Practical Guide to Engineering Procurement and Construction Contracts
Working in a Consortium or a Joint Venture on a project and the difference between the two
13.1 The reasons for forming a Joint Venture or a Consortium
Parties that want something built or those who are prepared to build that something often form a Joint Venture or a Consortium, as the case may be, for various reasons. The main reasons may be on the Owner’s side to share the risks of the project with other parties that have an interest in the project and the project’s yield, thereby reducing one’s own total risk exposure with regard to the project through the pooling of investment capital. On the Contractor’s side the reason can also be risk sharing and thereby reducing one’s own risk exposure regarding the project. Additionally, working in a Joint Venture or a Consortium allows for pooling of resources; the project may be too big for each individual Contractor, but together they will be able to build it by sharing the risk and pooling personnel and equipment. They form a Joint Venture when they are in the same business but a Consortium if they are rooted in different types of business and cannot fathom the risks of the other’s business and thus not all of the risks of the project.