Definition
Joint Venture(JV)
A separate legal entity created by two or more organisations to deliver work.
A joint venture (JV) is a formal business arrangement where two or more organisations combine resources, usually through a jointly owned company, to bid for and deliver a contract together. In procurement, the term is often used loosely alongside consortium, but a true JV typically implies a more permanent, jointly owned structure rather than a one-off bidding arrangement.
Joint venture versus consortium
The terms overlap in everyday procurement conversation, but there is a useful distinction: a consortium is often a looser, contract-specific grouping with a lead bidder, while a joint venture usually involves a dedicated jointly owned vehicle, shared investment, and an ongoing business relationship intended to extend beyond a single bid.
Buyers are generally less concerned with the label than with substance: they want to know who owns and controls the entity delivering the contract, how liability is shared, and whether the arrangement will remain stable for the contract's duration.
Setting up a JV for a bid
Where a joint venture will be used to deliver the contract, the partners typically need a shareholders' agreement covering ownership shares, governance, profit share, exit arrangements and what happens if one partner wants to leave or is bought out. This should be agreed, at least in outline, before the bid is submitted rather than negotiated after award, when the buyer may require evidence the vehicle is ready to contract.
- Shareholders' or members' agreement setting out ownership and governance
- Clear allocation of financial and delivery risk between partners
- A single management structure the buyer can hold accountable
- Financial standing checks carried out on the JV entity itself, not just the parent companies
Common pitfalls
Buyers can be wary of newly formed JV entities with no trading history, since standard financial standing checks (such as turnover and audited accounts) may not exist yet. Bidders should be ready to provide parent company guarantees or evidence of the underlying partners' financial strength to reassure the evaluation panel.
Disputes between JV partners during contract delivery are a recognised risk, so a clear internal governance and escalation process, agreed before submission, reduces the chance of disagreements affecting service to the buyer.
Frequently asked questions
- Is a joint venture always a separate legal entity?
- Not necessarily, but it usually implies a more formal and ongoing structure than a simple consortium, often a jointly owned company or limited liability partnership set up specifically for the purpose.
- Can a new joint venture with no trading history win a public contract?
- Yes, but the buyer will usually want assurance through parent company guarantees, evidence of the partners' individual financial standing, or a performance bond, since the JV itself may not meet standard financial checks on its own.
- Do all consortium bids become joint ventures?
- No, many consortia deliver contracts through a lead-and-subcontractor model without ever forming a jointly owned company. A joint venture is one option among several ways to structure a joint bid.
Related terms