seen on massive DOT projects where a payment and performance bond is required with a very high dollar amount for the bond\u2019s penal sum, it would be very difficult to find a single prime contractor with the bonding capacity to furnish such a bond,\u201d said Hester.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<figure class=\"image-right inside_story\">\n<div class=\"figure_content\">\n<div><img decoding=\"async\" alt=\"headshot of Mason Hester\" data-imagemodel=\"178242\" src=\"https:\/\/imgproxy.divecdn.com\/gVHpO2qGtjKc_9-KzLjSqJimWF8vkf0ZdWp8eZHT5ks\/g:nowe:124:0\/c:536:671\/rs:fit:0:860\/Z3M6Ly9kaXZlc2l0ZS1zdG9yYWdlL2RpdmVpbWFnZS9IZXN0ZXJfTWFzb25fV2Vic2l0ZS5qcGc=.webp\"\/><\/div>\n<\/div><figcaption class=\"inside_story_caption\">\n<p>Mason Hester<\/p>\n<p>Courtesy of Munsch Hardt<\/p>\n<p>\u00a0<\/p>\n<\/figcaption><\/figure>\n<p><span><span><span><span><span><span>These agreements, however, must be carefully structured to avoid costly disputes and should spell out the specific roles each participant will play in order to maximize chances of success, attorneys say.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>In one case that Hester handled, for example, a vague contract sparked an expensive legal battle over whether the disagreement should be handled in court or through arbitration, and whether the joint venture\u2019s officers were subject to those same terms. That kind of ambiguity, he said, could have been avoided with clearer language from the outset.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>\u201cA well-drafted JV agreement can often eliminate, or at least significantly reduce, the confusion, headaches and legal expenses that can result from a poorly drafted JV agreement,\u201d said Hester.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<h3 class=\"standard-heading\"><span><span><span><strong><span><span>Who does what?<\/span><\/span><\/strong><\/span><\/span><\/span><\/h3>\n<p><span><span><span><span><span><span>A strong JV contract should begin with clearly defining the roles of each firm.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>Most JVs are governed by a Joint Venture Agreement, or JVA, that outlines profit splits, scopes of work, dispute resolution processes and exit strategies, said David Podein, partner with Miami-based Haber Law. In some cases, especially on real estate-heavy developments, a letter of intent comes first to hammer out initial terms before a formal agreement is drawn up.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>\u201cThe roles should not be left to be determined once the company is formed,\u201d said Podein. \u201cThe determination on roles and responsibilities takes place during the negotiation stage.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>On construction-focused JVs, the split often depends on complementary skills, said Laura Fraher, partner at Barclay Damon, a Buffalo, New York-based law firm. One firm may bring geotechnical engineering knowledge while the other provides general construction capacity.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<figure class=\"image-right inside_story\">\n<div class=\"figure_content\">\n<div><img decoding=\"async\" alt=\"headshot of Laura Fraher\" data-imagemodel=\"178244\" src=\"https:\/\/imgproxy.divecdn.com\/q2PPYwXWo5c9RD5oxA17RvcWX3A7Gb4SPYTzcDe_wyA\/g:nowe:0:40\/c:1199:1499\/rs:fit:0:860\/Z3M6Ly9kaXZlc2l0ZS1zdG9yYWdlL2RpdmVpbWFnZS9GcmFoZXJfTGF1cmFfQmFyY2xheURhbW9uLmpwZw==.webp\"\/><\/div>\n<\/div><figcaption class=\"inside_story_caption\">\n<p>Laura Fraher<\/p>\n<p>Courtesy of Barclay Damon<\/p>\n<p>\u00a0<\/p>\n<\/figcaption><\/figure>\n<p><span><span><span><span><span><span>\u201cMany times a joint venture is formed between two parties because they have different areas of expertise and in those circumstances the division of labor is quite obvious,\u201d said Fraher. In circumstances where the division of labor isn\u2019t so apparent, \u201cthe work should be divided cooperatively between the parties based on considerations such as strategy, respective strengths and availability of resources,\u201d Fraher said.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<h3 class=\"standard-heading\"><span><span><span><strong><span><span>Will you marry me?<\/span><\/span><\/strong><\/span><\/span><\/span><\/h3>\n<p><span><span><span><span><span><span>This dynamic is why JVs are often referred to as a \u201cmarriage of convenience,\u201d said Hester. But like a romantic union, those partnerships do not always go smoothly.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>\u201cSo much of this can come down to the personalities and approaches of the management and their ability, or lack thereof, to have an approach of working together with their other JV members,\u201d said Hester. \u201cAs opposed to throwing the other JV member under the bus.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<section class=\"storylines-carousel-wrapper hide-small show-large\" id=\"desktop-carousel\"\/>\n<p><span><span><span><span><span><span>Because the JV is often jointly and severally liable for issues that arise during the project, owners do not need to prove which partner was at fault \u2014 just that the JV made a mistake. So, if one member points fingers, it opens the door for the owner to hold the entire JV accountable.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>\u201cIt is up to the JV members to figure out which one of them is responsible for some or all of that payment,\u201d said Hester. \u201cThe allocation of which is hopefully detailed in a well-crafted JV agreement.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<h3 class=\"standard-heading\"><span><span><span><strong><span><span>Deadlock resolution tools<\/span><\/span><\/strong><\/span><\/span><\/span><\/h3>\n<p><span><span><span><span><span><span>To avoid these scenarios, many JV contracts include tiered resolution processes, such as requiring senior leaders to meet before escalating to mediation or arbitration, said Podein. Some also establish internal review boards composed of company executives, said Trent Cotney, partner and construction team co-leader in the Tampa, Florida, office of Adams &amp;\u00a0Reese.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<figure class=\"image-right inside_story\">\n<div class=\"figure_content\">\n<div><img decoding=\"async\" alt=\"headshot of David Podein\" data-imagemodel=\"178246\" src=\"https:\/\/imgproxy.divecdn.com\/mCgx7PxV1bLXVsFzO68ZU02J90rFwNhcp2Mq-j-J94g\/g:nowe:78:108\/c:995:1244\/rs:fit:0:860\/Z3M6Ly9kaXZlc2l0ZS1zdG9yYWdlL2RpdmVpbWFnZS9EYXZpZF9Qb2RlaW5fLV9IYWJlcl9MYXdfLV8wMzg2LmpwZw==.webp\"\/><\/div>\n<\/div><figcaption class=\"inside_story_caption\">\n<p>David Podein<\/p>\n<p>Courtesy of Haber Law<\/p>\n<p>\u00a0<\/p>\n<\/figcaption><\/figure>\n<p><span><span><span><span><span><span>\u201cWe spend a lot of time upfront ironing out command and control and reflect that in the contract,\u201d said Cotney. \u201cThe goal is to be fast and efficient.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>Boards like these are especially important on 50\/50 ventures, where deadlocks are more likely. For that reason, Cotney said these agreements must have a clear deadlock resolution provision. <\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>Well-crafted JV agreements often include buy-sell provisions, allowing one party to buy out the other in the event of a deadlock, said Podein.\u00a0<\/span><\/span><\/span><\/span><\/span><\/span><span><span><span><span><span><span>Other key clauses include terms governing capital calls, profit sharing, bonding responsibilities and termination procedures.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<p><span><span><span><span><span><span>With design-build delivery methods and massive megaprojects on the rise, joint venture contracts are not going away anytime soon, said Fraher. To work best, parties must establish rules early, and meet responsibilities consistently.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<section class=\"storylines-carousel-wrapper show-small hide-large\" id=\"mobile-carousel\"\/>\n<p><span><span><span><span><span><span>\u201cJoint ventures are becoming more common as projects are growing in complexity and scope,\u201d said Fraher. \u201cThe most important thing is that the division of labor is agreed to clearly in advance and is well-documented to avoid any future disputes.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<\/p><\/div>\n<p>[ad_2]<br \/>\n<br \/><a href=\"https:\/\/www.constructiondive.com\/news\/contractors-mitigate-risk-joint-ventures\/746485\/\" rel=\"nofollow noopener\" target=\"_blank\">This article was originally posted at Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>[ad_1] Listen to the article 6 min This audio is auto-generated. 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