Short note: JV and sub-contracting

Joint venture (JV)

A joint venture is an association of two or more firms (often a foreign and a local firm, or a large and a small one) formed to undertake a specific project together, sharing the resources, risks, profit and loss. The partners may sign a JV agreement, name a lead partner, and are jointly and severally liable to the client. Merits: pooling of finance, equipment, experience and technology to qualify for large projects; sharing of risk; transfer of technology. Demerits: conflicts in management, divided responsibility, and the complexity of agreement. In Nepal, a JV is common in large public works and hydropower, and the PPA allows it with specified requirements on the share of each partner.

Sub-contracting

The main contractor gives a part of the work (such as electrical, plumbing, or earthwork) to a specialist subcontractor under a separate agreement. The main contractor remains fully responsible to the client, with the subcontractor responsible to the main contractor. Merits: specialised skills and less need for own equipment; faster work; sharing of risk. Demerits: coordination problems, quality control difficulty, and extra margin. The client's approval is needed, and the extent is limited by the contract (often a maximum percentage).