Joint Venture Construction Contracts: Complete Guide for Small Contractors 2025

Understanding Construction Joint Ventures

Why Joint Ventures Matter

Access Larger Projects:

2-10x

Your normal capacity

Combined Bonding:

Increased

Capacity potential

Capability Gaps:

Filled

By partner expertise

Joint ventures allow construction companies to combine resources, expertise, and bonding capacity to pursue projects beyond their individual capabilities. For small contractors, JVs provide pathways to larger government contracts while building experience and past performance.

Benefits of Joint Ventures

For Small Contractors

• Access to larger projects
• Gain past performance
• Learn from experienced partners
• Build bonding history

For Large Contractors

• Access to set-aside contracts
• Meet small business goals
• Share project risk
• Local market expertise

Types of Joint Ventures

JV Structures

Integrated Joint Venture

Partners combine operations completely. Single project management structure, shared profits/losses.

• Best for: Similar-sized partners with complementary skills
• Risk: Shared equally based on ownership
• Example: Two GCs pursuing a $50M project together

Sponsor-Sponsored Joint Venture

Large contractor sponsors small business. Small business is the "face" of the JV for set-aside purposes.

• Best for: Small business set-aside contracts
• Risk: Allocated per agreement
• Example: 8(a) firm JV with large GC for federal project

Teaming Arrangement (Not a JV)

Prime contractor with subcontractor commitment. Not a joint venture, but similar strategic purpose.

• Best for: When one party leads, other supports
• Risk: Prime bears most risk
• Example: GC teams with specialty sub for technical scope

Mentor-Protégé Programs

SBA All Small Mentor-Protégé Program

The SBA Mentor-Protégé program allows approved mentor-protégé pairs to form joint ventures that compete as small businesses for any federal contract for which the protégé qualifies.

Protégé Benefits

• JV counts as small business
• Access to mentor's resources
• Technical and management training
• Past performance credit

Mentor Benefits

• Access to set-aside contracts
• Good faith small business credit
• Develop supply chain partners
• Meet subcontracting goals

Protégé Eligibility

Qualifies as small business
Has not received 8(a) BD program exit letter
Not in last 6 months of 8(a) term (if applicable)
Limited to 2 mentor-protégé relationships

Mentor Eligibility

Positive financial statements
Successful past performance record
No pending debarment/suspension
Can be small or large business

Structuring a Joint Venture

Key Structure Decisions

Ownership Percentages

Determines profit/loss sharing and control. For small business JVs, small business must own at least 51%.

Management Structure

Who serves as project manager, estimator, superintendent? For small business JV, small business must control management.

Work Division

How is scope divided? Who self-performs what? Small business must perform at least 40% of work on set-aside JV contracts.

Financial Contributions

Capital requirements, working capital, who provides bonding, how are payments processed.

Common Ownership Structures

51/49

Small Business Lead

Set-aside eligible

50/50

Equal Partnership

Not set-aside eligible

60/40

Clear Leader

Easier decision making

Government JV Rules

Small Business JV Requirements

For a JV to qualify as small for set-aside contracts, specific SBA rules must be followed. Non-compliance can result in contract termination and debarment.

1
51% Small Business Ownership
Small business(es) must own at least 51% of the JV.
2
Small Business Management Control
Small business must control day-to-day management and administration.
3
40% Performance Requirement
Small business partner(s) must perform at least 40% of the contract work.
4
Three Contract Limit
JV can be awarded maximum of 3 contracts in 2-year period without becoming affiliated.

Affiliation Risks

SBA may find JV partners affiliated (combined for size purposes) if:

Large partner controls management decisions
JV is ongoing relationship (not project-specific)
Small business lacks independent viability
Financial dependence on large partner

JV Agreements

Essential Agreement Elements

Purpose and Scope

Specific project or opportunity the JV is formed to pursue. Duration of the JV.

Capital Contributions

What each party contributes (cash, equipment, personnel, bonding).

Profit and Loss Allocation

How profits are divided and losses are shared between partners.

Management and Decision Rights

Who makes what decisions, voting requirements, management committee structure.

Work Allocation

Which partner performs which scope, how scope changes are handled.

Dispute Resolution

How disputes between partners are resolved (mediation, arbitration, litigation).

Success Tips for JVs

Best Practices

Choose Partners Carefully
Verify financial stability, past performance, and cultural fit before committing.
Start Small
Test the relationship on a smaller project before pursuing major contracts together.
Define Roles Clearly
Ambiguity causes conflict. Document who does what in detail.
Plan for Disagreements
Establish dispute resolution procedures before they are needed.
Get Legal Help
JV agreements and SBA compliance are complex. Use experienced construction attorneys.

Finding JV Partners

SBA Resource Partner matchmaking events
AGC and ABC chapter networking
Agency small business outreach events
Prime contractor subcontracting plans
PTAC (Procurement Technical Assistance Centers)