Adrian L. Bastianelli, III Paul C. Monte Michael C. Zisa Joint Ventures 1.

Adrian L. Bastianelli, IIIPaul C. MonteMichael C. Zisa

Joint Ventures

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Presenters

• Adrian Bastianelli is the co-managing partner of P&A's Washington, DC office.

• Paul Monte is the co-managing partner in P&A's New York office.

• Mike Zisa is a partner in P&A's Washington, DC office.

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Joint Ventures Generally

• Definition• Advantages of Using a Joint Venture• Liability of Joint Venture Partners– Joint and Several– Liability Between Joint Venture Partners

• Teaming Agreements vs. Joint Venture Agreements

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Types of Joint Ventures

• Percentage Based• Line Item Joint Venture• JV that Subcontracts to a Partner• Design-Build Joint Venture• “Silent” Joint Venture• Small Disadvantaged Business Joint Ventures• Pre-Bid Joint Venture Agreements

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General Provisions

• Name• Members• Purpose• Bank Accounts• Licensing• Duration of Joint Venture• Ownership Interests

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Form of Joint Venture

• Partnership• Consortium• Single Purpose Entity– LLC– Corporation

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Capitalization

• Bidding Costs• Initial Capital Contributions• Additional Capital Contributions• Failure to Meet Cash Calls• Third Party Financing

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Profits

• Definition of Profits• Costs Chargeable to Joint Venture• Repayment of Capital Contributions• Timing of Distribution• Books and Records

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Management

• Managing Partner– Removal or Change of Managing Partner– Liability of Managing Partner

• Management Committee– Problems with 50/50 Vote

• Day to Day Operations– Project Manager

• Access to Information• Audit

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Subcontracting

• Choice of Subs• Subcontracting to a Joint Venture Partner– Payment• How and When• Retention

– Payroll– Insurance

• Subcontracting Where Joint Venture Is a DBE

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Manpower and Equipment

• Who Provides Manpower and Equipment– Skilled Labor– JV Partner Owned Equipment

• Who Provides Supervision– Choice of Project Management and Field Supt.

• Accounting for Supervision and Equipment– Agreed Rates– Tracking of Equipment Usage

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Default of a Joint Venture Partner

• Types of Default Breach of a Specific Joint Venture Term

o Failure to Meet a Capital Callo Failure to Provide Resourceso Failure to Timely Perform

Other types of defaulto Failure to Meet Standard of Careo Breach of Implied Duty of Good Faith and Fair Dealingo Failure to Disclose

• Remedies for Default Notice Right to Cure Consequences of Default

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Withdrawal or Dissolution

• Rare in Construction Joint Ventures• Notice to Owner, Subcontractors, and Surety• Continuing Liability of the Withdrawing

Partner

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Insurance

• Who Provides– Subrogation Rights

• Coverage– General Liability– Workers’ Comp– Equipment– Builder’s Risk or Completed Operations– E&O

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Bonding

• Underwriting Considerations– Review of All participants of the Joint Venture– Review of Joint Venture Agreement– "Angel Deals"– Additional Consideration for Certain Federal

Programs • Limited Number of Joint Venture Contracts• Statutory Requirements for Joint Venture• Consequences for Noncompliance

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Bonding

• Indemnity Requirements– Indemnity Agreement– Joint and Several liability

• Issuing Bonds to a JV – Get the Name Right

• Potential Conflicts for Sureties & Bond Producers– Claims– Losses

• Business disputes

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Disputes Between the Partners

• Disputes Between the Joint Venture and Third Parties Should be Addressed in the Joint Venture Agreement Cooperate With Each Other How Decisions Regarding Prosecution of the Claims Will Be Made

• Disputes Between Joint Venture Partners Day to Day Decisions Interpretation of the Agreement Defaults

• Special Defenses– Gross Negligence or Fraud– Limitations of Liability

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Dispute Resolution Between the Partners

• Types of Decision Making Day-to-Day Operational Decisions – Project Manager Normal Course of Business Decisions – Management

Committee Disputes Between the JV Partners

• Disputes Consensual Decision Tie Breaker Mechanism

• Mediation• Arbitration/Litigation

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Standard Form Agreements

• AGC• AIA• Other• Most Joint Ventures

Don't Use Standard Form Agreements

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Design-Build Joint Ventures

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Design-Build Joint Ventures

• Designers Role– Pre-Bid• Reliance on Design

– Post-Bid

• Format– Joint Venture – Partner at Risk– Subcontract

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Design-Build Joint Ventures

• Considerations in Selection of Designer– Experience– Size– Insurance

• Designers Often Seek Limits on Liability• Fee Structure• Incentives

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Design-Build Joint Ventures

• Design Obligations and Liability• Coordinating Design and Construction• Delay• Licensing• Errors and Omissions Insurance• Sureties Liability for Design Errors

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Typical P3 Project Structure

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Risk Transfer “Maximization”

• Political Risk• Downstream Risk Transfer Pressure• Design-Build +++• Design Build Risk Assumption– Design and Professional Standard of Care Issues– Permits and Approvals– Differing Site Conditions

• Utilities• Environmental

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Owner's Role

• ROW• Utilities• Site Conditions• Permits• Time & Scope of Design Review– Conformity with Design Intent– Compliance with Standard Specifications– Nonconformance Reports

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Warranties and Changes Orders

• Warrant Results & Success:– Design & Performance Criteria– Completed Operations– Tests

• Limited Change Orders– Impacts by Owner– Changed Conditions– Design Errors & Omissions

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Your Questions?

If you do not have the opportunity to have your question addressed during the seminar, you may

contact the presenter directly:

Adrian Bastianelli: [email protected] Monte: [email protected]

Mike Zisa: [email protected]

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