Joint Venture (Public Procurement)

A joint venture (JV) in a public procurement context is a corporate structure in which two or more companies create a new legal entity specifically to pursue and perform a contract (or a programme of contracts). It differs from an unincorporated consortium in that the JV company itself becomes the contracting party, the employer of staff, and the holder of assets and liabilities.

What is a joint venture in public procurement?

Article 19 of Directive 2014/24/EU allows groups of economic operators, including temporary associations, to bid jointly. It does not require incorporation. However, contracting authorities may require a specific legal form once a contract is awarded if the nature or scale of the contract makes corporate structure necessary for proper performance. For very large, long-duration, or high-risk infrastructure projects, contracting authorities or the bidding parties themselves often prefer a JV because of the clarity it provides.

Incorporated JV. The JV company is typically a special purpose vehicle (SPV) incorporated under the national company law of the relevant jurisdiction. Each founding member holds shares in the JV proportionate to their agreed contribution. The JV company enters the contract, employs staff (or uses seconded employees from the parents), and subcontracts to its parent companies or to third parties.

Project JV vs strategic JV. In public procurement, most JVs are project-specific: formed for a single contract or programme and wound up on completion. Strategic JVs, formed as ongoing businesses, are less common in the procurement context but exist in sectors like defence where long-term industrial partnerships are policy objectives.

Competition law considerations. Forming a JV between competitors is a notifiable transaction under EU merger control if the JV performs a lasting change of control and crosses the relevant turnover thresholds (Regulation (EC) No 139/2004). Even below notification thresholds, JV arrangements can raise concerns under Article 101 TFEU if they restrict competition between the parents in the market. Legal advice on competition implications should be obtained before forming a JV for a major public contract.

UK position. The UK Procurement Act 2023 follows the same principle: groups of suppliers may bid together and the authority cannot require a specific legal form before award. Post-award, the authority may require incorporation where it is justified by the contract.

Why it matters for bidders

Choosing a JV structure over an unincorporated consortium involves real costs and governance complexity: legal incorporation, shareholder agreements, company filings, board governance, tax structuring, and ultimately wind-down. For a three-year IT services contract, those costs rarely justify incorporation. For a 20-year hospital PFI or a major defence programme, the risk allocation, governance clarity, and asset ownership benefits of a JV typically do justify it.

Understanding the difference between a JV and a consortium agreement also matters for how you respond to the contracting authority's qualification questionnaire. Claiming JV status when you have only a teaming arrangement creates misrepresentation risk; describing an incorporated JV as simply a "consortium" may cause confusion about who is the legal counterparty.

Example

Two European rail companies form a JV company (a new SAS under French law) to bid for a high-speed rail maintenance concession. The JV company submits the bid, holds the concession contract, employs operational staff, and in turn subcontracts specialist track renewal work to one of the parent companies. The other parent contributes rolling stock maintenance expertise through a services agreement with the JV.

Frequently Asked Questions

Can the JV company rely on its parents' qualifications and references?

Yes, as a general rule. EU case law and the procurement Directives allow economic operators to rely on the capacities of other entities, including parent companies. The JV company should explicitly state in its bid which parent's capabilities it is relying on and attach the necessary supporting documentation.

What happens if one JV partner becomes insolvent during contract performance?

This depends on the JV agreement and the contract terms. In an incorporated JV, the other shareholders typically have first rights to acquire the insolvent party's shares. The contracting authority must be notified of any material change in the structure of the contracting entity. The authority may consent to a restructuring or, in some cases, may have termination rights.

Is a JV always joint and severally liable to the contracting authority?

An incorporated JV company is liable in its own right; the parents' liability to the authority depends on whether they have given parent company guarantees. Without guarantees, the contracting authority's recourse is to the JV company alone, which is one reason authorities often request performance bonds or parent guarantees on large JV-structured contracts.