JOINT

VENTURES
IN CONSTRUCTION
Third Edition

by

RICHARD W. MILLER
Miller Law Firm
4310 Madison Avenue
Kansas City, Missouri 64111
(816) 531-0755

Published by:
National Association of Surety Bond Producers
1828 L Street, N.W., Suite 720, Washington, DC 20036-5104
Tel (202) 686 3700
 TABLE OF CONTENTS

Chapter

1. Introduction 1

2. Checklist of Items to be Included in a Joint Venture Agreement.. 2

3. Pre-Bidding Joint Venture Agreements 3

Form A. Declaration of Joint Venture Agreement 5

Form B. Short Form Pre- Bidding Agreement 6

Form C. Long Form Pre-Bidding Agreement.. 8

Form D. Pre-Bidding Agreement for an Item Joint Venture .12

Form E. Pre-Bid Joint Venture Agreement With a DBE 14

4. Joint Venture in Which All Venturers Are Named in the Contract and the Bond .15

Form F. Joint Venture Agreement (All Members Are Disclosed) 16

5. Joint Venture With a Disadvantaged Party or a Party Who is not Financially

Responsible But Who Has an Interest in Excess of Fifty Percent 23

Form G. Joint Venture Agreement With a Disadvantaged Party 24

Form H. Financial and Management Assistance Agreement 31

6. Section 8(a) Arrangements .33

Form J. Teaming Agreement 35

7. Silent Joint Venture : 44

Form K. Pre-Bid Silent Joint Venture Agreement.. ..45

Form L. Silent Joint Venture Agreement .46

8. Contribution Bonds (Cross Indemnity Bonds) Between Joint Venturers ..49

Form M. Form Guaranteeing Obligation of Co-Venturer Principal

to Advance His Share of Contributions 50

Form N. Form Guaranteeing Obligation of Co-Venturer Principal

to Reimburse Other Venturers for Share of Ultimate Loss .51

9. A Plan for Cooperation Between Insurance Agents/Brokers on a Joint Venture Project.. 53

 Chapter 1

Introduction

A joint venture has been There is no limitation of liability as 5. It increases the ability to bid
described in many ways with many between the joint venture and the more projects and thereby
elements and purposes. For the pur­ owner and, if there is a default by spreads bonding capacity in pro­
pose of this discussion a joint any member of the joint venture, the portion to each member's
venture is a combination of two or remaining financially responsible interest in the joint venture.
more persons to carry out a single members of the joint venture are 6. It enables bids to be submitted
business enterprise or a series of busi­ required to complete the job. on major projects which other­
ness enterprises for profit, during Even with the risk that one mem­ wise one contractor could not do
which the parties combine such ber of the joint venture may have to alone.
items as property, money, skill and satisfy a greater percentage of the
knowledge to achieve such purpose. 7. It enables a pooling of talent,
loss than originally contemplated, resources, equipment, men and
The amount of money, equipment there are certain advantages to a
and property is normally either con­ financing with the other mem­
joint venture in construction: bers of the joint venture.
tributed equally or in specific
percentages, but there is no way to 1. It spreads the risk among the 8. It encourages future business
measure accurately the skill and members in proportion to each with members of the joint ven­
knowledge which each party brings member's interest in the joint ture.
to the joint venture. venture (although one member
may be liable in full to the owner 9. It keeps capital working.
Substantially the same rules which if another member of the joint 10. It allows a member to increase
are applicable to members of a part­ venture defaults). his area of operation and exper­
nership apply to members of a joint tise.
venture. One venture member can 2. It combines specialized abilities.
bind his associates by a contract 3. It increases the accuracy of bid The following sections will discuss
which is in furtherance of the enter­ estimates and permits members some of the ways in which to joint
prise or within the scope of activity to compare estimates with the venture, the risks inherent in certain
of the enterprise. Each venturer in a other members of the joint ven­ methods, and possible ways to mini­
true joint venture is liable for the ture. mize such risks. •
performance of the entire contract 4. It permits using a contractor

and the payment of all labor, materi­ with local knowledge.

al, equipment and other obligations.

 Chapter 2

Checklist of Items To Be Included

In a Joint Venture Agreement

Although every joint venture contributions to the working 15. The acquisition of equipment
agreement should be specifically pre­ fund, but the amount of contri­ and materials by the joint ven­
pared for each project, the following bution of funds by parties can be ture and the disposal of such
are common provisions which should increased or decreased depending equipment and material, either
be included or at least considered for on the contribution of equipment by sale with the proceeds treated
inclusion in such agreements: to the project. as ordinary income, or by distrib­
1. The date on which the agree­ 9. Payment of any fee to the con­ uting them to the parties.
ment is established and executed. trolling joint venturer or sponsor 16. The acquisition of licenses in the
2. The names, addresses and identi­ should be specified whether mea­ name of the joint venture or each
fication of the type of business sured as a share of the profits in venturer as required.
form of each member of the joint excess of that contemplated or as 17. The joint venture agreement
venture. a flat do llar sum. should clearly define what liabili­
3. The name under which the joint 10. If equipment is involved, a spe­ ties are to be insured against by
venture shall do business. cific clause should be inserted, each participant.
especially where the parties con­ 18. Items which are to be considered
4. A full description of the project.
tribute varying amounts of as costs to the joint venture for
5. A statement that the parties are equipment. the purpose of determining profit
actually joint venturers for the or loss, and those items which are
11. The parties to the joint venture
project, whether or not the con­ not reimbursable to members of
should agree to sign all necessary
struction contract is in the name the joint venture should be
documents relating to the con­
of all members. detailed.
tract, bank loans, indemnity
6. The establishment of a fund by agreements and the like. 19. When and how the joint venture
the parties to finance the work, 12. Designation of one of the joint is terminated and how such items
together with the amounts to be venturers as the general manager as guarantees, defects and insur­
contributed by each party with of the project with authority to ance will be handled after
the fund being deposited in a spe­ bind the joint venture, should be termination.
cial earmarked bank account,
included with a provision clearly 20. The state under which the provi­
under dual control, and with all
defining not only the managerial sions of the joint venture
progress payments and other
duties, but all other duties of the agreement will be interpreted
income being deposited in such
parties and procedures to be fol­ should be designated.
account.
lowed in dealing with unusual
It is essential that any joint ven­
7. A clause providing that, if addi­ situations or problems that may
ture agreement be tailored specif­
tional working capital is required, develop.
the parties will proportionally ically to the project involved, the
13. Items to be charged to the job needs and desires of each member,
contribute additional funds, as and the arrangements for a sepa­
needed, and spelling out the the degree and type of participation
rate set of books kept by an of the members thereof, the law of
effect of a failure of any member outside Certified Public Accoun­
to contribute. the state governing the joint venture,
tant should be specified. and the performance of the work
8. A declaration of the participa­ 14. A provision to handle the ramifi­ contemplated.
tion of the parties and the cations of the incapacity, death, This checklist and the agreements
percentages in which profits and bankruptcy, or insolvency of a which follow have been prepared
losses are shared should be set member must be added to the with these factors in mind and should
forth. Usually these percentages joint venture agreement. be used merely as gUides. •
are the same percentages as the

 Chapter 3

Pre-Bidding Joint Venture Agreements

The following forms relate to pre­ parties so desire. This agreement agreement to be performed by each
bidding agreements by a joint does have the distinct advantage of such member. In a typical item joint
venture. Form A is a Declaration of being short and confining itself to venture none of the work is done by
Joint Venture Agreement where the the basic understandings, which the the joint venture as such, but instead
bid is submitted solely in the name of parties should resolve prior to sub­ it is done by the respective members
one party and which has as its basic mitting a bid, but at the same time of the joint venture. The profit mar­
purpose the assurance between each the agreement does not overburden gin is built into the bid items
party to the joint venture and assur­ the parties with the many minute themselves, and thus the joint ven­
ance to the surety that the surety details of a full scale joint venture ture itself will not be disbursing
knows all the parties to the joint agreement. If the parties cannot profits to the venturers. Each ventur­
venture and that, if the bid is accept­ agree on the items in this agreement, er will profit or will sustain losses
ed and a contract awarded, each of then it is questionable that a joint based on how successful each is with
the parties, as joint venturers, will venture bid should be submitted. the item work allocated to them.
perform the contract, will execute For those who would want to Since the venturers are jointly liable
the application of the surety for any combine a pre-bid agreement with to the owner and third parties for all
required bonds, and will indemnify all the terms of a joint venture agree­ the work, each venturer in Paragraph
the surety as though each was named ment and thus avoid any after bid 8 of the form of item joint venture
as a principal in the contract and any negotiating, Form C is suggested as a agrees to indemnify the other from
bond. possible model. It also contains pro­ any losses or claims pertaining to the
Form B accomplishes the same visions, such as in paragraph 6, work allocated to each.
purpose as the Declaration but it also which some might consider result in In some item joint ventures the
goes far beyond the declaration by a more "harsh" treatment of a mem­ work is subcontracted to the respec­
setting forth the basic working rela­ ber of the joint venture who does not tive venturers, but this is a matter of
tionship between the members of the meet his financial and other obliga­ choice among the venturers them­
joint venture and designating such tions. The individual members of selves keeping in mind certain
items as the percentage involvement each respective joint venture must contractual requirements which may
of each member; the sponsor or man­ determine whether they would like require a certain percentage to be
aging party; the method of handling to utilize the concepts contained in done by the joint venture itself.
purchases, rentals, subcontracts and this agreement or those contained in Form E is a pre-bidding agreement
equipment; and the termination of a the joint venture agreement in with a disadvantaged party. This
member's interest on the happening Chapter 4. form recognizes the need for a full­
of certain financial difficulties. This The fourth Pre-Bidding length joint venture agreement
form contemplates and so states in Agreement (Form D) covers a short because of the uniqueness of the
Paragraph 14 that a joint venture form of an item joint venture in arrangement. •
agreement more specifically desig­ which each member of the joint ven­
nating the respective interests of ture is solely responsible to perform
each party will be entered into if the those bid items designated in the

 FORMA

Declaration of Joint Venture Agreement

This Declaration made and entered into this _ in the same manner and to the same extent as if
day of , 199 by and they, and each of them, were named as principals in
between _ said contract and in said bond(s}.
(hereinafter called
4. An original executed copy of this Declaration shall
"Contractor") and _
be furnished to said surety by the joint venturers,
- - - - - - - - - - - - - (hereinafter called who agree that its terms and obligations constitute
"Venturer") who hereby agree as follows:
one of the inducements to said surety to provide said
bond(s}.
1. A bid has been submitted or is to be submitted in the
name of Contractor to _
5. This Declaration shall, in all its terms and obliga­
(hereinafter called "Owner") for
tions, in addition to being for the benefit of said
construction of --------------
surety, be also for the benefit of any other surety or
sureties joining with said surety in executing said
Such bid is for and on behalf of said Contractor and
bond(s} as well as any surety or sureties assuming
Venturer who hereby declare that they are joint ven­
reinsurance thereupon.
turers in the submission of said bid, notwithstanding
the fact that the proposal is being made in the name In Witness Whereof, the parties have executed this
of Contractor alone. Declaration this _ _ day of _
19_
2. If the bid of Contractor is accepted and a contract
awarded, the parties hereto as joint venturers will
perform said contract and will share in the profit or Signed
loss which may result therefrom in the proportions
that their several interests bear to the whole.

3. If a bid bond or a performance bond or labor and

material (payment) bond, or both, are required to be
furnished in connection with said contract, then the
parties hereto as joint venturers, and each of them,
will execute the customary application and indemni­
fication agreement of the surety providing such
bond(s}, obligating themselves thereby severally and
jointly to perform, abide by, and be subject to, all the
agreements in said application contained and in
addition to indemnify and save harmless said surety

 FORM B

Short Form Pre-Bidding Agreement

This Pre-bidding Agreement entered into as of this - - -%

_ _ day of , 199_ _ by and

--_%

between the following parties: _

--_%

and
- - -%

5. The undersigned jointly shall execute (with each of

WITNESSETH: the undersigned designating its own broker for its
portion of the bond) any and all indemnity agree­
Whereas the parties hereto desire to submit a joint
ments required by the surety or sureties on any
bid to _
bonds furnished in connection with the award or
(hereinafter referred to as the "Owner"), for the con­
performance of any such contract and each shall
struction of _
assume and bear its proportionate share (as desig­
(herein called the "Work").
nated in paragraph 4 above) of any loss which may
Whereas, the parties each hereby certify and repre­ result therefrom, and each of the undersigned shall
sent to each other their ability to provide their contribute, when and as required, its ratable portion
respective share of bonding capacity, finances, person­ of all amounts needed for working capital, tools,
nel, equipment and supervision to complete the work in equipment and other items required for the perfor­
the event they are the successful bidder and to sustain mance of the Work.
and pay for any losses that may be incurred;
6. All expenses incurred by the parties hereto, or any
NOW THEREFORE, it is hereby agreed between the of them, in estimating and preparing the contem­
parties hereto as follows: plated bid shall be borne separately by each of the
parties and shall in no manner be considered as a
1. They will jointly prepare a bid to be submitted to

part of the construction cost of the Project in the

the Owner for a contract for the Work.

event the Work is awarded to the joint venture.

2. The bid shall be submitted in the names of the
7. In the event that no agreement is reached by the
undersigned as joint venturers and should a con­
parties hereto as to the amount of the bid to be sub­
tract for said Work be obtained as a result of such
mitted or if such agreement is reached and a bid is
bid, such contract shall be taken in the names of
submitted but no contract is offered or awarded to
the undersigned, as joint venturers, or in such other
the joint venture, then this Agreement shall be of
name as may be agreed upon by the undersigned
no further force and effect and any joint venture
with the consent and approval of the Owner.
relationship or joint venture between the parties for
3. Each and every obligation created by any such bid said Project shall automatically terminate.
or contract shall be the joint and several obligation
8.
of the undersigned.
shall be the Managing Party of the joint venture,
4. The interest of the undersigned in any such con­
subject, however, to the superior authority and con­
tract, if obtained, and in the Work shall be as
trol of the joint venturers. The Managing Party
follows:

6
 shall have direct charge over and supervision of all 12. In the event that during performance of the contract
matters necessary to, and connected with, the per­ any party shall become insolvent or bankrupt or take
formance of said contract. The undersigned shall, if advantage of any bankruptcy arrangement or debtor
necessary or advisable, execute and deliver to the statute in force at the time, said party shall cease to
Managing Party or a project manager designated by have any voice in the joint venture from and after
the Managing Party from time to time a power of that date, but the liability and responsibility of that
attorney sufficiently broad to enable said Managing party to the others shall continue in full force and
Party, or the project manager or both, to perform effect.
properly and promptly such duties and responsibili­
13. This Pre-bidding Agreement is limited and relates
ties.
solely to the Work and to any additions thereto or
9. Any profits or gains arising from the performance of modifications thereof and to no other, and upon the
the contract shall be apportioned to all the parties completion of the Work and its acceptance by the
in the same proportions as set forth in paragraph 4. Owner and the performance of all obligations of the
In the event of any losses arising from the perfor­ undersigned under such contract, a final accounting
mance of the contract, each party shall assume and and settlement shall be made by and among the
pay its full proportionate share as such proportions undersigned and thereupon this agreement shall ter­
are fixed by paragraph 4. minate and come to an end.

10. Incident to the performance of the contract, the 14. Upon being awarded a contract for the Work, the
Managing Party, directly or through the project undersigned, if requested to do so by the Managing
manager acting for it at the time, may deliver, in Party, will enter into a Joint Venture Agreement
the name and on behalf of the joint venture, such more specifically defining their respective interest
purchase orders, rental agreements, subcontracts in, and obligations under, such contract as among
and other agreements for the acquisition of materi­ themselves, and providing a practical method for
als, labor, equipment, facilities and work as the their collaboration and cooperation in performing
Managing Party may deem necessary or advisable. the Work. Such agreement shall incorporate all of
the provisions contained in this Pre-bidding
11. Incident to the performance of the contract, equip­
Agreement, as well as others deemed proper and
ment may be rented from any member of the joint
advisable. Until and unless a Joint Venture
venture, including the Managing Party, at fair and
Agreement is so executed, the provisions hereof
reasonable rates. Upon completion of the project,
shall constitute the sole and only agreement of the
the Managing Party will secure a bona fide bid for
parties concerning said Project.
each item or group of items of equipment purchased
by, or for, the joint venture, from one or more rep­ In Witness Whereof, the parties have executed
utable equipment dealers, and each of the parties this Pre-Bidding Agreement this day of
shall have the right to purchase any item or group 19
of items, at the highest prices bid therefor by such
dealers, but no party without the prior written con­
sent of all other parties shall be entitled to purchase
By ~ _
any greater percentum of such equipment than the
percentage of its interest in the joint venture. All
equipment not so disposed of shall be sold by the
Managing Party for the best price obtainable to
By _
such dealers or other outsiders.

 FORMe

Long Form Pre-Bidding Agreement

This Agreement, executed this day of ing in other business for its own respective account.
, 19__ , by and between
2. The parties will prepare, execute and submit a bid
____________________ , and
for the performance of the Contract in an amount
or amounts and on terms mutually agreed upon
is made with reference to the following:
between the parties prior to its submission, and will
Whereas, _ execute and submit all bid bonds required in con­
(hereinafter called "Owner") has invited bids for the nection therewith. The bid shall be made in the
construction of _ names of the parties or under a mutually agreed
_ _ _ _ _ _ _ _ _ _ (hereinafter called "Project") upon fictitious name.
and has had prepared Plans, Specifications and
3. Unless otherwise mutually agreed in writing, all
Addenda thereto, if any (herein called the "Contract");
costs and expenses incurred in connection with the
and
preparation of the bid, the submission of the bid
Whereas, the parties hereto intend by this agreement
and all other matters up to the date of the award of
(i) to constitute themselves a joint venture to submit a
the Contract shall be borne by the party which
bid for the performance of the Contract, and if the
incurred the same.
Contract is awarded to the joint venture, to perform the
Contract, and (ii) to specify their respective rights and 4. The parties hereby jointly and severally appoint and
obligations between themselves with respect to the sub­ constitute and
mission of the bid, the performance of the Contract, the
- - - - - - - - - - - - - - - and each of
manner in which the profits or losses therefrom shall be them, as their true and lawful attorneys-in-fact,
shared or borne and all other matters pertaining to the with full power and authority to act, severally for,
joint venture. and on behalf of, the Joint Venture, and each of the
parties hereby ratifies and confirms the signature of
NOW THEREFORE, the parties agree as follows:
either of said attorneys-in-fact on any said docu­
1. The parties hereby constitute themselves a joint ments as the act and deed of the Joint Venture and
venture (the "Joint Venture") for the sole and each of the parties.
exclusive purpose of submitting a bid for the perfor­
5. Except as is otherwise provided in Paragraphs 3,6
mance of the Contract and, if the Contract is
and 13 hereof, the parties shall share the profits or
awarded to the Joint Venture, of performing the
bear the losses of the Joint Venture and shall own
Contract. The Joint Venture and this agreement
all of the property and funds acquired by the Joint
shall terminate (a) if the parties do not agree on the
Venture in the following proportion (their
terms of the bid, (b) if the Contract is not awarded
"Proportionate Share", as the same may be changed
to the Joint Venture, (c) or when the performance
from time to time with respect to the sharing of
of the Contract has been completed as the case may
profits and ownership of property and funds, pur­
be, and when the accounts are settled between the
suant to Paragraphs 6 or 13, but not as to the
parties in accordance with the terms hereof. This
bearing of losses or as to the obligation to con­
agreement shall not limit either party from engag­
tribute to working capital):

 - - -% the right to assert against the defaulting party any

and all causes of action arising out of such default
--_% and any and all remedies therefor proVided by law.

Each party agrees to indemnify the other against 7. When the Joint Venture has funds in excess of its
any loss or liability in excess of the proportion set working capital requirements, as determined from
forth above by reason of any liability incurred or time to time by the parties, th~ Proportionate Share
loss sustained in connection with, or arising out of, of each party in such excess shall be paid to the par­
(i) the performance of the Contract, (ii) any bonds ties. Either party may withdraw funds from the Joint
to which the Joint Venture is a party, (iii) any Venture with the consent of the other party. Any
indemnity agreements executed in connection with such withdrawal shall not of itself, unless otherwise
any such bonds, (iv) any financing arrangements to agreed, change the Proportionate Share of either
perform the Contract, and (v) the Joint Venture, party.
generally.
8. All funds received by the Joint Venture from any
6. The parties from time to time shall determine the source shall be deposited in an account or accounts
amount of working capital required to perform the in the name of the Joint Venture in such bank or
Contract. If the parties are unable to so agree, the banks, mutually agreed upon by both parties and
largest amount which either party in good faith shall be subject to withdrawal by such person or
specifies shall be deemed to be the amount of work­ persons as the parties shall determine from time to
ing capital determined to be required to perform the time.
Contract. Each party shall contribute to the Joint
Venture its Proportionate Share of the amount so 9. Each party shall own its Proportionate Share of all
determined within ten (0) days after each determi­ equipment, machines, tools, materials, supplies and
nation is made. If either party shall fail to other property which are purchased by the Joint
contribute all of its Proportionate Share when due Venture or charged to the account of the Joint
and if such default shall continue for ten (0) days Venture. At the completion of the Contract, or
after written notice from the non-defaulting party, sooner if such property no longer is required for the
the non-defaulting party shall contribute the defi­ performance of the Contract, such property shall be
ciency in the proportionate share of the defaulting divided between the parties in a manner agreed
party. In such event, and regardless of any later upon by the parties. If the parties are unable to
offer by the defaulting party to remedy its default or agree on the division of some or all of such property,
the later remedy by a defaulting party of its default, the property as to which the parties are unable to
the Proportionate Share of each party in the profits agree shall be sold and each party shall be paid its
of the Joint Venture and in the ownership of all Proportionate Share of the sale proceeds. All funds
property and funds thereafter acquired by the Joint and property acquired by the Joint Venture shall be
Venture automatically shall change to the respec­ held in the name of the Joint Venture.
tive proportions that the total amount contributed 10. Separate books of account of the transactions of the
to working capital by each party bears to the total Joint Venture shall be kept and maintained by the
amount contributed to working capital by both par­ Managing Party at its principal office or at the job
ties (exclusive of any amount later contributed by a site, and the same shall be available for inspection
defaulting party), but the Proportionate Share of by either party at any reasonable time. The books
each party in any losses of the Joint Venture shall of the Joint Venture shall be maintained on a per­
remain as specified in Paragraph 5. In addition to centage of completion basis and the tax returns of
the foregoing, the non-defaulting party shall have the Joint Venture shall be prepared on a completed

 contract basis or on such other basis as the parties management powers and duties to be delegated to
determine. The Managing Party shall furnish the the Managing Party, to persons specified in
other party or parties from time to time with such Paragraph 4, and to any other person or persons.
statements and reports relating to the progress of Subject to the foregoing, the Managing Party shall
the performance of the Contract and to the finan­ be _
cial condition of the Joint Venture as the other The Managing Party shall be responsible for the
party reasonably may request. At the completion of direct management and supervision of the perfor­
the Contract and at such intervals as the parties mance of the Contract. At the completion of the
may agree upon, each party shall be furnished with Contract and when the receipts and disbursements
a complete account of the receipts and disburse­ of the joint Venture have been finally determined,
ments of the Joint Venture. On December 31 of if the joint Venture made a profit, the Joint Venture
each year during the existence of the Joint Venture shall pay the Managing Party a management fee in
and at the completion of the Contract, if requested an amount equal to ten percent (10%) of such prof­
by either party, the accounts of the Joint Venture it. The management fee shall be charged to the
shall be a audited by a mutually acceptable firm of Joint Venture as a direct cost. If the Joint Venture
independent certified public accountants. Each does not make a profit, the Managing Party shall
such audit shall be performed in a manner which not be entitled to a management fee. The parties ­
will permit the accountants to express an unquali­ shall furnish from their respective organizations, to
fied accountant's opinion with respect to the the extent available, all of the personnel, skill,
financial statements of the Joint Venture if the experience and knowledge which is required to per­
existing facts warrant such an unqualified opinion. form the Contract efficiently and expeditiously.
The cost of each audit shall be borne by the Joint
13. If either party shall be adjudged to be bankrupt, or
Venture.
make an assignment for the benefit of its creditors,
11. When the Contract has been fully completed and or if a receiver is appointed to take over all or sub­
accepted and after the Joint Venture has paid or stantially all of its assets, then (i) the Joint Venture
provided for (i) all costs incurred in connection automatically shall terminate, (ii) such party shall
with the performance of the Contract and by the have no further voice in the performance of the
Joint Venture, Oi) all claims not fully covered by Contract, (iii) such party's Proportionate Share of
insurance, (iii) reserves for all claims made or the Joint Venture's profit (determined after the per­
threatened against the Joint Venture and (iv) formance of the Contract has been completed and
reserves for contingencies, if any, that the parties accepted) shall be limited to such party's
shall determine to be advisable, and after repaying Proportionate Share of the proportion of such profit
to each party the amount advanced by it to the which the joint Venture's direct and overhead costs
Joint Venture as working capital, the Proportionate paid or accrued to the end of the month during
Share of each party in the profits then remaining which the joint Venture terminates pursuant to this
shall be distributed to each party. The amount of Paragraph 13 bears to the Joint Venture's direct and
each reserve, or the remaining balance thereof, overhead costs paid or occurred to the completion
shall be similarly distributed when the same no and acceptance of the Contract, but such party's
longer is required. Proportionate Share of any losses of the Joint
Venture shall remain as specified in Paragraph 5
12. Each party shall have an equal voice in the manage­
(the books of account maintained by the Joint
ment of the joint Venture and the parties shall
Venture shall be conclusive for all purposes hereun­
agree from time to time on the methods and man­
der), and (iv) the other party shall do all things
ner of performance of the Contract and on the

10

 necessary to complete the performance of the are employed, of the owner thereof and the time
Contract and to wind up the affairs of the Joint spent by each in the performance of the Contract.
Venture, collect all obligations due it, pay all oblig­ Every month each owner of such equipment shall
ations owed by it and distribute its assets. submit a statement to the Joint Venture for the
rental costs associated with using that owner's equip­
14. owns the
ment during the preceding month. Each such
equipment which is described on Exhibit "A" here­
statement shall be in such detail as the other owner
to and
of such equipment reasonably shall require.
owns the equipment which is described on Exhibit
"B" hereto. To the greatest extent possible, each 15. Neither party without the written consent of the
party shall make the equipment which it owns party shall have the right to borrow money on behalf
available for use by the Joint Venture and the Joint of the Joint Venture or use the credit of the other
Venture shall use the same to the greatest extent party for any purpose.
possible in the performance of the Contract. For
16. All bid, performance, labor, and material, mainte­
the use of the equipment, the Joint Venture shall
nance and other types of bonds required by the Joint
pay the party which owns the equipment used the
Venture in connection with the Contract shall be
applicable daily, weekly, or monthly rental rate
obtained through a broker or brokers mutually
specified on the relevant exhibit whichever results
agreed upon between the parties.
in the lowest rental, for the period commencing
with the time at which the equipment is delivered 17. Neither party shaH assign, pledge, hypothecate or
to the job site and ending with the time when the transfer its interest in the Joint Venture, or any part
Joint Venture informs the owner of such equipment thereof (including any interest in the funds or prop­
that the equipment no longer is needed for use by erty of the Joint Venture) without the prior written
the Joint Venture. The Joint Venture shall bear the consent of the other party.
cost of operating the equipment, including payment
18. Subject to the provisions of Paragraph 17, this
for fuel, oil and lubricants for the equipment, pre­
Agreement shall inure to the benefit of and shall be
ventive maintenance of the equipment, tires,
binding upon the respective successors and assigns of
damages by careless operation of the equipment and
the parties hereto.
damages by unusual job conditions. The owner
shall bear the cost of normal repairs to, and repair IN WITNESS WHEREOF, the parties have exe­
parts for, the equipment and of repairing or replac­ cuted this Pre-Bidding Agreement effective as of the
ing tires worn or damaged by normal use of the date first mentioned above.
equipment. Each owner of such equipment shall
fully insure the equipment, at its costs, and the
Joint Venture shall not be responsible for the loss
of, or any damage to, the equipment while it is in
the custody or control of the Joint Venture; provid­ By _
ed, that the Joint Venture shall bear (i) the portion
Its President
of the cost of the loss of, or damage to, the equip­
ment which is not reimbursed to the owner of the
equipment by its insurance. The Joint Venture will
provide appropriate supervisory and accounting By _
controls to maintain an accurate and complete
Its President
record of the various types of such equipment which

11

 FORM 0

Pre-Bidding Agreement for an Item Joint Venture

(Example only - must be reformatted for each joint venture)

This Pre-Bidding Agreement entered into as of bid shall be borne separately by each of the parties
this _ _ day of , 19_ _ by and and shall in no manner be considered as part of the
between ABLE CONSTRUCTION COMPANY (here­ construction cost of the Project in the event the
inafter "Able"), and BAKER CONSTRUCTION CO. work is awarded to the joint venture.
(hereinafter "Baker").
5. In the event that no agreement is reached by the par­
ties hereto as to the amount of the bid to be
WITNESSETH:
submitted or if such agreement is reached and a bid is
Whereas, the parties hereto desire to submit a joint bid
submitted, but no contract is offered or awarded to
to The United States of America (hereinafter "USA"),
the joint venture, then this Agreement shall be of no
for the construction of
----------­ further force and effect and any joint venture rela­
(hereinafter "Project").
tionship or joint venture between the parties for said
NOW THEREFORE, it is hereby agreed between the project shall automatically terminate.
parties hereto as follows:
6. Each and every obligation created by any such bid or
1. Baker will prepare the bid on Bid Items 20, 21, 22, contract, except for Bid Items 20, 21, 22, 23, 34 and
23,34 and 35 and submit that to Able and Able will 35, shall be the sole obligation of Able. Any profits
prepare the balance of the bid using the bid of Baker or gains arising from the performance of the contract,
and submit the joint bid of both to USA for a con­ except as to Bid Items 20,21,22,23,34 and 35, shall
tract for the construction of the Project. belong to Able. In the event of any losses arising
from the performance of the contract or any claims
2. The bid shall be submitted in the names of the
on the bonds, except as to Bid Items 20, 21, 22, 23,
undersigned on the USA form as joint venturers and
34 and 35, Able shall assume and pay all such losses
should a contract for said Project be obtained as a
and claims.
result of such bid, such contract shall be taken in the
names of the undersigned, as joint venturers, or in 7. Each and every obligation created by Bid Items 20,
such other name as may be agreed upon by the 21,22,23,34, and 35, shall be the sole obligation of
undersigned with the consent and approval of USA. Baker. Any profits or gains arising from the perfor­
mance of Bid Items 20, 21, 22, 23, 34 and 35, shall
3. Each party shall execute any and all applications and
belong to Baker. In the event of any losses arising
indemnity agreements required by the surety or
from the performance of Bid Items 20, 21, 22, 23,34
sureties on any bonds furnished in connection with
and 35, or on any claims on the bonds as to those six
the bid or award or performance of any such con­
bid items, Baker shall assume and pay all such losses
tract. The premiums for any such bonds shall be
and claims.
divided and paid by each party in the proportion that
the cost of the bid items for the work to be done by 8. Able agrees to protect, indemnify and hold Baker
each party shall bear to the total contract amount. harmless in connection with the performance of the
Contract and all claims made in connection with the
4. All expenses incurred by the parties hereto, or any of
Contract, or on any claims on the bonds except as to
them, in estimating and preparing the contemplated

12

 the work in connection with Bid Items 20, 21, 22,

23,34 and 35, and Baker agrees to protect, indemnify
and hold Able harmless with respect to the work
covered by Bid Items 20, 21, 22, 23, 34 and 35, or on
any claims on the bonds as to those six bid items.

9. Upon being awarded a contract for the above­

described work, the undersigned will enter into a
Joint Venture Agreement more specifically defining
their respective interests in, and obligations under,
such contract as among themselves, and providing a
practical method for their collaboration and coopera­
tion in performing the work, and in such agreement
there shall be incorporated all of the provisions con­
tained in this Pre-bidding Agreement, as well as
others deemed proper and advisable. Until and
unless a Joint Venture Agreement is so executed, the
provisions hereof shall constitute the sole and only
agreement of the parties concerning said project.

In Witness Whereof, the parties have executed

this Pre-Bidding Agreement in multiple the day and
year above written.

ABLE CONSTRUCTION COMPANY

By _

Its

BAKER CONSTRUCTION CO.

By _

Its

13
 FORM E

Pre-Bid Joint Venture Agreement With a DBE

This Pre-Bid Agreement, made and entered into Exhibit A and the Financial Consulting Agreement,
this _ _ day of , 199__ , attached hereto as Exhibit B, shall be utilized and exe­
by and between ~ _ cuted by both parties in connection with performing
(hereinafter called "DBE") and ~ _ the contract for the Owner and to set out the respective
_ _ _ _ _ _ _ _ _ _ _ _ (hereinafter called rights, obligations and duties of both parties to the Joint
"Contractor"), both of whom collectively are sometimes Venture and to each other. It is further understood that
referred to as the "Joint Venturers" if for any reason the Joint Venture Agreement or
Financial Assistance Agreement are not signed, then at
WITNESSETH: the option of Contractor either or both Agreements
WHEREAS, the Joint Venturers are planning to sub­ shall be deemed executed and shall be binding on and
mit a bid as a Joint Venture to _ enforceable by, both parties to the same extent as
(hereinafter referred to as the "Owner") for the con­ though they were duly executed.
struction of a project described as: _
IN WITNESS WHEREOF, the parties have executed
this Pre-Bid Joint Venture Agreement on the day and
(hereinafter referred to as the "Project"); and,
year above written.
WHEREAS, DBE does not have the ability to obtain
the necessary bid, payment and performance bonds and
does not have sufficient financial capability to handle CONTRACTOR: _
the financial and supervisory commitments arising from
this proposed Joint Venture bid and Contractor on cer­ By
tain terms is willing to provide to DBE the bonds, President (First Party)
finances, and certain staff and supervisory assistance;
and
Attest:
WHEREAS, the Joint Venturers desire to enter into
this Agreement so as to establish, if the Joint Venture is
the low bidder and a contract is awarded to the Joint Secretary
Venture, their respective interests including what ser­
vices will be performed and who will do what work
under the contract, how the profits derived therefrom DBE: _
and how any liability for losses arising out of the perfor­
mance thereof shall be divided.
By
NOW THEREFORE, the parties hereto hereby President (Second Party)
declare themselves as Joint Venturers for the purpose of
submitting a bid to the Owner on the Project and if the
Joint Venture is the successful bidder and if a contract is Attest:
awarded by the Owner to the Joint Venture, then the
form of Joint Venture Agreement attached hereto as Secretary

14

 Chapter 4

Joint Venture in Which All Venturers

Are Named in the Contract and the Bond

Joint ventures can be categorized named in the contract and the participation. This method is so
many ways but they normally fall bond. Such arrangements are dis­ rarely used today that there is no
into one of four groupings: cussed in Chapter 7. further discussion of it in this pre­
sentation.
1. A joint venture in which all mem­ 3. An item joint venture which was
bers of the joint venture are discussed in Chapter 3. The following is a form of joint
disclosed and are named in the venture agreement in which all
4. The corporate joint venture in
contract and the bond and are members are named and share in the
which a separate corporation is
responsible for all the work. This profits and losses in proportion to
formed to perform work on a cer­
is the most common form of joint their disclosed ownership in the joint
tain project or projects under one
venture. venture. •
contract or a series of contracts
2. A silent joint venture in which with the members of the joint
some but not all members of the venture holding stock in the cor­
joint venture are disclosed and poration in proportion to their

15

 FORM F

Joint Venture Agreement

(All Members Are Disclosed)

This Joint Venture Agreement made and entered undertake any contracts other than the said construc­
into this _ _ day of , 19_, by tion contract, and nothing in this agreement shall be
and between, _ construed as a limitation of the powers or rights of any
_ _ _ _ _ _ _ _ _ _ ,with its principal office and party hereto to carry on its separate business for its sale
place of business in _ benefit except, however, the parties hereto shall cooper­
and _ ate with each other according to the terms and spirit
_ _ _ _ _ _ _ _ _ _ , with its principal office and hereof in the performance of said construction contract.
place of business in _
To carry out the Joint Venture the parties hereto
both of whom collectively are sometimes referred to as
mutually agree as follows:
the "Joint Venturers",
1. The work to be performed by the Joint Venture shall
WITNESSETH: consist of the Contract and any change orders or
supplemental agreements entered into with the
WHEREAS, the Joint Venturers submitted a bid and
owner in connection with the aforedescribed
a contract has been awarded by _
Project, all of which are hereinafter referred to as
the "Contract" and shall be performed by the Joint
(hereinafter referred to as the "Owner"), for the con-
Venture operating under the name of _
struction of a Project described as _

(hereinafter being referred to as the "Project"); and 2. Each of the parties shall have an undivided interest
in the Joint Venture, shall contribute all necessary
WHEREAS, the parties hereto desire that their
working capital and shall participate in its net gains
interest in the services to be rendered and the work to
and profits and share in its losses and liabilities in
be done under the construction contract and any profits
the proportion set opposite its name in the next
derived therefrom and any liability for losses arising out
succeeding sentence. In addition, the interest of
of the performance thereof be defined by an agreement
the parties hereto in and to the Contract, and in
in writing;
and to any and all property and equipment acquired
NOW, THEREFORE, said parties hereto hereby con­ in connection with the performance thereof
stitute themselves as Joint Venturers for the purpose of (except as hereinafter provided) and in and to any
performing and completing the said construction con­ and all moneys which may be derived from the per­
tract, but not for any other purposes, it being expressly formance thereof, and the obligations and liabilities
understood that this agreement contemplate only the of each of the parties hereto as between themselves
furnishing and performance of the work, labor, service, in connection with the Contract and with respect
materials, plant, equipment and supplies necessary for to any and all liabilities, costs and expenses in con­
the completion of the construction of the Project and nection therewith, shall be in the following
that the parties are not making any permanent partner­ proportions, viz.:
ship agreement or joint venture agreement to bid for or

16
 Name Percentage 4. The aforesaid members of the Administrative
Committee and their alternates have been designat­
- - - -%
ed by the Joint Venturers to act for them with full

- - - -%
authority in any matter or thing in connection
with, or relating to, this Joint Venture and the
Each party shall have an equal voice in the determi­
Contract, including, but not limited to the negotia­
nation of any matter involving the business of the
tion of contracts, the determination of working
Joint Venture until and unless paragraph 21 hereof
funds, materials, plant and equipment to be sup­
should become applicable. Each party does hereby
plied, the manner of performance, assignment of
agree to indemnify the other against any loss or lia­
work between the Joint Venturers, settlement of dis­
bility exceeding the proportions, hereinabove stated,
putes with the Owner and with others, changes and
for whatever reason, including any payments required
modifications in the extent or scope of the work,
to be made in, and about, the performance of the
organization and personnel. Actions and decisions
Contract.
of the Administrative Committee shall be by unani­
3. In order to facilitate the handling of all matters and mous vote and, as to any and all matters having to
questions in connection with the performance of do with the Joint Venture, the Project, the
the Contract by the parties hereto an Contract, or the performance thereof under this
Administrative Committee shall be formed and agreement or otherwise, or as to the interpretation
each of the parties shall appoint the following rep­ of this agreement, or as to any claim or dispute
resentatives (herein called the "designees" and thereunder, such actions and decisions shall be
"alternates") to act for it in all such matters with final, inclusive and binding on the Joint Venturers
full and complete authority in its behalf in relation with the same force and effect as if each Venturer
to any matters or things in connection with, arising has specifically or affirmatively taken such action or
out of, or relative to, this Joint Venture, and to act decision. The Administrative Committee shall be
for, and bind, the respective parties appointing such given such specific powers in addition to the forego­
designees to any and all matters or things involving ing as the Joint Venturers may from time to time
this Joint Venture and the performance of the delegate and they shall also have the power to dele­
Contract: gate to such person or persons as they may
determine such of their powers as they deem neces­
sary or convenient in the best interests of the parties
hereto. If necessary or desirable, each of the parties
hereto shall execute and deliver to their respective
appoints
designees such powers of attorney as may be
as its designee and required to enable them to properly perform the
duties entrusted to them. It is understood and
as its alternate.
agreed that none of the parties hereto nor any of the
designees or alternates shall have the power to bor­
row moneys for, in the name of, or to pledge the
credit of, the other party to this agreement or on
appoints their joint credit.

as its designee and 5. In the event that either member of the

Administrative Committee shall be temporarily
as its alternate.
incapacitated or temporarily not available to act,

17

 the alternate for such member hereinbefore named dance with policies an procedures established by the
shall act for such member during such period or Committee, (b) coordinate the work, and (c) be
periods of temporary incapacity or non-availability. responsible for necessary contracts with the Owner,
If either member of the Administrative Committee its authorized representatives and any others neces­
shall die or become permanently incapacitated or sary to complete the work under the Contract.
unavailable to act, then a successor for such mem­
8. The joint Venturers shall furnish such parts of their
ber shall be named by the joint Venturer who
respective organizations and personnel for the per­
appointed such member, and pending the appoint­
formance of the Contract as may be requested by
ment of such successor the alternate for the member
the Administrative Committee, and each joint
so dying or being permanently incapacitated or
Venturer further expressly agrees that it shall con­
unavailable to act shall act as and for such member.
tribute and make available for the Joint Venture, as
In the event of the temporary incapacity or non­
far as is reasonably practicable for the performance
availability or death or permanent incapacity or
of the Contract, the utmost skill, experience and
non-availability of any alternate, the Joint Venturer
knowledge of their respective organizations. As
which appointed such alternate shall appoint a suc­
much as possible the Administrative Committee
cessor alternate either temporarily or permanently
shall have all of the above provided equally by each
as may be necessary. Any successor member or alter­
member of the joint Venture.
nate appointed, as hereinabove provided, shall have
every power to act hereunder that was possessed by 9. A joint bank account or accounts shall be opened in
his predecessor under this Agreement. Either party such bank or banks, under such description or
at any time and from time to time may change its descriptions as the joint Venturers may determine,
designee or alternate by advising the other of such in which all funds advanced by the parties hereto
appointment, but until the appointment and notifi­ for the performance of the Contract and all moneys
cation of the appointment to the other party as received from the Owner and from others in con­
aforesaid, each party shall be bound conclusively by nection with such performance shall be deposited.
the acts and decisions of the designee or alternate Said sums may be withdrawn by check, draft or
previously appointed by it hereunder in the same other instrument in such form and with such signa­
manner and with the same effect as if such action tories as the parties hereto may from time to time
had been taken or decision made by authority of the direct. Such funds shall be used solely for this
proper officers of each party duly authorized by its Project.
board of directors.
10. Within ten days from the execution of this
6. Meetings of the members of the Administrative Agreement, each of the parties hereto shall advance
Committee for the transaction of business of the and pay into said account or accounts for use in the
Joint Venture may be called at such time and such performance of the Contract, the initial sum of
place, subject to reasonable notice, by either Joint $ . The need for working capital addi­
Venturer or by any member of the Administrative tional to the working capital to be provided as
Committee as may be considered necessary or desir­ aforesaid shall be determined from time to time by
able. the designees hereinbefore designated in Paragraph
3. Within ten days after such determination by the
7. The Administrative Committee shall appoint a
designees each party shall pay into such bank
Project Manager who shall operate under the direc­
account or accounts its proportionate share, as per
tion, control and authority of the Administrative
Paragraph 2, of any needed additional working capi­
Committee and shall (a) be responsible for the
tal, unless the designees, shall determine that such
direction and management of the work in accor­

18

 additional working capital is required before the taxes on equipment, permits, customs, imposts,
expiration of said ten days, in which event it shall duties, charges, legal fees, accounting fees, liabilities
be so paid into said bank account or bank accounts and losses not covered or compensated by insurance
at the time that it is so determined by the designees. or otherwise and all other expenses and obligations
incurred or suffered in and about the performance
11. In the event either party hereto is unable or fails or
of said Project of a nature under sound accounting
neglects to advance or contribute its proportionate
practices properly chargeable as a cost of the perfor­
share of the working capital required in the perfor­
mance of the Project. Said costs shall not include
mance of the Contract, then the other party may,
any charges against the Joint Venture for any over­
but need not, advance such deficiency or any part
head expenses or charges of the main or branch
thereof, and the party so advancing such deficiency
offices of the parties hereto or for the time which
shall receive interest on such excess funds at a rate
may be expended in connection with the work by
which is two percent (2%) per annum higher than
any of the parties hereto or their officers or employ­
the rate at which such advancing party can borrow
ees, unless assigned to this Project, and except as
such sum. Such advance shall bear interest from
may be approved by the designees. Travel expenses
the date of advancement to the date of repayment,
and subsistence during travel reasonably incurred in
and such excess funds shall be repaid in full with
the performance or interest of the work under the
such interest from the said bank account or
Contract shall be treated as part of the cost of the
accounts prior to any sums being paid to the non­
Project and shall be paid with Joint Venture funds.
advancing member of the Joint Venture. The
interest so paid shall be deducted from the funds 15. The Joint Venture shall carry adequate public liabil­
otherwise due the party who failed to contribute its ity, property damage and worker's compensation
proportionate part of the working capital. insurance, as well as any other insurance that may
be required or advisable from time to time, so as to
12. Except as provided in Paragraph 11 for the repay­
adequately protect the parties hereto and hold them
ment of excess funds advanced by one party, no part
harmless from any accident or claim which may
of any advances deposited in said bank account or
arise in the course of the performance of the
accounts shall be returned to any of the parties and
Contract, the cost of which insurance attributable
no distribution of profits shall be made prior to the
to the Joint Venture shall be chargeable thereto.
completion of the Project except as may otherwise
Fidelity bond coverage in amounts and form satis­
be mutually agreed upon in writing by the parties
factory to the designees shall be maintained on such
hereto. On completion of the Project, all working
persons directly connected with the performance of
capital advanced shall be repaid to the party or par­
the Contract as the designees may require and all
ties advancing the same prior to the distribution of
such fidelity bond premiums shall be part of the
any profits as hereinafter provided.
construction cost. All such insurance and bonds
13. The business of the Joint Venture shall be conduct­ that may from time to time be carried shall be
ed, and its property and effects held solely and obtained through the respective brokers of each of
exclusively in the joint names of both parties or in the parties hereto in such manner so that such bro­
the coined name of _ kers shall receive the benefit of brokerage
commissions for the placing of any such insurance
or bond in the proposition that their respective
14. Cost of construction shall consist of the costs of all
clients have an interest in the Joint Venture.
subcontracts, labor, material, services, supplies,
plant and equipment purchased or rented, bonds, 16. Separate books of account for the Joint Venture
insurance, taxes on labor and material, property shall be kept and maintained by such personnel and

19

 in such office or offices as the Administrative of the Joint Venture then and thereafter remaining,
Committee may determine pursuant to the methods inclusive of reserves and unexpected balances
prescribed by the Administrative Committee for thereof, when determined by the Joint Venture to
the entry of all accounts in connection with the be required no longer, shall be distributed to and
Contract. All books of account, records, vouchers, divided among the parties in the proportions set
contracts and data of any character relating to the forth in paragraph 2 hereof.
performance of the Contract shall be subject to
18. Except as otherwise expressly provided in this
examination by either Joint Venturer at all times.
Agreement or in the Contract, no Joint Venturer
The Administrative Committee shall prescribe the
shall be entitled to any compensation other than by
methods of accounting in all matters relating to the
participation in the profits and earnings of the Joint
affairs of the Joint Venture and the performance of
Venture as hereinbefore provided for services ren­
the Contract. The books of account of the Joint
dered by it on behalf of the Joint Venture.
Venture may be audited from time to time by an
independent auditor selected by the Administrative 19. It is contemplated that in the performance of the
Committee, the cost of any such audit to be paid work under the Contract, plant and equipment
from the funds of the Joint Venture. Periodic audits owned by the parties hereto may be used. Each
upon the request of either party hereto, shall party agrees to rent to the Joint Venture on terms,
include a comparison between the items of actual if any, established in the Contract, or on terms
cost and the cost set up in the estimate for each approved by the Administrative Committee, such
item. Upon completion of the Contract, a com­ of its plant and equipment as is available and suit­
plete and final audit and true and correct able for the performance of said work and is
accounting shall be had of all expenses and all requested by the Administrative Committee. The
accounts, vouchers, records and data relating to the proceeds of such plant and equipment rentals shall
Contract and Joint Venture, and to the extent that belong to, and be credited and paid to, the Joint
any such records must be kept subsequent to the Venturer furnishing such plant and equipment, and
completion of the Contract and liquidation of the the other Joint Venturer shall have no interest in
Joint Venture, pursuant to the provisions of law or such plant, and equipment rentals and no responsi­
by direction of the parties, the same shall be kept at bility in connection therewith.
such place or places as the parties hereto from time
20. Upon completion of the Project, the parties,
to time may determine and the cost thereof shall be
through their respective representatives designated
borne equally by the parties. The cost of all such
hereunder, will secure a bona fide bid for each item
audits shall be a part of the construction cost of the
or group of items of equipment or tools purchased
Project.
by the Join Venture, from one or more reputable
17. Upon completion of the Project, after payment of, equipment dealers, and each of the parties shall
and provision for, all costs and liability incurred in have the right to purchase any item or group of
the performance of the Contract, including liabili­ items, at the highest prices bid therefore by such
ty admitted or reasonably anticipated on, or in dealers, provided that neither party without the
relation to, claims not secured by insurance, and consent of the other shall be entitled to purchase a
after provision for such reserves in respect of guar­ greater percentage of such equipment or tools than
antees and contingencies as the Joint Venture shall the percentage of its interest in the Joint Venture.
deem necessary, and after repayment to each party If more than one party shall desire the same item or
of the amount(s) which it advanced to the Joint items of equipment or tools, at a price(s) so deter­
Venture as working capital or otherwise, any funds mined, and a mutually satisfactory adjustment is not

20

 effected by agreement between or among them, terms, provisions and conditions of this Agreement.
then such item or items of equipment or tools, in
23. Neither this Agreement nor any interest of the par­
like manner as items thereof not desired by the par­
ties or either of them herein, including interest in
ties, shall be disposed of, by sale, for the best price
any moneys belonging to or which may accrue to
obtainable, to outsiders.
the Joint Venture in connection with the Contract
21. In the event of the bankruptcy or insolvency of one or any interest in the joint accounts or in any prop­
of the parties hereto, or should one of the parties erty of any kind employed or used in connection
hereto commit any act of bankruptcy or take advan­ with the Contract may be assigned, pledged, trans­
tage of any bankruptcy, reorganization, composition ferred or hypothecated, except that in the event
or arrangement statute, then, notwithstanding any­ one of the parties desire to obtain banking accom­
thing in this Agreement to the contrary, such party modations for the purpose of this Agreement and
("hereinafter referred to as the Insolvent Party") the Contract, such party may, with the prior written
from and after said date, and its designee and alter­ consent of the other party, assign, pledge or hypoth­
nate, shall cease to have any say or voice in the ecate its rights, title and interest in, and to, such
management of the Project and the Contract, and moneys as it may be entitled to receive hereunder
whenever it is provided in this Agreement that the to the lending institution as security for said bank­
act, consent or decision of the parties hereto are ing accommodations.
required, it shall be deemed to mean the act, con­
24. The right of any person, firm or corporation claim­
sent or decision of the other party hereto excluding
ing by, through or under any party hereto
the Insolvent Party. However, the Insolvent Party
(including but not limiting the same to judgment or
shall remain liable for its share of any of the losses
other creditors, receivers, trustees, assignees, gar­
as provided in this agreement and shall be entitled
nishees, executors or administrators), to assert any
to receive its share of the profits, if any, as provided
claim against the right, title and interest of any
in this Agreement, to be paid at the time and in the
party hereto, shall be limited solely to the right to
manner as in this Agreement provided. Should such
claim or receive after completion of the Project and
insolvency, bankruptcy or other proceeding of the
the Contract and after the closing of the accounts
type above described cause damage or extra cost to
of the Joint Venturers, the distributive share of such
the other party, such damage or extra cost shall be
party in the net profits and proceeds payable here­
charged against the interest of the Insolvent Party.
under, and then only subject to the equities and
22. The relationship between the Joint Venturers shall prior rights of the other party as in this Agreement
be limited to the performance of the Contract set forth.
under the terms of this Agreement, which shall be
25. No claims arising out of, or related to, the operation
construed and be deemed to be a Joint Venture for
or conduct of the Joint Venture asserted against one
the performance only of the Contract between the
or both of the Joint Venturers by a claimant other
Joint Venturers and the Owner. Nothing herein
than a Joint Venturer shall be settled except with
contained shall be construed to constitute the Joint
the unanimous consent of the members of the
Venturers as partners or to constitute either Joint
Administrative Committee, if then in existence, or
Venturer the general agent of the other Joint
of both of the Joint Venturers, provided that the
Venturer, or in any manner to limit either of the
consent of any insolvent Joint Venturer or of any
Joint Venturers in the conduct of their respective
Joint Venturer who shall deny liability to the other
businesses or activities in the making of other con­
Joint Venturer with respect to such claim shall not
tracts or the performance of other work, or impose
be required.
any liability except that of performance of the

21

26. All questions relative to the execution, validity, In Witness Whereof, the parties have executed this
interpretation and performance of this Agreement Joint Venture Agreement in multiple copies on the day
shall be governed by the laws of the State of and year above written.

27. This agreement shall remain in effect only for such Joint Venturer: _
length of time as may be necessary to carry out the
Contract and the terms, provisions and conditions
By

of this Agreement.
Its

28. All notices required to be given or which may be

given under any of the provisions of this Agreement
by either party hereto to the other shall be given by
Attest:
sending such written notice to the Joint Venturer
entitled thereto by mail addressed to the office of
Secretary
such Joint Venturer as first hereinabove set forth.

29. The foregoing provisions and stipulations of this

Joint Venturer: _
agreement shall bind the Joint Venturers and their
respective successors and assigns.
By
30. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an Its
original and together shall constitute a single
instrument.
Attest:

Secretary

22

 Chapter 5

Joint Venture With a Disadvantaged Party or a

Party Who Is Not Financially Responsible But

Who Has an Interest in Excess of Fifty Percent

Various governmental agencies not allow as much assistance. by the project manager, the decision
have programs to enable contractors In an arrangement with a disad­ could be made by the Investor who is
who have no independent bonding vantaged party, it is extremely the only financially responsible
capacity to bid on, and perform work important that the party who has less party.
on, projects requiring bonds. These than 50%, but is the only financially In order to permit the financially
programs have necessarily resulted in responsible party, be in a position to responsible party to control the pro­
arrangements, some of which have take any tax losses. In view of the ject, such party must also control the
taken the form of joint ventures, fact that in this form of an agree­ project manager. Since the project
being formed to provide bonding and ment the party designated as the manager has critical responsibilities,
financial capabilities to these disad­ Disadvantaged Contractor normally the second paragraph of paragraph
vantaged companies. Under these does not have the financial capabili­ 10 provides that "If the Adminis­
various governmental programs, the ty to perform the contract and, in trative Committee is unable to agree
minority or economically disadvan­ many instances, it thus is fruitless to on the Project Manager or if the
taged contractor must have at least require such party to bear any per­ employee designated to act as Project
51 % of the joint venture interest. centage of the loss. Also, in order to Manager shall fail, refuse, or be
The standard form of joint venture have a joint venture approved in unable for a period of 30 days to fully
agreement set forth previously, as many areas, it sometimes is signifi­ and completely perform the duties
well as the silent joint venture agree­ cant to the approving agency that and obligations of the Project
ment, are not applicable under such the party that does not have the Manager, then Investor, has the
circumstances and should not be financial capability is not going to be absolute and sole right to designate
used. required to bear any of the loss. the Project Manager and any succes­
As will be discussed in the next Since, as a practical matter, the sor to said Project Manager until all
chapter, although the protection responsible party is going to have to the obligations of the Joint Venture
which might be accorded to the bear the loss in any event, the agree­ are completed and satisfied, or until
financially responsible member of ment might as well specify this. any loans or other financial commit­
such a joint venture is similar to the In view of the fact that the finan­ ments of Investor are concluded and
protection that should exist in cer­ cially responsible party, whom the satisfied in full, or until the obliga­
tain types of a silent joint venture, form of agreement set forth below tions of the Joint Venture and
this is not and should not be a silent has designated as Investor, is respon­ Investor on the Bonds and related
joint venture arrangement, and that sible for all of the losses on the Indemnity Agreements posted in
form of an agreement will not suffice. project, an administrative committee connection with the Contract are
The government has different should be appointed to run the pro­ released, whichever is later."
forms of programs. Some programs ject in order to achieve control for Such control is not permitted under
involve disadvantaged persons who Investor. If the administrative com­ a Section 8(a) arrangement.
can be classified in many instances as mittee is unable to agree on any Many times the parties recognize
minorities such as females. These matter, then all decisions which that the disadvantaged party needs
can be in the form of goals to be met should have been made by the financial and management assistance
and the government in certain administrative committee on such beyond a normal joint venture agree­
instances will allow non-minorities matter will be made "by the Project ment. A Financial and Management
and non-females to assist such com­ Manager, whose decision will be Assistance Agreement has been pre­
panies in many ways. Other binding upon the parties." The pared to set out this type of
programs, such as the 8(a) set-aside agreement could also provide that, arrangement. •
have much stricter rules which do instead of the decision being made

23
 FORMG

Joint Venture Agreement With a Disadvantaged Party

This Joint Venture Agreement made and entered

stitute themselves as Joint Venturers for the purpose of
into this _ day of , 199_, by and
performing and completing the Contract as herein pro­
between _
vided, but for no other purposes. It is expressly
understood that this agreement contemplates only the
(hereinafter called "Investor") with its principal office furnishing and performance of the work, labor, services,
and place of business in _ materials, plant, equipment and supplies necessary for
the completion of the Contract and that the parties are
and _
not making any permanent partnership or joint venture
(hereinafter called "DBE") with its principal office and
agreement to bid on, or undertake any contracts other
place of business in _
than the Contract. Nothing in this agreement shall be
both of whom collectively are sometimes referred to as
construed as a limitation of the powers or rights of any
the "Joint Venturers"
party hereto to carryon its separate business for its sole
benefit except, however, the parties hereto shall cooper­
WITNESSETH:
ate with each other according to the terms and spirit
WHEREAS, a contract has been awarded to the hereof in the performance of the said Contract. To
Joint Venturers by _ carry out the Joint Venture Investor and DBE hereto
__________(hereinafter referred to as the mutually agree as follows:
"Owner"), for the construction of a Project described as
1. The work to be performed by the Joint Venture shall
consist of the Contract and any change orders or
supplemental agreements entered into with the
(hereinafter referred to as the "Project"); and
Owner in connection with the Project, all of which
WHEREAS, DBE did not have the capability to are hereinafter referred to as the "Contract" and
obtain the necessary bid bond and does not have the shall be performed by the Joint Venture operating
capability to obtain the necessary payment and perfor­ under the name of _
mance bonds and does not have sufficient financial
ability to handle the financial, supervisory and manage­
2. All necessary working capital shall be contributed
rial commitments arising from this Contract; and
by Investor as and when Investor deems such funds
WHEREAS, Investor on certain terms is willing to are necessary.
provide the bonds and financial assistance; and,
3. Each of the parties shall have an undivided interest
WHEREAS, the parties desire that their respective in the Joint Venture, and shall participate in its net
interests and the service to be rendered by each and the gains and profits and share in its losses and liabili­
work to be done under the Contract and any profits ties in the proportion set opposite the name of each
derived therefrom and any liability for losses arising out and the interests of the parties in the Contract, and
of the performance thereof be defined by an agreement to any and all moneys which may be derived from
in writing: the performance thereof, and the obligations and
liabilities of each of the parties hereto as between
NOW THEREFORE, Investor and DBE hereby con­

24

 themselves and with respect to any and alliiabili­ Administrative Committee and their alternates
ties, costs and expenses in connection with the have been designated by the joint Venturers to act
Contract, shall be in the following proportions, viz.; for them with full authority in any matter or thing
in connection with or relating to the Contract,

PERCENTAGE PERCENTAGE including, but not limited to the negotiation of

NAME OF PROFIT OF LOSS contracts, the determination of working funds,

materials, plant and equipment to be supplied, the
DBE 51 % 0%
manner of performance, assignment of work
Investor 49% 100% between the Joint Venturers, settlement of disputes
with the Owner and with others, changes and mod­
4. The business of the Joint Venture shall be conduct­ ifications in the extent or scope of the work,

ed and its property and effects held solely and organization and personnel. Actions and decisions

exclusively in the joint names of both parties or in of the Administrative Committee shall be by unani-.

the coined name of the Joint Venture. mous vote and shall as to any and all matters
having to do with the Joint Venture, the Project,
5. All moneys received from the Owner and from oth­ the Contract, or the performance thereof under this
ers in connection with the performance of the agreement or otherwise, or as to the interpretation
Contract shall be deposited in the Joint Venturers' of the agreement, or as to any claim or dispute
bank account. On completion of the Project, any thereunder, be final, conclusive and binding on the
working capital advanced by Investor shall be Joint Venturers with the same force and effect as if
repaid to Investor prior to the distribution of any each Venturer had specifically or affirmatively
profits as hereinafter provided. taken such action or decision.
6. To facilitate the handling of all matters and ques­ 7. The Administrative Committee shall be given such
tions in connection with the performance of the specific powers in addition to the foregoing as the
Contract by the parties hereto, an Administrative
Joint Venturers may from time to time unanimously
Committee shall be formed and each of the parties
delegate and they shall also have the power to dele­
shall appoint the following representatives (herein
gate to such person or persons as they may
called the "designees" and "alternates") to act for it
unanimously determine such of their powers as they
in all such matters with full and complete authority
deem necessary or convenient in the best interests
in its behalf in relation to any matters or things in
of the parties hereto. If necessary or desirable, each
connection with, arising out of, or relative to, this
of the parties hereto shall execute and deliver to
Joint Venture and to act for and bind the respective
their respective designees such powers of attorney as
parties appointing such designees to any and all
may be required to enable them to properly perform
matters of things involving the performance of the
the duties entrusted to them. It is understood and
Contract. DBE appoints _
agreed that none of the parties hereto nor any of
_ _ _ _ _ _ _ _ _ _ _ _ as its designee and the designees or alternates shall have the power to
borrow moneys for, in the name of, or to pledge the
credit of, the other party to this agreement or on
as its alternate. Investor appoints _ their joint credit.

_______________as its designee 8. In the event that either member of the

Administrative Committee shall be temporarily
and _
incapacitated ot temporarily not available to act or
as its alternate. The aforesaid members of the
if either member of the Administrative Committee

25

 shall die or become permanently incapacitated or (e) the employment and discharge of all superviso­
unavailable to act, and if that Joint Venturer does ry, skilled and unskilled employees;
not want the alternate to fulfill the position of
(0 representation of the Joint Venture in matters
designee, then a successor for such member shall be
relating to labor;
named by the Joint Venturer who appointed such
member. In the event of the temporary incapacity (g) the submission, certification and appropriate
or non-availability or death or permanent incapaci­ documentation of all vouchers and payment
ty or non-availability of any alternate, the Joint requests to the Owner for payments due the
Venturer which appointed such alternate shall Joint Venture;
appoint a successor alternate either temporarily or
(h) the power to do everything the Investor may
permanently as may be necessary. Any successor
deem necessary to carry out and complete the
member or alternate appointed, as hereinabove pro­
Contract.
vided, shall have every power to act hereunder that
was possessed by his predecessor under this agree­ 10. If the Administrative Committee is unable to agree
ment. Either party at any time and from time to on the Project Manager or if the employee designat­
time may change its designee or alternate by advis­ ed to act as Project Manager shall fail, refuse, or be
ing the other of such appointment, but until the unable for a period of 30 days to fully and complete­
appointment and notification of the appointment ly perform the duties and obligations of the Project
to the other party as aforesaid, each party shall be Manager, then Investor, has the absolute and sole
be bound conclusively by the acts and decisions of right to designate the Project Manager and any suc­
the designee or alternate previously appointed by it cessor to said Project Manager until all the
hereunder in the same manner and with the same obligations of the Joint Venture are completed and
effect as if such action had been taken or decision satisfied, or until any loans or other financial com­
made by authority of its proper officers thereunto mitments of Investor are concluded and satisfied in
duly authorized by its board of directors. full, or until the obligations of the Joint Venture
and Investor on the Bonds and related Indemnity
9. The Administrative Committee shall appoint a
Agreements posted in connection with the
Project Manager to administer the work on the
Contract are released, whichever is later.
Project whose duties and responsibilities shall
include: 11. Meetings of the members of the Administrative
Committee for the transaction of the business of
(a) the supervision and coordination of the work in
the Joint Venture may be called at such time and
accordance with the terms and conditions of
such place, subject to reasonable notice, by either
the Contract;
Joint Venturer or by any member of the
(b) the general direction and supervision of the Administrative Committee as may be considered
Contract to be performed directly by the Joint necessary or desirable.
Venturer;
12. A Joint Venture office shall be established at the
(c) the establishment and operation of the adminis­ office of Investor, until the financial commitments
trative functions of the Joint Venture such as of the Joint Venture are concluded, where all
payroll; accounting, payroll, general office procedures and
all other Joint Venture books and records will be
(d) the power in the name of the parties to negoti­
located and handled.
ate, execute and deliver purchase orders, rental
agreements, subcontracts and other agreements; 13. The working capital and general funds of the Joint
and Venture shall be deposited in one or more general

26

 checking accounts of the Joint Venture. otherwise and all other expenses and obligations
Withdrawals from such general accounts shall be incurred or suffered in and about the performance of
made upon the joint signatures of the Designees or said Project of a nature under sound accounting
by any two persons from time to time mutually practices properly chargeable as a cost of the perfor­
agreed upon by the respective Designees. In addi­ mance of the Project. Said costs shall not include
tion, there will be established by mutual agreement any charges against the Joint Venture for any over­
of the parties one or more payroll and tax or other head expenses or charges of the main or branch
accounts in the bank as designated or in such other offices of the parties hereto or for the time which
bank or banks and subject to withdrawal upon the may be expended in connection with the work by
sale joint signatures of the Designees or by any two any of the parties hereto or their officers or employ­
persons from time to time mutually agreed upon by ees, unless assigned to this Project, and except as
the respective Designees. may be approved by the Designees. Travel expenses
and subsistence during travel, reasonably incurred
14. Irrespective of anything in this agreement to the
in the performance or interest of the work under the
contrary, it is specifically understood and agreed
Contract, shall be treated as a part of the cost of the
that in the event of a disagreement between DBE
Project and shall be paid with Joint Venture funds.
and Investor, that disagreement or dispute shall be
resolved by the Project Manager whose decision 17. The Joint Venture shall carry adequate public liabil­
shall be binding upon the parties and if the ity, property damage and worker's compensation
Designees cannot resolve payment of any sums then insurance, as well as any other insurance that may
the Project Manager is authorized on his signature be required or advisable from time to time, so as to
above to endorse any such checks for payments of adequately protect the parties hereto and adequately
any statements or bills he believes are valid debts of hold them harmless from any accident or claim
the Joint Venture. which may arise in the course of the performance of
the Contract, the cost of which insurance attribut­
15. The Joint Venturers shall furnish such parts of their
able to the Joint Venture shall be chargeable
respective organizations and personnel for the per­
thereto. Fidelity bond coverage in amounts and
formance of the Contract as may be requested by
form satisfactory to the Designees shall be main­
the Administrative Committee, and each Joint
tained on such persons directly connected with
Venturer further expressly agrees that it shall con­
performance of the Contract as the Designees may
tribute and make available for the Joint Venture, as
require and all such fidelity bond premiums shall be
far as is reasonably practicable, for the performance
part of the cost of the Contract. All such insurance
of the Contract the utmost skill, experience and
and bonds that may from time to time be carried
knowledge of their respective organizations. Such
shall be obtained through the insurance agency for
personnel shall be provided on as equal a basis by
Investor and the designees on the Administrative
each party as possible.
Committee can determine how the brokerage com­
16. In addition to the other items set forth herein, cost missions will be divided, if at all, between the
of the Contract shall consist of the costs of all sub­ insurance agency for the DBE and the insurance
contracts, labor, material, services, supplies, plant agency for the Investor if those are not the same
and equipment purchased or rented, bonds, insur­ agency.
ance, taxes on labor and material, property taxes on
18. Except as otherwise expressly agreed between the
equipment, permits, customs, imports, duties,
Joint Venturers, no Joint Venturer shall be entitled
charges, legal fees, accounting fees, liabilities and
to any compensation other than by participation in
losses not covered or compensated by insurance or
the profits and earnings of the Joint Venture as

27

 hereinbefore provided for services rendered by it on thereafter remaining, inclusive of reserves and

behalf of the Joint Venture. unexpected balances thereof, when determined by

the Project Manager to be no longer required, shall
19. The Administrative Committee shall prescribe the be distributed to, and divided among, the parties in
methods of accounting in all matters relating to the the proportions set forth in Paragraph 3 hereof.
affairs of the Joint Venture and the performance of
the Contract. The books of account of the Joint 21. It is contemplated that in the performance of the
Venture may be audited from time to time by an work under the Contract, plant and equipment
independent auditor selected by the Administrative owned by the parties hereto may be used. Each
Committee, the cost of any such audit to be paid party agrees to rent to the Joint Venture on terms, if
from the funds of the Joint Venture. Periodic audits any, established in the Contract or on terms
upon the request of either party hereto, shall approved by the Administrative Committee, such
include comparison between the items of actual of its plant and equipment as is available and suit­
cost and the items set up in the estimate of the cost. able for the performance of said work and as
Upon completion of the Contract, a complete and requested by the Administrative Committee. The
final audit and true and correct accounting shall be proceeds of such plant and equipment rentals shall
had of all expenses and all accounts, vouchers, belong to, and be credited and paid to, the Joint
records and data relating to the Contract and Joint Venturer furnishing such plant and equipment, and
Venture. The cost of all such audits shall be a part the other Joint Venturer shall have no interest in
of the Contract of the Project and to the extent such plant, equipment, and equipment rentals and
that records must be kept subsequent to the com­ no responsibility in connection therewith.
pletion of the Contract, pursuant to the provisions
22. Upon completion of the Project, the parties,
of law, the same shall be kept at such place or places
through their respective representatives designated
as the designees may from time to time determine
herein, will secure a bona fide bid for each item or
and the cost hereof shall be borne equally by the
group of items of equipment or tools purchased by
parties.
the Joint Venture from one or more reputable
20. Upon completion and satisfaction of all obligations equipment dealers, and each of the parties shall
of the Joint Venture, including all work in connec­ have the right to purchase any item or group of
tion with the Project, upon satisfaction in full of all items at the highest prices bid therefor by such deal­
loans and other financial commitments of Investor ers. If more than one party shall desire the same
in connection with the Project and Contract, upon item or items of equipment or tools, at a price(s) so
release of all obligations of the Joint Venture and determined, and a mutually satisfactory adjustment
Investor on the Bonds and related indemnity agree­ is not effected by agreement between or among
ments posted in connection with the Contract, them, then such item or items or equipment or
after payment of and provision for all costs and lia­ tools, in like manner as items therefor not desired
bility incurred in the performance of the Contract, by the parties, shall be disposed of by sale, for the
including liability admitted or reasonably anticipat­ best price obtainable, to outsiders. The profits from
ed on, or in relation to, claims not secured by said sale will be divided according to their respec­
insurance, and after provision for such reserves in tive interests in the Joint Venture.
respect of guarantees and contingencies as the
23. In the event of the bankruptcy or insolvency of one
Project Manager shall deem necessary, and after
of the parties hereto, or should one of the parties
repayment to any party of the amount(s) it
hereto commit any act of bankruptcy or take advan­
advanced to the Joint Venture as working capital or
tage of any bankruptcy, reorganization,
otherwise, any funds of the Joint Venture then and
composition, or arrangement statute, then notwith­

28

 standing anything in this agreement to the contrary, prior written consent of the other party first
such party (hereinafter referred to as the "insolvent obtained, assign, pledge, or hypothecate its rights,
party") from and after said date, and its designee title and interest in, and to, such moneys as it may
and alternate, shall cease to have any say or voice be entitled to receive hereunder to the lending
in the management of the Project and the institution as security for said banking accommoda­
Contract, and whenever it is provided in this agree­ tions.
ment that the act, consent or decision of the parties
26. The right of any person, firm, or corporation claim­
hereto is required, it shall be deemed to mean the
ing by, through, or under, any party hereto
act, consent, or decision of the other party hereto
(including but not limiting the same to judgment
excluding the insolvent party. However, the insol­
administrators) to assert any claim against the right,
vent party shall remain liable for its share of any of
title and interest of any party hereto shall be limited
the losses as provided in this agreement, to be paid
solely to the right to claim or receive, after comple­
at the time and in the manner as in this agreement
tion of the Project and the Contract, after the
provided. Should such insolvency, bankruptcy, or
closing of the accounts of the Joint Venturers, and
other proceeding of the type above described caused
the satisfaction and release of all loans, obligations,
damage or extra cost to the other party, such dam­
Bonds and related indemnity agreements in accor­
age or extra cost shall be charged against the
dance with Paragraph 17 hereof, the distributive
interest of the insolvent party.
share of such party in the net proceeds payable
24. The relationship between the Joint Venturers shall hereunder, whether consisting of the return of any
be limited to the performance of the Contract contribution made to working funds hereunder,
under the terms of this agreement, which shall be earnings, or other avails, and then only subject to
construed and be deemed to be a Joint Venture for the equities and prior rights of the other party as in
the performance only of the Contract between the this agreement set forth.
joint Venturers and the Owner. Nothing herein
27. No claims arising out of, or related to, the operation
contained shall be construed to designate either
or conduct of the Joint Venture asserted against one
Joint Venturer as the general agent of the other
or both of the Joint Venturers by a claimant other
Joint Venturer, or in any manner to limit either of
than a Joint Venturer shall be settled except with
the Joint Venturers in the conduct of their respec­
the unanimous consent of the members of the
tive businesses or activities in the making of other
Administrative Committee, if then in existence, or
contracts or the performance of other work, or
by both of the Joint Venturers, provided that the
impose any liability except that of performance of
consent of any insolvent Joint Venturer or of any
the terms, provisions and conditions of this agree­
Joint Venturer who shall deny liability to the other
ment.
Joint Venturer with respect to such claim shall not
25. Neither this agreement nor any interest of the par­ be required. Notwithstanding anything herein to
ties or either of them herein, including interest in the contrary, if the Joint Venturers or the members
any moneys belonging to, or which may accrue to, of the Administrative Committee cannot agree on
the Joint Venture in connection with the Contract the settlement or resolution of any claims, then
or any interest in the joint accounts or in any prop­ such determination of the same will be made by the
erty of any kind employed or used in connection Project Manager.
with the Contract, may be assigned, pledged, trans­
28. All questions relative to the execution, validity,
ferred, or hypothecated, except that in the event
interpretation and performance of this agreement
one of the parties desires to obtain banking accom­
shall be governed by the laws of the State of
modations for the purpose of this agreement and
the Contract, such party may, but only with the

29

29. This agreement shall remain in effect only for such INVESTOR:
length of time as may be necessary to carry out the
undertaking and the terms, provisions and condi­
By
tions of this agreement supercedes all prior
agreements between the parties. The foregoing pro­ Its
visions and stipulations of this agreement shall bind
the Joint Venturers and their respective successors
and assigns. Attest:

30. All notices required to be given or which may be

Secretary
given under any of the provisions of this agreement
by either party hereto to the other shall be given by
sending such written notice to the Joint Venturer DBE:
entitled thereto by mail addressed to the office of
such Joint Venturer at its last known address.
By
31. This agreement may be executed in any number of Its
counterparts, each of which shall be deemed an
original and together shall constitute a single
instrument. Attest:

IN WITNESS WHEREOF, the parties have executed

this Agreement on the day and year above noted. Secretary

30

 FORMH

Financial and Management Assistance Agreement

THIS AGREEMENT, made and entered into this bills and payroll and any costs, expenses and income
_ day of , 199_ , by and of any joint venture between DBE and Contractor
shall be recorded therein; e) training employees of
between

DBE to perform such services.

(hereinafter referred to as "Contractor"), First Party,

and ~ _
2. DBE does not have anyone on its staff that can satis­
(hereinafter referred to as "DBE"), Second Party,
factorily perform the services to be performed by
Contractor and Contractor shall also try to train oth­
WITNESSETH: ers employed by DBE to perform those services with
the ultimate goal being to enable DBE to perform
WHEREAS, DBE is a minority contractor which these services without assistance by Contractor.
does not have the funds and personnel to perform cer­ Other than in the process of training as herein pro­
tain supervisory and managerial functions; vided, Contractor shall have a) no authority to direct
WHEREAS, DBE considers it necessary to employ or in any way control employees of DBE, b) no voice
Contractor to perform certain financial, supervising and whatsoever in the hiring or firing of employees of
managerial functions for its own business and for any DBE, and c) no control whatsoever over the time,
joint venture entered into with Contractor; manner or wages paid to employees of DBE. Under
no circumstances shall Contractor have any responsi­
WHEREAS, Contractor is engaged in construction bility or obligation for compensation due or payable
for a number of years and has the personnel and exper­ to employees of DBE and any joint venture, taxes
tise in managing and operating construction operations;
and fringes measured by, or in relation to, the
WHEREAS, Contractor is interested in entering amount of such compensation, insurance premiums
into a joint venture arrangement with DBE to assist and any other direct or indirect costs, or otherwise.
DBE in running its business; 3. For the services performed by Contractor under this
NOW, THEREFORE, in consideration of the Agreement, DBE shall pay Contractor $ _
premises and the mutual covenants expressed therein, per month for each joint venture project of the par­
IT IS AGREED: ties. In addition, Contractor shall be paid by DBE
for any employee of Contractor who shall be
1. DBE hereby hires and employs Contractor to perform
employed by DBE or any joint venture between DBE
the following services on any project undertaken by
and Contractor.
DBE in any joint venture with Contractor a) all basic
managerial and administrative functions normally 4. The records, books of account and other papers of
performed in the management of a like contracting every character and description pertaining to any
concern subject to direction from the directors of joint venture between the parties shall be kept at
DBE; b) estimating the work c) obtaining insurance; Contractor's office and shall not be removed there­
and d) maintaining all accounting records and per­ from, and shall be open to inspection and audit by
forming all accounting services including keeping DBE during normal business hours after reasonable
complete books of account, including payment of all notice.

31
5. If either party to this Agreement shall fail to perform 7. This Agreement and all questions relative to the exe­
as herein provided and shall fail to commence to rec­ cution, validity, interpretation and performance of
tify such default within five (5) days after the other this Agreement shall be governed by, and construed
party gives it written notice thereof, then such non­ in accordance with, the laws of the State of
defaulting party may terminate this Agreement by __________ and, if there is any dispute

giving the defaulting party notice that the between the parties, then that suit can only be
Agreement is terminated. This Agreement, unless brought and maintained in the _
terminated as provided in the immediately preceding _ _ _ _~ Court of

paragraph, shall continue in force and effect for _ _ _ _ _ _ _ _ _ _ _ _ _ _ County, State of

years from the date hereof and it shall automatically ________ and venue and jurisdiction shall
renew itself from year to year thereafter unless at rest solely in said County, and nowhere else.
least ninety (90) days prior to the end of any such
IN WITNESS WHEREOF, the parties hereto have
Agreement year either party shall give the other
caused this Financial Assistance Agreement to be exe­
party written notice that the same shall expire at the
cuted by their respective officers hereunto duly
end of the Agreement year then in force which shall
authorized on the day and year above written.
be deemed to end on of each year during
continuance of this Agreement. Notwithstanding
anything herein to the contrary, DBE cannot exer­
cise its right not to renew the contract until a) all CONTRACTOR: _
the work on all joint ventures between DBE and
Contractor are completed and accepted and all liabil­
By
ities and warranties in connection therewith are fully
President (First Party)
satisfied; b) any loans which Contractor has made to,
or for, DBE or has guaranteed for DBE individually or
for any joint venture between DBE and Contractor
Attest:
are satisfied and no longer remain unpaid and
Contractor is relieved of its obligations thereon, and
Secretary
c) any obligation or exposure on any bonds or indem­
nification agreements as to which Contractor has
acted as an indemnitor remains open, not cancelled
or unsatisfied either for DBE or any joint venture DBE: _
between DBE and Contractor.

6. Nothing herein contained shall be considered to con­ By

stitute the parties hereto as partners nor to constitute President (Second Party)
any party hereto as the general agent of any other
party and nothing in this Agreement shall be con­
strued as a limitation or restriction upon the right Attest:
and power of either party to carryon its separate
business for its sole benefit. The only arrangement Secretary
between the parties separate from this Agreement
would be any joint venture agreements between the
parties which are or will be set forth in specific writ­
ten agreements.

32

 Chapter 6

Section 8(a) Arrangements

Agreements for performing meet the size standard for the SIC other resources to be furnished
Section 8(a) work are covered by the code industry designated for the con­ by each Participant to the joint
Small Business Act, as amended par­ tract. venture, with a detailed schedule
ticularly § 7(j)(l0), 15 USC of cost or value of each.
A violation of any of the applica­
636(j)(l0) and 13 CER. §124.321, ble rules or regulations has grim 6. A provision specifying the
§124.314 and 48 CER. § 9.6. As consequences since a violation of responsibilities of the parties
will be discussed, these arrangements any of the required provisions of a with regard to contract perfor­
thus are far more restrictive than an joint venture agreement may cause mance, source of labor and
arrangement with a disadvantaged the SBA to direct the 8(a) concern negotiation of the 8(a) contract
party who is not 8(a) certified. to cancel the agreement or terminate and any subcontracts to the joint
The 8(a) concern shall notify the the concern's Program Participation. venture.
applicable field office and request The following provisions shall be
7. A provision specifying that an
approval for any contemplated agree­ included in all 8(a) joint venture
approved joint venture agree­
ments, arrangements or agreements:
ment may be amended in writing
understandings, regardless of type, 1. A provision setting forth the pur­ from time to time by the parties,
that may in any way give an interest pose of the joint venture. but that all amendments, exten­
to any person, other than those upon
2. A provision designating the par­ sions and modifications to, and
whom eligibility was based, in the
ties to the joint venture as deviations from, requirements of
operation, management or control of
co-managers. the agreement shall be subject to
the 8(a) concern. These include,
prior approval by the
but are not limited to, joint venture, 3. A provision stating that not less AA/MSB&COD or his/her
management, sponsorship, or train­ than 51 percent of the net profits designee.
ing agreements. Joint venture, earned by the joint venture shall
management and similar agreements be distributed to the 8(a) con­ 8. A provision providing for the
between an 8(a) concern and a part cern. (The distribution of establishment of a working capi­
owner of the concern are prohibited. proceeds shall be based on the tal fund at the onset of contract
There are specific size limitations after tax net profits of the joint performance. A provision pro­
so that an 8(a) concern cannot enter venture). viding for maintaining and
into a joint venture with any con­ adding to the working capital
4. A provision providing for the fund throughout performance of
cern other than one that meets the establishment and administra­
8(a) standards except for certain the contract.
tion of a special bank account in
Program Participants owned and the name of the joint venture. 9. An employee of the 8(a) concern
controlled by Indian Tribes. An 8(a) This account shall require the must be the designated project
concern entering into a joint venture signature of all participants to manager responsible for contract
agreement with another concern is the joint venture or designees for performance.
considered to be affiliated for size withdrawal purposes. All pay­
purposes with the other concern 10. Accounting and other adminis­
ments due the joint venture for trative records relating to the
with respect to performance of the performance on the 8(a) subcon­
8(a) subcontract. As such, the joint venture shall be kept in the
tract shall be deposited in the office of the 8(a) concern, unless
annual receipts or employees of the special account from which all
other concern are included in deter­ approval to keep them elsewhere
expenses incurred under the sub­ is granted by the
mining the size of the selected 8(a) contract shall be paid.
concern. The combined annual AA/MSB&COD based upon the
receipts or employees of the concerns 5. An itemized description of all firm's written request. Upon
major equipment, facilities, and completion of the contract per­
entering into the joint venture must

33

 formed by the joint venture, the of the contract in case of organi­ Program eligibility is based.
final original records shall be zational dissolution or Management agreements are intend­
retained by the 8(a) concern. bankruptcy of one of the parties ed to provide 8(a) concerns with
to the joint venture. advice and assistance, not to permit
11. Quarterly financial statements
a second person or business entity to
showing cumulative contract 3. The joint venture agreement
actually perform the tasks required
receipts and expenditures shall specify an arbitrator to set­
under a particular 8(a) award. The
(including salaries of the joint tle any dispute that may arise,
management concern cannot per­
venture's principals) shall be sub­ and shall delineate duties and
form any services for the 8(a)
mitted to SBA not later than 45 responsibilities for continuing
concern that can be obtained
days after each operating quarter the performance of the contract
through SBA or at a reasonable cost
of the joint venture. while disputes are being
in the open market. The 8(a) con­
resolved.
12. A project-end profit and loss cern shall submit to SBA itemized
statement shall be submitted no 4. The 8(a) partner to an eligible invoices for services received from
later than 90 days after comple­ joint venture, and not the aggre­ the management concern which
tion of the contract including a gate of all parties to the joint shall be compared to assure that they
statement of final profit distribu­ venture, must perform the conform with the management
tion. applicable percentages of work agreement and approved for payment
required by [13 C.ER. § 124.314], by the SBA prior to payment by the
Further requirements of a joint
[13 C.ER. §124.321(f)]. 8(a) concern.
venture arrangement are:
1. All parties to the joint venture A Management Agreement is not These arrangements are governed
must sign such documents as are recommended since it is so restric­ by very specific rules and regulations.
necessary to obligate themselves tive. For example, a Management A teaming agreement - joint venture
to ensure performance of the Agreement cannot transfer actual which complies with the present reg­
8(a) contract. [C.ER. § control of the day-to-day operations ulations is attached. For the ease in
124.321(e)]. of the 8(a) concern to another con­ considering this, the respective sec­
cern, whether disadvantaged or not, tions of the applicable regulations
2. The joint venture shall provide or to an individual(s) other than the are listed at the end of various para­
for continuance of performance individual(s) upon whom 8(a) graphs. •

34

 FORMJ

Teaming Agreement

This Teaming Agreement, made and entered into Venture") in order that their respective interests under
this _ _ day of , 199_ _ , by the Contract, including services to be rendered, work to
and between ,a be done, profits derived therefrom, and liabilities for
_ _ _ _ _~ corporation, with its losses arising thereunder, be defined by an agreement in
principal office and place of business in _ writing. (48 C.ER. §9.6)
(hereinafter,
NOW, THEREFORE, said parties hereto hereby
"Section 8(a)") and ~ _
form a team arrangement and constitute themselves as
a corporation, with
Joint Venturers for the purpose of performing and com­
its principal office and place of business in _
pleting the Contract, but not for any other purpose, it
_ _ _ _ _ _~ (hereinafter,
being expressly understood that this Agreement con­
"Participant") (both Section 8(a) and Participant col­
templates only the furnishing and performance of the
lectively are sometimes referred to as the "Joint
work, labor, service, materials, plant, equipment and
Venturers").
supplies necessary for the completion of the Contract
defined herein and that the parties are not making any
WITNESSETH:
permanent partnership agreement or joint venture
agreement to bid for, or undertake, any contracts other
WHEREAS, Section 8(a) is a Minority Business
than said Contract.
Enterprise, certified by the Small Business
Administration under Section 8(a) of the Small To carry out the Joint Venture the parties hereto
Business Act, and mutually agree as follows:

WHEREAS, the Joint Venturers jointly submitted a 1. The work to be performed by the Joint Venture shall
bid to, and a contract (hereinafter referred to as a consist of all obligations required of the Joint
"Contract" as more fully defined in Section 1 hereof) Venture pursuant to the Contract and all change
has been awarded by _ orders and supplemental agreements entered into
(hereinafter referred to as the "Contractor"), for the with the Contractor in connection with the
construction of Project No. (hereinafter Project. Hereinafter, the term "Contract" shall
referred to as the "Project"); and, refer to and include the Contract awarded to the
Joint Venture by the Owner with respect to the
WHEREAS, Section 8(a) does not have the finan­
Project, together with all change orders and supple­
cial capacity to obtain the necessary payment and
mental agreements relating thereto. The Joint
performance bonds and does not have sufficient experi­
Venture shall operate under the name of _
ence and funds to handle the financial and managerial
commitments arising from the bid and Contract, and
_ _ _ _ _~ . Each of the parties
Participant on certain terms is willing to obtain such
shall sign such documents as are necessary to oblig­
bonds and provide such finances and managerial assis­
ate themselves to ensure performance of the
tance; and
Contract. 13 C.ER. §124.321(c)(2).
WHEREAS, the parties hereto desire to form a team
arrangement (hereinafter referred to as the "Joint

35
2. Each of the parties shall have an undivided interest have been designated by the Joint Venturers to act
in the Joint Venture and shall participate in its net for, and on behalf of, the party each one represents
gains and profits and share in its losses and liabili­ with full authority in any matter or thing in con­
ties in the proportion set opposite its name in the nection with or relating to the Contract, including,
next succeeding sentence. In addition, the interests but not limited to the negotiation and execution of
of the parties hereto in and to the Contract, all contracts (including but not limited to contracts for
monies which may be derived from the performance labor and materials from the parties to this
thereof, and all obligations and liabilities of each of Agreement and other subcontractors), the determi­
the parties hereto as between themselves in connec­ nation of working funds, materials, plant and
tion with the Contract, and with respect to any and equipment to be supplied, the manner of perfor­
all liabilities, costs and expenses in connection mance, the assignment of work between the Joint
therewith, shall be in the following proportions, Venturers, the settlement of disputes with the
viz.: Contractor and with others, changes and modifica­
tions in the extent or scope of the work, and the
organization of the Joint Venture and its personnel.
PERCENTAGE
Actions and decisions of the Administrative
OF AFTER TAX PERCENTAGE
Committee shall be by unanimous vote and shall as
NAME NET PROFIT OF LOSSES
to any and all matters having to do with the Joint
Section 8(a) 51 % 0% Venture, the Project, the Contract, the perfor­
Participant 49% 100% mance thereof under this Agreement or otherwise,
the interpretation of this Agreement, and all claims
13 C.ER. §124.321(c)
and disputes hereunder, be final, conclusive and
binding on the Joint Venturers with the same force
3. Each of the parties shall be a co-manager of the
and effect as if each Joint Venturer had specifically
Joint Venture and in order to facilitate the handling
or affirmatively taken such action or decision. The
of all matters and questions in connection with the
Administrative Committee shall be given such spe­
performance of the Contract by the parties hereto,
cific powers in addition to the foregoing as the Joint
an Administrative Committee shall be formed and
Venturers may from time to time unanimously dele­
each of the parties shall appoint the following rep­
gate. The Administrative Committee shall also
resentatives (herein called the "Designees" and
have the power to delegate to one or more persons
"Alternates") to act for each respective party in all
such of its powers as it deems necessary or conve­
such matters with full and complete authority in its
nient in the best interests of the parties hereto. If
behalf in relation to any matters or things in con­
necessary or desirable, each of the parties hereto
nection with, arising out of, or relative to, this Joint
shall execute and deliver to their respective
Venture, and to act for and bind the respective par­
Designees such powers of attorney as may be
ties to any and all matters or things involving the
required to enable them to properly perform the
performance of the Contract. Section 8(a) hereby
duties entrusted to them. It is understood and
appoints _
as its Designee and _ agreed that none of the parties hereto nor any of
their Designees or Alternates shall have the power
as its Alternate. Participant hereby appoints
to borrow money for, in the name of, or to pledge
__________________ as its
the credit of, the other party to this Agreement,
Designee and _
either individually or on joint credit with such a
as its Alternate. The aforesaid Designees of the
party. 13 C.F.R. §124.32l(c).
Administrative Committee and their Alternates

36

4. In the event that either Designee shall die, become the Joint Venture;
permanently or temporarily incapacitated, or (d) the establishment and operation of the adminis­
become permanently or temporarily unable or trative functions of the Joint Venture, including
unavailable to act, and if that Designee's respective but not limited to such matters as payroll; and
party does not want the Alternate to fulfill the posi­ (e) the power in the name of the parties to negoti­
tion of Designee, then a successor for such Designee ate, execute and deliver purchase orders, rental
shall be named by the Joint Venturer who appoint­ agreements, subcontracts and other agreements
ed such Designee. Any such successor member or (including but not limited to contracts with the
Alternate appointed as hereinabove provided shall individual Joint Venturers), and to take such
have every power to act hereunder that was pos­ steps and otherwise obligate the parties as the
sessed by his predecessor under this Agreement. Project Manager may deem necessary in con­
Either party at any time and from time to time may nection with performing the obligations of the
change its Designee or Alternate by advising the Contract.
other of such appointment, but until the appoint­
In the event (1) the Administrative Committee
ment and notification of the appointment to the
is unable to agree on the Project Manager, or (2)
other party as aforesaid, each party shall be bound
the person designated to act as Project Manager
conclusively by the acts and decisions of the
shall fail, refuse or be unable for a period of 30 days
Designee or Alternate previously appointed by it
to fully and completely perform the duties and
hereunder in the same manner and with the same
obligations of the Project Manager, or (3) either
effect as if such action had been taken or decision
Joint Venturer notifies the other in writing that it
made by authority of that party's officers duly
would like to replace the Project Manager and the
authorized by its board of directors.
members of the Administrative Committee cannot
5. Meetings of the Administrative Committee for the agree on a replacement, then under any of these sit­
transaction of the business of the Joint Venture may uations, Participant has the right to designate the
be called at such time and place, subject to reason­ Project Manager and all its successors until (a) all
able notice, by either Joint Venturer or by any the work and obligations of the Joint Venture on
member of the Administrative Committee as may the Contract are completed, executed and satisfied;
be considered necessary or desirable. (b) all liabilities and warranties in connection
therewith are satisfied; (c) the obligations of the
6. The Administrative Committee shall appoint a
Joint Venture and Participant on the Bonds and
Project Manager whose duties and responsibilities
related Indemnity Agreements posted in connec­
shall include:
tion with the Contract are released; and (d) all
loans guaranteed by Participant for the Joint
(a) the general direction, supervision and coordina­
Venture have been satisfied and paid in full,
tion of performance under the Contract by the
whichever contingency shall occur last.
Joint Venturers and the Joint Venture's sub-con­
tractors and suppliers (if any); 7. A Joint Venture office shall be established at the
(b) the employment and discharge of all supervisory, office of Section 8(a) until the Joint Venture's
skilled and unskilled employees and representa­ financial commitments are concluded, where all
tion of the Joint Venture in all matters relating accounting, payroll, general office procedures and
to labor; all other Joint Venture books and records will be
(c) the submission and certification of all vouchers, located and handled. Participant will be paid
payment requests and other appropriate docu­ $ per month for maintaining such
mentation to the Contractor for payments due book until all such record keeping is no longer

37

required for maintaining the books and records and Joint Venturer further expressly agrees that it shall
assisting and teaching personnel selected by Section contribute and make available for the Joint Venture
8(a) on how to maintain such books and records on as far as is reasonably practicable for the perfor­
this and other projects. The working capital and mance of the Contract the utmost skill, experience
general funds of the Joint Venture shall be deposit­ and knowledge of their respective organizations.
ed in a special checking account of the Joint
10. All monies received from the Contractor and from
Venture. Withdrawals from such general accounts
others in connection with the performance of the
shall be made upon the joint signatures of the
Contract shall be deposited in the special bank
Designees or by any two persons from time to time
account in the name of the Joint Venture. 13 CER.
mutually agreed upon by the respective Designees.
§124.321(c)
In addition, there will be established by mutual
agreement of the parties one or more payroll and 11. On completion of the Project, any working capital
tax or other accounts in a designated bank or in advanced by either Joint Venturer shall be repaid in
such other bank or banks, and subject to withdrawal full to the respective Joint Venturer prior to the dis­
upon the sole joint signatures of the Designees or by tribution of any gains or profits as hereinafter
any two persons frorrtilltime to time mutually agreed provided.
upon by the respective Designees. If the Designees
12. The business of the Joint Venture shall be conduct­
or the persons selected by the Designees cannot
ed and its property and effects held solely and
agree on whether to pay a certain bill or indebted­
exclusively in the joint names of both parties or in
ness, then the Project Manager has the authority to
the Joint Venture name.
endorse any such check and make any such with­
drawal and on the failure of the Project Manager to 13. The costs of the Contract shall consist of the costs
do so, then the Arbitrator has the authority to do of all subcontracts (including any and all subcon­
so. 13 CER. §124.321(c) tracts with the individual parties to this
Agreemenr), labor, material, services, supplies,
Notwithstanding anything in this Agreement to the
plans and equipment purchased or rented, bonds,
contrary, it is specifically understood and agreed
insurance, taxes on labor and material, property
that in the event of a disagreement between
taxes on equipment, permits, customs, imports,
Participant and Section 8(a), that disagreement or
duties, charges, legal fees, accounting fees, liabilities
dispute shall be resolved by _~ _
and losses not covered or compensated by insurance
or otherwise, and all other expenses and obligations
(hereinafter called the "Arbitrator") whose decision
incurred or suffered in and about the performance
shall be binding upon the parties. All work on the
of said Project of a nature that are properly charge­
Project shall continue during the pendency of any
able as a cost of the performance of the Project
dispute between the parties; and the Arbitrator, in
under sound accounting practices. Said costs shall
addition to deciding all disputes between the par­
not include any charges against the Joint Venture
ties, shall delineate the duties and responsibilities of
for any overhead expenses for the main or branch
the parties during the pendency of the dispute and
offices of the parties hereto or any labor or materials
prior to its resolution. U CER. §124.321(e)
suppfied by the parties hereto in connection with
The Joint Venturers shall furnish such parts of their the Project unless payment for such overhead,
respective organizations and personnel for the per­ materials and labor is expressly approved by the
formance of the Contract as may be requested by Project Manager or Administrative Committee.
the Administrative Committee and on payment Travel expenses and subsistence during travel rea­
terms approved by the Project Manager, and each sonably incurred in the performance or interest of

38

 the work under the Contract shall be treated as a after completion of the Contract including a state­
part of the cost of the Project and shall be paid with ment of final profit distribution. Upon completion
Joint Venture funds. of the Contract, a complete and final audit and true
and correct accounting shall be had of all expenses
14. The Joint Venture shall carry adequate public liabil­
and all accounts, vouchers, records and data relat­
ity, property damage and worker's compensation
ing to the Contract and Joint Venture. The cost of
insurance, as well as any other insurance that may
all such audits shall be deemed a cost of the
be required or advisable from time to time, so as to
Contract, and to the extent that records must be
adequately protect the parties hereto and hold them
kept subsequent to the completion of the Contract,
harmless from all accidents and claims which may
pursuant to the provisions of law, the final original
arise in the course of the performance of the
records shall be retained by Section 8(a) at such
Contract. The cost of such insurance attributable
place or places as the Administrative Committee
to the Joint Venture shall be chargeable thereto.
may from time to time determine and the cost
Fidelity bond coverage in amounts and form satis­
thereof shall be borne equally by the parties. 13
factory to the Administrative Committee shall be
C.ER. §124.321(e)
maintained on such persons directly connected
with performance of the Contract as the 16. Upon (a) completion and satisfaction of all obliga­
Administrative Committee may require, and all tions of the Joint Venture, (b) completion of all
such fidelity bond premiums shall be part of the work in connection with the Project, (c) satisfac­
costs of the Contract. All such insurance and tion in full of all loans and other financial
bonds that may from time to time be carried shall commitments of Participant in connection with the
be obtained through the respective brokers of each Project and Contract (if any), (d) release of all
of the parties hereto in such manner so that such obligations of the Joint Venture and Participant on
brokers shall receive equally the benefit of broker­ the Bonds and related Indemnity Agreements post­
age commissions for the placing of any such ed in connection with the Contract, (e) payment
insurance or bond. of, and provision for, all costs and liability incurred
in the performance of the Contract (including lia­
15. The Administrative Committee shall prescribe the
bility admitted or reasonably anticipated on or in
methods of accounting in all matters relating to the
relation to claims not secured by insurance) after
affairs of the Joint Venture and the performance of
provisions for such reserves in respect of guaranties
the Contract. The books of account of the Joint
and contingencies as the Project Manager shall
Venture may be audited from time to time by an
deem necessary, and (f) repayment to any party of
independent auditor selected by the Administrative
the amount(s) which such party advanced to the
Committee, the cost of any such audit to be paid
Joint Venture as working capital or otherwise, all
from the funds of the Joint Venture. Periodic audits
funds of the Joint Venture then and thereafter
upon the request of either party hereto shall include
remaining, inclusive of reserves and unexpected
comparison between the items of cost and the items
balances thereof when determined by the Project
set up in the estimate of the cost. Quarterly finan­
Manager to be no longer required, shall be distrib­
cial statements showing cumulative Contract
uted to and divided among the parties in the
receipts and expenditures (including salaries, if any,
proportions set forth in Section 2 hereof. Nothing
of the principals of the Joint Venture) shall be sub­
in this Agreement shall be construed as a limitation
mitted to the SBA not later than forty-five (45)
of the powers or rights of any party hereto to carry
days after each operating quarter of the Joint
on its separate business for its sole benefit except,
Venture. A Project-end profit and loss statement
however, the parties hereto shall cooperate with
shall be submitted no later than ninety (90) days

39

 each other according to the terms and spirit hereof requested by the Administrative Committee. The
in the performance of the Contract. proceeds of such plant and equipment rentals shall
belong to, and be credited and paid to, the Joint
17. Except as otherwise expressly provided herein or as
Venturer furnishing such plant and equipment, and
otherwise agreed between the Joint Venturers, no
the other Joint Venturer shall have no interest in
Joint Venturer shall be entitled to any compensa­
such plant and equipment rentals and no responsi­
tion other than by participation in the profits and
bility in connection therewith. Attached hereto as
earnings of the Joint Venture as hereinbefore pro­
Exhibit A and made a part hereof is an itemized
vided in Section 2 hereof, for services rendered by it
description of all major equipment, facilities, and
on behalf of the Joint Venture nor for any part of its
other resources to be furnished by each party to the
or their overhead expense, including salaries of
Joint Venture with a detailed schedule of cost or
their executives, officers, or employees, except the
value or rental charge of each. This Exhibit A shall
salaries, if any, allowed by the Owner as reim­
be supplemented as additions thereto are agreed
bursable under the Contract, and the salaries of all
upon between the parties.13 CER. §124.321(c)
personnel of the Joint Venturers assigned to, and
performing services for, the Joint Venture, which 19. Upon completion of the Project, the parties,
shall be paid out of the funds of the Joint Venture. through their respective members of the
Non-reimbursable costs incurred for the benefit of Administrative Committee, will secure a bona fide
the work or the undertaking shall, subject to the bid from one or more reputable equipment dealers,
approval of the Administrative Committee, be paid for each item or group of items of equipment or
out of the Joint Venture funds and be deemed costs tools purchased by the Joint Venture. Each of the
of the Contract and Project. Nothing contained parties shall have the right to purchase any item or
herein shall prevent the parties to this Agreement group of items, at the highest prices bid therefor by
from being compensated for their overhead, labor, such dealers. If both Joint Venturers shall desire the
materials and other items or services supplied to the same item or items at a price(s) so determined, and
Joint Venture pursuant to (a) subcontracts or pur­ a mutually satisfactory adjustment is not effected by
chase orders between the Joint Venture and the agreement between them, then such item or items
respective party, and (b) approvals that are received of equipment or tools, in like manner as items
for such compensation from the Administrative thereof not desired by the parties, shall be disposed
Committee pursuant to Section 13 of this of by sale for the best price obtainable to third-par­
Agreement. All such amounts expended for such ties.
overhead, labor, materials and other items or ser­
20. In the event of the bankruptcy or insolvency of one
vices supplied by the parties to this Agreement shall
of the parties hereto, or should one of the parties
be charged as "costs" to the Joint Venture under
hereto commit any act of bankruptcy or be named
Section 13 hereof and shall not be deemed distribu­
as debtor in any bankruptcy proceeding, or should
tions of any profits as provided in Section 2 hereof.
either party take advantage of any bankruptcy, reor­
18. It is contemplated that in the performance of the ganization, composition or arrangement statute,
work under the Contract, plant and equipment then notwithstanding anything in this Agreement
owned by the parties hereto may be used. Each to the contrary, such party (hereinafter referred to
party agrees to rent to the Joint Venture on terms, if as the "Insolvent Party") from and after said date,
any, established in the Contract, or on terms and its Designee and Alternate, shall cease to have
approved by the Administrative Committee, such any say or voice in the management of the Project
of its plant and equipment as is available and suit­ and the Contract. Whenever it is provided in this
able for the performance of said work and as Agreement that the act, consent or decision of the

40

 parties hereto is required, it shall be deemed to ing accommodations.

mean only the act, consent or decision of the other
23. The right of any person, firm or corporation claim­
party hereto who is not the Insolvent Party.
ing by, through, or under, any party hereto
However, the Insolvent Party shall remain liable for
(including but not limiting the same to judgment
its share of any of the losses as provided in this
creditors), to assert any claim against the right, title
Agreement, to be paid at the time and in the man­
and interest of any party hereto, shall be limited
ner as in this Agreement provided. Should such
solely to the right to claim or receive after comple­
insolvency, bankruptcy or other proceeding of the
tion of the Project and the Contract and after the
type above described cause damage or extra cost to
closing of the accounts of the joint Venturers, and
the other joint Venturer, such damage or extra cost
the satisfaction and release of all loans, obligations,
shall be charged against the interest of the
Bonds and related Indemnity Agreements in accor­
Insolvent Party. 13 C.F.R. §124.321(e)
dance with Section 16 hereof, the distributive share
21. The relationship between the joint Venturers shall of such party in the net proceeds payable hereunder,
be limited to the performance of the Contract whether consisting of return of any contribution
under the terms of this Agreement, which shall be made to working funds hereunder, earnings or other
construed and be deemed to be a joint Venture for avails, and then only subject to the equities and
the performance only of the Contract between the prior rights of the other party as in this Agreement
joint Venturers and the Contractor. Nothing here­ set forth.
in contained shall be construed to constitute the
24. No claims arising out of, or related to, the operation
joint Venturers partners or to constitute either Joint
or conduct of the Joint Venture asserted against one
Venturer the general agent of the other Joint
or both of the Joint Venturers by a claimant other
Venturer, or in any manner to limit either of the
than a Joint Venturer shall be settled except with
Joint Venturers in the conduct of their respective
the unanimous consent of the members of the
businesses or activities in the making of other con­
Administrative Committee, if then in existence, or
tracts or the performance of other work, or impose
of both of the Joint Venturers, provided that the
any liability except that of performance of the
consent of any Insolvent Party or of any joint
terms, provisions and conditions of this Agreement.
Venturer who shall deny liability to the other Joint
22. Neither this Agreement nor any interest of the par­ Venturer with respect to such claim shall not be
ties or either of them herein, including any interest required. Notwithstanding anything herein to the
in moneys belonging to or which may accrue to the contrary, if the Joint Venturers or the members of
Joint Venture in connection with the Contract, any the Administrative Committee cannot agree on the
interest in the joint accounts, and any interest in settlement or resolution of any claims, then such
any property of any kind employed or used in con­ determination of the same will be made by the
nection with the Contract, may be assigned, Arbitrator.
pledged, transferred or hypothecated, except that in
25. Notwithstanding anything herein to the contrary, it
the event one of the parties desires to obtain bank­
is further agreed that:
ing accommodations for the purpose of this
Agreement and the Contract, such party may, but a) Section 8(a) agrees to protect, defend, indemnify
only with the prior written consent of the other and save harmless Participant from and against
party first obtained, assign, pledge or hypothecate any and all losses, costs, claims, expenses,
its rights, title and interest in, and to, such moneys actions, judgments, demands, suits, liens, or
as such party may be entitled to receive hereunder obligations whatsoever made against or levied
to the lending institution as security for said bank­ against or collected from such parties, or either

41

 of them, or from or against such Bid Bond and excluding and excepting only the sole negli­
Payment and Performance Bonds arising out of gence of Participant, its agents or employees;
or in any manner resulting from, the Contract, and
the Project and the performance thereof;
e) Section 8(a) shall obtain General Liability and
b) In the event any claims shall be made against the Automobile Liability policies in limits accept­
Bid Bond and Payment and Performance Bonds able to Participant and shall cause such policies
provided hereunder, or in the event of any to be endorsed so as to name Participant as an
notice of default issued to Section 8(a) by the additional insured in connection with activities
Contractor or Contracting Officer. Section performed in connection with the Contract.
8(a) shall cause such claims to be settled and The insurance provider and terms and provi­
released and shall cause such default to be reme­ sions of such policies shall be acceptable to, and
died and withdrawn within ten (10) days from apptoved by, Participant.
such notice. If Section 8(a) shall refuse or fail
26. All questions relative to the execution, validity,
to comply with such notice, then Participant
interpretation and performance of this Agreement
shall have the right to take over on its own to
shall be governed by the laws of the State of
remedy any such claim or default and Section
_ _ _ _ _ _ _ _ _ , and if there is any dispute
8(a) agrees to protect, defend, indemnify and
between the parties, then the parties agree that suit
hold harmless Participant against, and to reim­
can only be brought and maintained in the
burse Participant for, all costs and expenses _ _ _ _ _ of _
incurred by Participant in connection there­
County, ,and venue and jurisdiction
with;
shall rest solely in County,
c) Participant shall at all times have authority to __________ and nowhere else. Any
take whatever actions it deems necessary to pro­ decision by the Arbitrator is subject to being con­
tect its interests and obligations under the Bid firmed and can be confirmed just the same as any
Bond and the Payment and Performance Bonds, other decision by an arbitrator or arbitration panel.
and Section 8(a) shall cooperate in a reasonable
27. This Agreement shall remain in effect only for such
manner with Participant's attempts to do so. By
length of time as may be necessary to carry out the
its signature on this Agreement, Section 8(a)
undertaking and the terms, provisions and condi­
consents to the foregoing provision;
tions of this Agreement.
d) Section 8(a) shall protect, defend, indemnify and
28. All notices required to be given or which may be
save harmless Participant from and against any
given under any of the provisions of this Agreement
and all losses, costs, liabilities, actions, suits,
by either party shall be given by sending such writ­
claims, judgments, demands or obligations
ten notice by mail addressed to the office of such
whatsoever brought or asserted against
Joint Venturer as first hereinabove set forth.
Participant by any person or persons (including
without limitation, employees of Section 8(a) 29. The foregoing provisions and stipulations of this
or its subcontractors) and arising out of or in Agreement shall bind the Joint Venturers and their
any manner associated with the performance of respective successors and assigns; provided, neither
the Contract and caused by or resulting ftom party may assign or delegate any of its duties,
the negligence of Section 8(a) and its agents responsibilities and liabilities hereunder without the
employees, subcontractors or suppliers, and prior, written consent of the other.

42

30. This Agreement may only be amended from time to

time by the parties in writing and all such amend­
ments shall be subject to the prior approval by the
appropriate personnel of the SBA or the designee
thereof. 13 CER. §124.321(c) (Date)

31. This Agreement may be executed in any number of

counterparts, each of which shall be deemed an
original and together shall constitute a single
instrument.

IN WITh1ESS WHEREOF, the parties hereto have

executed this Joint Venture Agreement on the day and
year first above written.

SECTION 8(a): _

By

Its

Attest:

Secretary

PARTICIPANT: _

By

Its

Attest:

Secretary

43
 Chapter 7

Silent Joint Venture

In a silent joint venture, one or silent joint venturer has no direct silent joint venture agreement is
more parties are named in the con­ standing with the owner which contained hereafter and paragraphs 1
tract and bond but there also are one would enable the silent venturer in and 3 prevent the non-financially
or more parties who are not dis­ his own right to step in and remedy sound party from proceeding without
closed. The usage of this the default. From the silent ventur­ the consent of the financial party.
arrangement arises under different er's standpoint, this arrangement has
There is very little, if any, protec­
circumstances, such as: serious shortcomings since the silent
tion for the silent, inactive venturer
venturer has all the liability of a
(a) one of the members of the joint whose capacity is little more than
member of a regular joint venture
venture is unable to obtain suffi­ that of an indemnitor to obtain
without having the necessary means
cient bonding or financing, or bonding. A suggested form of joint
to minimize his liability.
both, on his own and requests a venture agreement has been drafted
third party to arrange the bond­ If the intent of the parties is mere­ for the protection of the silent ven­
ing or financing, or both, in such ly to provide for an indemnitor for turer who is inactive on the job.
a way as not to disclose his the purpose of obtaining a bond,
If the silent venturer is going to
dependence on the third party; then the parties should consider
supply an equally proportionate
using the silent joint venture as a
(b) one of the parties to the venture amount of capital, equipment, per­
vehicle to achieve this purpose since
does not want his relationship sonnel and other items, then the
the liability of a joint venturer (even
disclosed, such as a supplier or standard form joint venture agree­
silent) could end up being consider­
subcontractor joint venturing ment in Chapter 4 hereof may be
ably broader than the obligation that
with a general contractor and at used with the recognition and
an indemnitor assumes to a surety.
the same time bidding other gen­ change to the agreement that the
eral contractors; and Prior to, and as a condition prece­ contract will be taken and the bond
dent of, issuing a bid bond to a silent issued solely in the name of one
(c) one of the members of the ven­
joint venture, the surety normally member of the joint venture and not
ture is not licensed in the area of
requires a written commitment from both members but with the further
the job and a disclosure of his
all the members, including the silent recognition that this in no way
involvement might cause the bid
venturer to execute the bond appli­ detracts from the fact that it is a
to be disallowed (caveat - this
cation and indemnity agreement and joint venture and the parties are
will not cure the problem in cer­
to be bound by the bid and the oblig­ equal joint venturers.
tain states and on certain types of
ations incumbent with a bid bond
project); and Most contracts with governmental
and indemnity agreement. If such is
agencies require each member of a
Irrespective of the fact that the not obtained, then the surety could
joint venture to be identified and to
responsibilities and obligations of the be in the position of having issued a
execute the contract and bond.
joint venturers to each other in a bid bond with the silent venturer
Thus, a silent joint venture agree­
silent joint venture are limited to unnamed and thus uncommitted.
those defined in the joint venture ment should not be used on any such
Similarly, if the party supplying the
agreement and application, certain project or contract since to do so
bonding capacity believes the bid is
could expose all parties to fraud and
common elements and principles too low or for some other reason does
other charges, both civil and crimi­
exist in all these arrangements. The not want to sign the take out
nal. •
silent joint venturer has no direct Payment and Performance Bonds,
responsibility or obligation to the then provision needs to be made to
owner for completion of the work. prevent the other venturer from
Similarly, upon default or non-per­ going forward without the consent of
formance by the joint venture, the all venturers. A form of a pre-bid

44
 FORM K

Pre-Bid Silent Joint Venture Agreement

This Agreement made this _ _ day of _ Contract if the same is awarded to, and accepted by,
199_ , by and between _ said Contractor and if the Surety issues each such
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ (herein Bond.
called "Contractor"), party of the first part, and
2. Irrespective of anything in the joint venture agree­
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ (herein
ment to the contrary, the parties hereto agree to be
called "Silent Venturer"), party of the second part,
joint venturers and as such to be jointly and severally
liable to each other for the submission of said bid and
WITNESSETH:
the performance of the obligations of the Bid and
other Bonds and Contract, if awarded.
WHEREAS, Contractor intends to submit a bid on
the Contract for construction of - - - - - - - - - 3. If the Contract is awarded to and accepted by
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ (hereinafter Contractor, and if the Surety issues the Payment
called "Project") ; and Bond and Performance Bond, the parties hereto shall
be and become joint venturers for the performance of
WHEREAS, if the Contract is awarded to
the Contract and as such the parties shall share in
Contractor and the Contract is entered into for its per­
the profits or losses thereof equally, or as otherwise
formance by Contractor and the owner, Contractor and
mutually agreed upon between them, shall be jointly
Silent Venturer intend to participate in a joint venture
and severally liable for performance in connection
for the performance of Contract and as joint venturers
with the bid that is submitted.
to share in the profits or losses thereof, to be jointly and
severally liable for its performance and to designate the 4. The parties agree to execute a formal Joint Venture
respective obligations of the parties and authority to Agreement in the form attached hereto as Exhibit A,
control the work or act as agent for each other; and which shall designate both the respective rights and
obligations of the parties and the authority to control
WHEREAS _
the work or act as agent for each other.
as Surety (hereinafter called "Surety") has agreed to
issue a Bid Bond in connection with the bid which the 5. If the Surety issues the Bid, Performance or Payment
parties propose to submit on the Project. Bonds relating to the bid or Contract on this Project,
then this Agreement may not be cancelled, abrogat­
NOW, THEREFORE, in consideration of the premis­
ed or amended except with the prior written consent
es and the mutual agreements of the parties hereinafter
of Surety and Silent Venturer.
set forth, and conditioned upon the issuance by Surety,
of a Bid or Proposal Bond in connection with said IN WITNESS WHEREOF, the parties have executed
Contract, the parties hereto agree as follows: this Pre-Bid Agreement in multiple copies on the day
and year first above written.
1. Contractor shall execute: a) all Indemnity and other
agreements required by the Surety in connection Witness or Attest:
with the Surety executing any Bonds as to the
Project, b) said Bid Bond in connection with the bid
Contractor
that is submitted, and c) any Performance and
Payment Bonds required in connection with the
Silent Venturer

45

 FORM L

Silent Joint Venture Agreement

THIS AGREEMENT, made and entered into this in executing the agreements contained in said appli­
_ _ day of ,199_, by cation.
and between , whose
2. If the Surety executes such Bonds after receiving an
principal office and place of business is at
application and indemnification by Silent Venturer,
herein
------------------ then Contractor covenants and agrees to pay Silent
called "Contractor", First Party, and _
Venturer the sum of $ , and to make and
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ whose
effect such payment by _
principal office and place of business is at _
Contractor acknowledges that its obligation to pay
said sum to Silent Venturer is absolute and shall not
herein called "Silent Venturer", Second Party.
be subject to abatement or diminution for any reason
or under any circumstances.
WITNESSETH:
WHEREAS, , as 3. In addition to the sums set forth in paragraph 2 here­
Owner, has indicated its intent to award to the of, Silent Venturer shall receive percent
Contractor a Contract in accordance with drawings and ( __ %) of the profits inuring from the perfor­
specifications prepared by _ mance of such Contract. Under no circumstances
______________ , Architect; and shall Silent Venturer be responsible for any losses
incurred by Contractor as a result of, or in the per­
WHEREAS, Contractor needs to obtain Payment
formance or non-performance of, this Contract.
and Performance Bonds ("Bonds") in the penal sum of
$ ; and 4.This instrument and Silent Venturer's joinder in said
application and the agreements provided for therein
WHEREAS, Contractor can obtain such Bonds from
are conditioned upon each and all the following
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ , (hereinafter
covenants, terms and conditions, which Contractor
called "Surety"), if and only if Silent Venturer will join
agrees to perform, keep and observe, at its own sole
it in the application therefor; and
cost and expense and without cost or expense to
WHEREAS, Silent Venturer is willing to execute said Silent Venturer, to-wit:
application of Surety only upon and subject to the terms
(a) Contractor shall faithfully perform each and
and conditions set forth herein;
every obligation and punctually make each and
NOW, THEREFORE, in consideration of the premis­ every payment incumbent on it under, by virtue
es and the covenants set forth herein, IT IS of, or in relation to, said Contract or work to be
MUTUALLY AGREED: done;

1. Silent Venturer will join Contractor in the execu­ (b) Contractor will not suffer or permit any default to
tion of an application to, and indemnification of, the arise under, or in relation to, said Contract or
Surety for the Bid Bond and Payment and work;
Performance Bonds in the penal sum of said
(c) Contractor will pay the premium(s) on said

Contract, and Silent Venturer will join Contractor

Bonds as soon as the same shall become due;

46

(d) Contractor shall faithfully perform each and whereupon Contractor shall be entitled to reim­
every covenant and agreement for said Bonds bursement from said trust account, for the
and indemnity agreement and observe all the amounts which it expended in connection with
other terms and conditions contained therein; any item as to which payment has been made, up
to but not in excess of the lesser of (i) eighty-five
(e) Contractor hereby grants to Silent Venturer all
percent (85 %) of the estimate covered by said
and the same rights, privileges and immunities
payment, or (ii) the balance then on deposit in
under, in relation to, or in any manner concern­
said trust account, such reimbursement to be by
ing, said Contract, the work provided for therein
check drawn on said trust account signed as here­
or moneys payable thereunder, as are granted to
in provided.
the Surety in and by any indemnity agreement or
application or both; 5. If and to the extent that payments, if any accruing to
Contractor under the Contract or hereunder shall
(f) Contractor shall establish in such bank(s) as
not suffice to pay all bills and expenses incurred in
Silent Venturer may designate from time to time,
the prosecution of said work, as the same accrue and
a separate and special trust bank account, herein
become due, Contractor shall immediately supply
called the "trust account", and to be identified as
any deficiency forthwith.
such on the records of the bank as a trust account
solely for the joint venture Contractor who shall 6. Silent Venturer shall have no responsibility upon
receive in trust all moneys due under or on any promise or undertaking of Contractor, and
account of said Contract and shall deposit such Contractor shall have no right or authority to pledge
moneys, as soon as received, in said trust or involve the credit or financial responsibility of
account{s), and shall not permit any moneys to Silent Venturer in any way or for any amount.
be withdrawn from any such trust account except
7. Silent Venturer shall have no duty or responsibility
in the manner and for the purposes hereinafter
at any time to enforce compliance with the provi­
provided. Until such trust account is terminated
sions hereof, and may waive any such provision, for
upon the written consent of Silent Venturer
as long as it shall elect, without waiving or otherwise
delivered to the bank, no moneys may be with­
affecting its right at any time to insist upon complete
drawn from the respective account except upon
and precise performance in accordance with the
joint signature of an individual designated from
tenor hereof.
time to time by Contractor and an individual
designated from time to time by Silent Venturer 8. Silent Venturer's rights and privileges herein are
or upon the sole signature of such person(s) as intended to be exercisable from the date hereof and
Silent Venturer alone may designate from time to are not dependent on any default of the Contractor
time under and pursuant to paragraph 8 hereof. under said Contract, application for Bonds or other
instrument.
(g) Contractor shall pay promptly, as the same
become due, all obligations incurred in connec­ 9. If and at any time that the Silent Venturer shall be
tion with said Contract or prosecution of the of the opinion that Contractor shall have failed to
work provided for therein, including the premi­ perform or observe any covenant, agreement, condi­
um for said Bonds; and tion or restriction contained in said Contract or
herein, or both, the Silent Venturer shall have the
(h) As and when requested by the Silent Venturer,
right:
Contractor shall provide Silent Venturer proof
that it has paid for all items covered by said (a) to give notice of such opinion to the bank(s) in
Bonds in the work covered by said payment, which any such trust account(s) shall be main­

47

 tained at the time and on so doing, the authority styled or considered for certain purposes, it is specifi­
of Contractor to sign, or to designate a represen­ cally understood and agreed that Contractor shall
tative to sign, checks for the withdrawal of funds perform all work, pay all charges in connection
therefrom, jointly with the Silent Venturer, shall therewith, under the Contract, provide all workers,
be terminated instantly at the election of the equipment, materials and supplies necessary to com­
Silent Venturer and said bank(s} thereafter shall plete such work and do everything else necessary to
honor checks for the withdrawal of funds from complete such work in strict accord with the
such trust account(s} when and only when signed Contract and Silent Venturer will have no obliga­
solely by such person(s} as the Silent Venturer tion except at its sole option to do anything in
alone may designate in writing from time to time; connection with the Contract except to join in the
and application for the Contract Bond and other docu­
ments incident thereto.
(b) in addition to other rights which the Silent
Venturer has, it has the unrestricted right to 11. The provisions hereof shall bind the parties hereto
remove Contractor from the job site and install and their respective successors and assigns.
itself as completing contractor or perform the
IN WITNESS WHEREOF, the parties have executed
balance of the work itself or place a contractor of
this agreement in duplicate on the day and year first
the Silent Venturer's selection as completing
above mentioned.
contractor and Contractor shall forfeit all rights
to any proceeds and shall immediately reimburse
the Silent Venturer for any losses then or there­ Contractor
after incurred.

10. Although this joint venture arrangement may be

Silent Venturer

48

 Chapter 8

Contribution Bonds

(Cross Indemnity Bonds)

Between Joint Venturers

Members of a joint venture are venturers. Instead, their purpose is to to be written so as to reflect the
jointly and severally liable to the assure that the joint venture is ade­ terms of the type of bond given. For
owner for the full performance of the quately financed. As such, these example, in the event the first form
contract and the satisfaction of all bonds are pure financial guarantees of bond is used guaranteeing the
costs incurred in connection with - nothing more. principal's obligation to advance
such performance. Many consider it Contribution bonds thus fall into funds, then the joint venture agree­
the essence of a true joint venture two categories, forms of which are ment should recognize the right of
that the members thereof should also attached hereto. the surety:
be similarly liable to the surety. (a) at its election, to have a voice
(a) The first form guarantees the
Various methods have been con­ and vote in the affairs of the joint
obligation of the principal to
ceived to allow a member of the venture at least in proportion to the
joint venture either to limit his advance his share of contributions to
the funding of the joint venture dur­ funds it has advanced;
indemnity obligation or to obtain a
ing its life as required by the Joint (b) to have a standing in the joint
guarantee of performance from his
Venture Agreement. venture if it cures any default by its
joint venture member. However,
most of these methods have not been (b) The second form guarantees principal and the extent of such
accepted by the surety industry since the obligation of the principal to standing; and
these methods tend to avoid joint reimburse co-venturers and their (c) to be reimbursed (prior to any
and several liability and strike at the sureties for his share of any ultimate funds being paid over to its princi­
very heart of the joint venture loss sustained by the joint venture at pal) a sum equal to any amounts
arrangement itself. the time of the final accounting. advanced for the benefit of the prin­
Out of this background were draft­ This second form of bond does not cipal plus interest from the date of
ed Contribution Bonds (Cross overlap the first form in that it does such advance.
Indemnity Bonds) of joint venturers. not guarantee that the principal will A form of joint venture agreement
The acceptance of these Bids both respond to any calls for contribution covering this type of arrangement is
by contractors and surety companies of funds during the life of the pro­ not attached since it would vary in
has been limited. ject. direct relation to the form of contri­
The purpose of these bonds is not Any usage of these bonds will nec­ bution bond utilized. •
in any way related to splitting or essarily require the joint venture
dividing the work among the joint agreement between the co-venturers

49

 FORM M

Form Guaranteeing Obligation of Co-Venturer

Principal to Advance His Share of Contributions

KNOW ALL MEN BY THESE PRESENTS THAT other to protect against loss caused by the default of any
WE, , as Principal, member of the Joint Venture in the performance of its
and ~ _ obligation to advance funds promptly in such amounts
as Surety, are held and firmly bound herein in the penal and at such time as provided in the joint Venture
sum of ($ ), to the following parties as Agreement;
Obligees:
WHEREAS, Surety has agreed to execute this Bond
Co-Venturer: on behalf of Principal subject to the conditions and lim­
itations set forth herein;

NOW THEREFORE, the condition of this obliga­

tion is such that if Principal shall promptly advance
funds to or for the benefit of the joint Venture as
Surety of Such Co-Venturer: required by the Joint Venture Agreement, and in an
amount or amounts reasonably related to the needs and
purposes of the Joint Venture, then this obligation shall
be null and void, otherwise to remain in full force and
effect. Provided, however:

WHEREAS, Principal and Co-Venturers have 1. Surety's obligation hereunder shall not exceed in the
aggregate the penal sum of this Bond and may be
entered into a contract with - - - - - - - - - - ­
_____________________ as paid at the option of Surety to the Joint Venture or
to Co-Venturers and their Sureties as their interests
Owner, dated - - - - - -for the construction may appear.
of _
("Contract") and have entered into a Joint Venture 2. In the final accounting of the Joint Venture, Surety
Agreement dated _ shall be entitled to participate ratably for any funds
defining their respective interest and responsibilities it may have advanced under the Bond.
under the mentioned Contract; 3. In the event Co-Venturers and their Sureties sustain
WHEREAS, Surety and Sureties for the Co­ loss within the terms of the Bonds, but in excess of
the amount payable hereunder, Co- Venturers and
Venturers have executed as Co-Sureties on a limited
their Sureties shall have priority of salvage rights.
Co-Surety basis, a bond on behalf of Principal and Co­
Venturers in favor of the Owner in the aggregate penal IN WITNESS WHEREOF, the parties hereto have
sum of ($ ), which according to its terms executed this Agreement this day of
guarantees the faithful performance of the Contract and _ _ _ _ _ _ _ _ _ _ ,199_ .
payment of labor and material bills;
Principal:
WHEREAS, Principal and Surety and each Co­
Venturer and its Surety desire indemnity from each
Surety:

50
 FORM N

Form Guaranteeing Obligation of

Co-Venturer Principal to Reimburse Other Venturers

for Share of Ultimate Loss

KNOW ALL MEN BY THESE PRESENTS THAT which bond is hereinafter called the Primary Bond;
WE, _
WHEREAS, Principal and Surety and each Co­
as Principal, and ~ _
Venturer and its Surety desire indemnity from each
- - - - - - - - - , as Surety, are held and firmly other to protect against loss caused by the default of any
bound as set forth herein in the penal sum of _
member of the joint venture in the performance of its
_ _ _ _ _ _ _ _ _ _ _ ($ ), to
obligations under the Contract and the Joint Venture
the following parties as Obligees:
Agreement;
Co-Venturer:
WHEREAS, Surety has agreed to execute this bond
on behalf of Principal subject to the conditions and lim­
itations set forth herein;

NOW THEREFORE, the condition of this obligation

is such that if Principal shall reimburse Co-Venturers
Surety of Such Co-Venturer: and their Sureties for any ultimate loss which they shall
sustain as a result of any default on the part of Principal
in the performance of its obligations under the Contract
and the Joint Venture Agreement or either of them,
then this obligation shall be null and void; otherwise it
will remain in full force and effect. Provided, however:
WHEREAS, Principal and Co-Venturers have
entered into a contract ("Contract") with 1. In the event Principal shall default in the perfor­
mance of any obligation to perform or arrange
performance on such obligation and in the event
as Owner, dated , for the construction of Surety does not so perform or arrange performance
and if Co-Venturers and their Sureties complete the
and have entered into a Joint Venture Agreement work of the Contract and the Joint Venture
dated defining their respec­ Agreement, Surety will reimburse Co- Venturers and
tive interests and responsibilities under this Contract; their Sureties, subject to the provisions of this Bond,
WHEREAS, Surety and the Sureties for the Co­ for all ultimate loss so sustained by them.
Venturers have executed, as Co-Sureties on a limited 2. Surety's liability under this Bond and the Primary
Co-Surety basis, a bond on behalf of Principal and Co­ Bond shall not exceed the amount of Surety's obliga­
Venturers on behalf of the Owner in the aggregate tion under the Primary Bond. Claims and obligations
penal sum of ($ ), which according to its under the Primary Bond shall have priority and shall
terms guarantees the faithful performance of the first be satisfied. After exoneration or discharge of
Contract and payment of labor and material bills, the Primary Bond, the Surety's net loss thereunder, if

51

 any, shall be deducted from the penal sum of this

Bond, and the balance, if any, shall be available to
Co-Venturers as an aggregate sum, as their interests
may appear, and as provided herein.

3. In the event Co-Venturers and their Sureties sustain

loss within the terms of this Bond; but in excess of
the amount payable hereunder, Co-Venturers and
their Sureties shall have priority of salvage rights.

IN WITNESS WHEREOF, the parties hereto have

executed this Agreement this _ _ day of
_ _ _ _ _ ,199_,

Principal:

Surety:

52
 Chapter 9

A Plan for Cooperation Between Insurance

Agents/Brokers on a Joint Venture Proj ect

Not only must the insurance cov­ advantages that the cooperating travel expense, services purchased
erage on a joint venture project be agents enjoy with respect to the and any other unusual expense. It
determined, but which agents will analysis of the risk. This would would not include any internal
handle the bonds and insurance include special forms, market expense nor any expense for time
requirements also needs to be entrees, experience and the like. spent by any of the agents. All of
resolved. The following plan is one 4. The sponsoring agent would then these expenses would be reim­
method for handling the insurance market the joint venture insur­ bursed by the sponsoring agent
and bonding needs for a joint ven­ ance program. The sponsoring out of the pot. Commissions
ture. agent would take full advantage of remaining in the pot after expens­
any special advantages enjoyed by es would be distributed to each
1. The insurance agent of the spon­
soring contractor shall be named the cooperating agent. agent participating in the same
the sponsoring agent and the proposition that that agent's client
5. The sponsoring agent will keep
sponsoring agent shall have the had an interest in the profits of
the cooperating agents fully
immediate and total responsibility the joint venture at the inception
informed on all matters of any
to the joint venture for everything of the joint venture. The commis­
importance related to the insur­
related to the insuring of that sions could also be divided equally
ance program. This would include,
joint venture. The sponsoring if the agents so chose.
at least, the furnishing to each
agent can delegate this responsi­ cooperating agent of copies of all 7. There are special problems to be
bility to others, but in no way does policies, endorsements, agreement resolved with respect to joint ven­
this lessen the total responsibility with the carrier, copies of all cor­ ture insurance and some of those
of the sponsoring agent. The respondence of material matters, are as follows:
insurance agents for the other and a memorandum of any impor­ (a) The agents and the venturers
venturers (referred to here as tant discussions with the must agree what the minimum
cooperating agents) retain the full insurance carrier, or any other limit would be carried on any
responsibility for seeing that their interested persons. It would nor­ umbrella covering the ven­
principal's interest is properly cov­ mally not include advice to the ture;
ered. cooperating agent on such matters (b) A joint venture presents a
2. It is the sponsoring agents initial as the mailing of certificates, the unique problem because the
responsibility to gather all facts discussion of small losses, the accident which occurs as a
regarding the venture, analyze the change of automobile or other result of joint venture activi­
risk, submit the analysis and the units on or off the policy and the ties may not be reported until
facts related thereto to the coop­ like. The cooperating agents long after the joint venture is
erating agent(s) for approval and should be kept fully informed on disbanded. Care must be taken
when agreement is reached, move loss summaries, engineering to stop any liability from flow­
to the second stage. If agreement reports and other information of ing to the individual venturers
cannot be reached between the this character. after the venture is complete.
sponsoring and cooperating agent, 6. Irrespective of who issues the poli­
then the point of disagreement (c) Completed operations is, of
cy, all commissions will be paid course, one of the principal
will be submitted back to the prin­ into a common pot, controlled by
cipals by the sponsoring agent for hazards that continues after
the sponsoring agent. At some the joint venture is complete.
their decision. convenient time, all agents will It is suggested that this cover­
3. It is the responsibility of the coop­ submit to the sponsoring agent a age be negotiated at the time
erating agent to advise the list of their out-of-pocket expens­ the joint venture insurance is
sponsoring agent of any special es. This would include particularly

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 placed, in a way that will of the joint venture. (i) The discovery period on fideli­
extend the completed opera­ (f) Although it is quite improba­ ty coverage should be
tions coverage for a period of extended beyond the one (1)
ble that a retrospective rating
at least five (5) years after approach will be used on a year period since fidelity cov­
completion of the job or, even joint venture, the agents con­ erage will cease at the end of
more preferable, to the end of cerned should give substantial the joint venture.
the statutory limitation for the attention to the problems that 8. Guidelines for Surety Support:
liability. Consideration should will arise out of retrospective (a) The agents handling the sure­
be given to doing this at a flat premium adjustments two (2) ty requirements for each
premium. An alternative is to or three (3) years after the venturer should be advised at
negotiate with each of the venture is complete. Once the the earliest possible date to
venturers' insurance carriers reserves for loss appear to be contact the sponsoring agent
the addition of the joint ven­ reasonably stabilized, every to coordinate the financial
ture risk on each of the effort should be made to reach information required.
individual policies. Each ven­ an agreement with the insur­
turer would cover only his (b) Each venturer's surety should
ance carrier to avoid any
own risk arising out of this further adjustment. have the opportunity to par­
joint venture, but it would ticipate in the same
then extend coverage for (g) On any joint venture of any proportion that their princi­
whatever length of time is length of time, special atten­ pals participate.
deemed necessary. tion should be given to the
employee benefits, such as (c) A pre-bid agreement establish­
(d) Any comment with regard to group life, hospitalization, and ing terms and conditions of
completed operations above, similar benefits, on any the final joint venture agree­
applies equally with respect to employees loaned to the joint ment should be submitted to
contractual liability coverage. venture by the various ventur­ each surety by the sponsoring
(e) During the maintenance ers. agent.
period following the comple­ (h) If equipment is rented to the (d) To avoid last minute misun­
tion of the joint venture joint venture by one of the derstandings as to various
project, the joint venture venturers, agreement should sureties' requirements for such
should consider subcontract­ be reached regarding the items as indemnity, the spon­
ing the maintenance responsibility for damage to sor should advise all venturers
responsibility to one of the that equipment which is not well before the bid date of the
venturers and this venturer insured under the owner's pol­ final terms, conditions and
should undertake the insur­ icy or which is subject to a requiremehts of the sureties. •
ance responsibility and file deductible.
certificates with each member

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