Consortium or Joint Venture : the same or very different?

In certain countries and cultures, the words “joint venture” or “JV” and “consortium” may be used as synonyms. For the purpose of this article, we will adopt the usual differentiation between these, as observed during the past decades in the construction, infrastructure, oil & gas, power and renewable businesses.

Both a consortium and a JV (Joint Venture) are ways for two or more parties to join forces and participate to a tender. And, if successful, they will jointly execute the contract. Thanks to the “joint and several liability”, the employer is no worse off compared to dealing with a single contractor. In fact, joint & several means that the employer can go to either or both for fulfillment of the contract or recovery of damages. The employer is therefore in a better position, spreading the risk of in-execution over two or more companies.

From the above, can we assume that a consortium and an incorporated JV are more or less the same?

Let’s test this by looking at the facts. The list is a bit longer than anticipated with 12 points to compare. But, I hope, this is helpful to fully understand the implications of either solution.

1) Distribution of the scope of the works

JV’s are often used by parties that also have the competences to execute the whole works on their own. However, the project is perceived as too big or too risky to go alone. In a JV, their is no necessity to allocate the scope to specific parties from the start of the project.

A consortium requires a clear scope split between the parties. Care should be taken that nothing falls in between the scope of the consortium partners. Jointly they are obviously responsible for the total scope (the whole works) towards the employer. Each parties’ scope will be established at the time of concluding the consortium agreement (or soon after). Based on this, they will each prepare their part of the joint offer.

2) Percentage of a party in the JV or consortium

Often, employers ask contractors what is the stake of each party in the project.

This question feels completely natural for JV partners. They will easily give the precise figures of their participation: 50/50 or 60/40 or 40/30/30 etc. The figures are round numbers and remain constant all the way through the project execution, from signing the JV agreement up to conclusion of the project. The numbers represent the participation of each member in the JV, including the equity (if applicable).

For consortium partners, things are not so easy. As explained above, the important parameter for the partners is their scope of works. At the beginning, the parties only have an approximate idea of how much their scope will represent in the overall contract price. When submitting the joint bid, each parties’ proportionate share will be known: it is the percentage of their price in the overall price. This proportionate share will vary during the course of the project due to the inevitable change orders, price escalation (if applicable) and successful claims.

3) Allocation of resources

A JV will set-up and staff a whole project team including even support functions like human resources. The JV somehow “rents” resources from the consortium partners or from third parties.

In a consortium, each party uses its existing resources to execute the works. They can draw from their existing pool of resources without needing the approval from the other party.

The staff in a JV is more likely to have a “project” approach. They will naturally identify themselves with the performance and results of the project. The staff in a consortium often works within a matrix structure. They report partly to the project manager and partly to their function leader (e.g. engineering, sourcing, etc.) As a consequence, and unfortunately so, they probably think less “project”.

4) Sharing of risks

JV’s are usually chosen by civil contractors to share the risks of a project. Clearly, the risks are not allocated to individual partners but assumed by the JV.

In a consortium, the risks allocation goes together with the scope of works. For example, a consortium partner may be responsible for the supply of certain equipment that is subject to performance testing. The corresponding performance LDs are usually borne entirely by that party. Obviously, things get more complicated when the scope of several partners actually influence the overall performances of the project in an interdependent way. In that case, in the consortium agreement, precise allocation rules of the performance LDs have to be established.

So, consortium partners normally don’t share the risks but allocate it to a specific party. One exception is sharing of delay LDs above the % cap applied to a party’s proportionate share. Such “extreme delay LDs” are often allocated in accordance with the proportionate share of the parties.

5) Sharing of profit & loss

From all what is mentioned above, one can guess that the sharing of profit & loss is also very different for the two solutions:

For a JV, the parties share the profit (or loss) in accordance with their participation in the JV.

Within a consortium set-up, potential profit or loss depends on the relevant party’s performance on its scope. The actual profit is not known by the other partner. One party can be at a loss while the other is making profit and doesn’t have to compensate the other.

6) Sharing of costs

Due to the JV structure, the JV assume all the costs and therefore the parties automatically share the costs.

In a Consortium, parties can agree to have joint costs (e.g. for insurance) and are likely to share this in accordance with their proportionate share. However, due to the need to keep the parties “at arm’s length” for fiscal clarity, Consortium partners try to avoid sharing of costs and prefer to allocate costs to a specific party. For example, in the past, there was a usual practice for consortium members to provision, say 2% of their price, as the consortium leader’s fee. Nowadays, the preferred solution is that the consortium leader provisions its leadership costs (and establishes its price accordingly). This avoids invoicing between the consortium partners, which is not favorable for fiscal clarity regarding separation of profit & loss.

7) Price determination

The JV partners jointly decide the offer price. Together, they establish the project budget, the provisions and the resulting project margin.

In a consortium, each party has full power to decide on its respective price, provisions and margin. When adding the prices, often, the parties realize that the result is not competitive. This is especially true when they perceive risk on their partners and provision for it. Then, they start pushing each other to lower the price and increase the award probability. But they only have soft power to influence the other partner(s).

8) Decision power

In a JV, the nominated project director can act with a certain autonomy to make the project a success.

In a consortium, each party has its own project manager. Together they choose a leader, just to coordinate and be the “one face to the customer”. Usually, the party with the biggest scope becomes the leader. The leader cannot bind the parties without prior agreement from all. Only in very exceptional cases, can the leader act immediately. He must do so impartially and only to preserve rights for the consortium or avoid imminent damage. This can apply to an emergency situation related to health & safety or environmental damage.

It is important for the employer to understand the limits to the power of the consortium leader. The employer should avoid demanding immediate responses when the consortium leader doesn’t have prior approvals and his partner is absent. Agreeing on the spot would put him in breach of the consortium agreement. This will result in further dispute within the consortium and may backfire to the employer.

9) Legal entity, or not

An incorporated JV is in fact a new legal entity, although temporary, set-up by the parties to execute that specific project.

In case of a consortium, no new legal entity is created. It is just a contractual agreement for two (or more) existing entities to work together on that project.

10) Invoicing and payments

The previous point should make one thing clear: a consortium cannot invoice. The underlying entities, being the consortium partners, each have to invoice the respective progress on their scope. Usually, the parties provide a cover letter, summarizing the underlying invoices. Technically speaking, this cover letter is not an invoice. I’ve seen many employer representatives object to multiple invoices but… there is no other way around. A JV doesn’t have this problem.

The JV will have its own bank account. For a consortium, the parties could identify a single bank account and redistribute monies in accordance with their invoices. However, an employer can be pragmatic and accept to pay directly to the bank accounts of each of the consortium partners. With the joint & several liability, this doesn’t lead to additional exposure and will facilitate the life of the contractor (as the money will become available quicker to the parties without time lost with additional bank transfers).

11) Accounting and tax

An incorporated JV will have its own accounting and will take care of the payment of the taxes for the whole project. These will directly impact the project results and therefore the distribution of profit (or loss) among the parties.

For a consortium, each party handles its own accounting and taxes. Typical wording for a consortium agreement goes as follows: “Each Party shall be fully and solely responsible for paying all taxes, duties, social security contributions and similar charges (including penalties and interest) of whatever nature  levied in connection with its Scope of Supply, or relating to its personnel or its subcontractors‘ personnel, and shall carry out all necessary filings, registrations and fulfill all other obligations towards relevant fiscal authorities in relation thereto”

12) Default by the contractor or one of the parties

As mentioned above, the consortium partners are jointly and severally liable towards the employer. The employer can automatically go after each of existing entities that have signed the contract.

For a JV, employers need to check their recourse to the underlying entities. Parent company guarantees may clarify this. If not, this set-up could be far more risky for the employer in case the JV becomes insolvent.

If one party is in default, the other consortium or JV partner(s) has to find a replacement entity. Or otherwise perform the whole of the works. At least one similarity from the point of view of the contractors!


From an employer’s point of view, there may be no big difference between a JV and a consortium. However, the way contractors operate is completely different for both solutions. It is important for both the employer and the contractors to understand these differences. For the employer, this helps understanding the behavior of the contractor. For the contracting entities, each and every aspect of their relationship depends on the set-up: price, margin, scope, liquidated damages, invoicing etc.

The best choice between either solution can be derived quite naturally from the following:

  • Consortium: Each party knows how to perform a specific part of the scope but not the scope of the partner(s). Due to lack of understanding, they fear the risks on the partner’s scope and want to be isolated from it. For example, on a power plant, the civil works contractor and the electro-mechanical contractor usually work as a consortium.
  • Joint Venture: The parties want to share the risks and will execute the project through a common organization. This is the typical way of collaboration between two civil works contractors.

We encourage you to have a look at the rest of our blog, containing interesting articles on subjects like negotiation, contract risk management, FIDIC, dispute resolution etc.

Contract Risk Scoring, how can it help you in your decision process?


This post analyses the decisions you can take with your Contract Risk Scoring methodology & tool. The objective is to maximize your chances to achieve your desired business results.

What is Contract Risk Scoring ?

Contract Risk Scoring is a methodology to identify risks in contracts, to attribute a representative risk score to each relevant subject (with the help of a tool) and to generate an overall score for the contract. Usually, specific risks on the relevant subjects are rated from 0 (low) to 5 (high) with an overall contract score on a scale of 100. The higher the score, the more riskier the project.

This methodology is specifically suited for the project businesses: infra, construction, turn-key equipment supplies, power, renewable energy, oil & gas etc. Typically, all the subjects in the image below are covered:

You can also click on the image to access an example free-use tool: TRaCRs – Tender Risk and Contract Review system.  

Why should you use Contract Risk Scoring ?

Unbalanced contracts can become a hurdle for the achievement of your business targets. A general differentiation between “balanced vs unbalanced contract” is too vague, too qualitative as a concept. Contract Risk Scoring tools compute an overall score for the contract/project and include also detailed scores per topic (20 representative questions & answers).

If you are unfamiliar with the concept of Contract Risk Scoring, we recommend you to read the following article first: Contract Risk Scoring, 10 questions answered

4 decisions that can be made with a Contract Risk Scoring system

You can take the following decisions with the support of a Contract Risk Scoring system (and TRaCRs specifically):

1. Deciding whether you should go, or not, for a project.

The Go-No Go decision can be based on the overall Contract Risk Scoring. Typically, scores above 60 or 70 should strongly make you consider a “No Go” decision. Also, a combination of several high scores on specific topics can trigger a “No Go” decision. This is because the project would have too many hurdles so that you can no longer realistically expect to achieve your outcomes.

2. Deciding what are your target improvements during negotiation.

The subjects where a high risk-level answer (4 or 5) is applicable as per the RfQ (Request for Quotation), should get your attention. Either, you can accept the risks and mitigate / control them. Or, you identify them as a negotiation target to improve your position. If you don’t succeed, you can still take a “No Go” decision and get out of the project.

Contract/Negotiation training

3. Deciding on what level of provisions you want to include in your pricing.

You are exposed to a risk when, in a certain number of scenarios, your company is going to lose money. Taking risk “for free” is not a good long-term strategy. And, believe me, companies do it more often than one imagines. This, due to a lack of acknowledgment and valuing of risks. Adverse scenarios will occur, sooner or later, as per their statistical probability. You can be lucky on a single contract. On a series of projects/contracts luck is not even an option and you have to make a provision to cope with the problems when they occur. You will keep unused provisions on projects where the risk doesn’t materialize for future projects. Like this, you can amortize the cost of overcoming specific risks over a project portfolio.

4. Deciding on what level of profit you want to have on a contract.

Of course, there is a correlation between risk taking and profit. If risky projects would not be more profitable, why would anyone go for them? Less risky projects are very attractive. Consequently, price competition is higher and profit margins go down. To tender successfully for a project, you need to be aware of the Contract Risk Scoring. With that information you can lower your margin for balanced contracts and increase it when you are taking higher risks.

Catalogue AfiTaC


Risk analysis is moving back to where it belongs, the decision process. Contract Risk Scoring tools help you to support the identification of the commercial & contractual hurdles that may stop you from achieving your desired outcomes. They help you to focus on the following:

  • implementation of mitigation actions,
  • establishment of acceptable risk and liability levels,
  • determination of provisions & margin levels etc.

TRaCRs is a free Contract Risk Scoring tool suitable for the construction business, for infrastructure projects, for power plants etc. The tool can be adapted for your specific business and expanded to focus on specific hurdles. Don’t hesitate to contact us so that we can discuss this in further detail for your specific case.

For further reading on Contract Risk Scoring, we recommend you the following publications:

About AfiTaC is the blog on commercial and contractual subjects for the Project Businesses (Construction, Infrastructure, Oil & Gas, Power & Renewable, Water Supply & Sanitation, etc). Its objective is to stimulate reflection, learning, convergence to balanced contracts and positive dispute resolution. You can subscribe to our newsletter by writing to “”. You can also connect to our LinkedIn page. Engagement with the readers is what keeps us going. So, don’t hesitate to exchange with us by commenting here below, liking our publication on LinkedIn and writing to us “”. 

Contract Risk Scoring, 10 questions answered

Contract Risk Scoring is a hot topic. IACCM is actively promoting it. But, as this subject is quite new for many of us, we’ll all have a couple of questions. Here below we provide the answers to the most usual ones on the topic. If you have more questions, don’t hesitate to write in the comment section here below and I, or someone else, will certainly provide you with the answers.

1) How can I start with Contract Risk Scoring?

You could set-up your own scoring system, buy software or look for books on the subject. The most straightforward way to start is to go to an existing tool like TRaCRs – an abbreviation of Tender Risk and Contract Review system – available on

2) Do I need to be a contract expert to do Contract Risk Scoring?

Not at all. The very purpose of Contract Risk Scoring is to analyse “dry” contracts from the viewpoint of real-life users, situations and risks. For each question, TRaCRs is providing five possible answers written in simple language. It is much easier to choose out of multiple choices than to have to describe a risk from scratch. The report that you will get out of TRaCRs will help you to provide solid feedback on your contract to your risk board in a professional and focussed way. In the near future, we will try to include more tutorials within the system and we will certainly write more posts on the subject. We recommend you to follow us on LinkedIn or directly on our blog .

3) Is Contract Risk Scoring something for big multinational companies or for SME’s?

It is something extremely useful for both. Big multinational companies usually have their own risk department. They naturally set up a risk evaluation questionnaire. For small and medium sized companies, a pre-formatted system like TRaCRs can be of great help in order not to reinvent the wheel. We have made a post on this subject: Manage your risks like “the big boys & girls” do!

4) When can I consider my contract is low risk or high risk?

On TRaCRs, a score below 30 means the contract has low risk. Between 30 and 50, we find the projects with moderate contract risk. Above 50, we can speak of a high risk project that should be followed-up with special care. To give you an idea, a typical World Bank financed project got a score of 25 while a privately funded IPP project can easily go over 50.

5) When tendering, can I determine a level of provisions based on the score of my contract?

The golden rule is to provision 1% of contract price for each 10 points scored. This means that, if your project scored 30, we would recommend you to provision 3% for general contingencies related to contractual and commercial risks.

6) Can risk scoring increase my selectivity during Go-No Go meetings?

Certainly. You can probably not handle all the tenders you get to look at. So, you need to be selective. What better way to do so than to objectively establish the risk level of your potential tenders? If the success probability level is the same, the rational choice is to go for the less risky projects.

7) Can the risk score help you during negotiation?

Definitely, It will show the risk areas in the contract that you are negotiating. This visibility will give you clear targets of where to improve. If you set yourself the challenge to always lower your score, you are on the right track to negotiate balanced contracts for your company.

8) Is Contract Risk Scoring a costly affair?

Absolutely not. TRaCRs is a free tool, available to all (no membership required). And it will remain so. This is a service we provide to everyone working on contracts. It is our pleasure to share more than 20 years of experience on negotiating and analysing the risks in international infrastructure and renewable power contracts.

9) If a question/answers in TRaCRs is/are not applicable to my particular case, what should I do/answer?

First you have to think whether the question is really not applicable to your project. If you are convinced of it, you can simply choose the first answer with a risk level 0. No need to compute risk where there is none. This would artificially increase your score and, as you understood, the lower the score the better. For example, if the Contractor is from the country where the project is located, the question related to tax and importation is not applicable.

When answers are not exactly matching with your situation, we encourage you to choose the answer that comes closes to it. You can then provide some information in the box immediately below the answers to explain your choice and the difference with the actual situation.

10) Can TRaCRs be customized for my particular business, adapted to all types of industries/businesses?

It is possible that the current questionnaire doesn’t match perfectly with the risks your company is facing. In that case, you can write to and ask for a more adapted version. The current version is especially suited for civil works, infrastructure and power projects. You are welcome to suggest adapted questions and answers for your industry / business.

That’s all for this time. Let’s keep interacting on such a passionate subject as is Contract Risk Scoring. Test TRaCRs on your specific project and let us know how did it go and if you find the outcome useful.

About AfiTaC is the blog on commercial and contractual subjects for the Project Businesses (Construction, Infrastructure, Oil & Gas, Power & Renewable, Water Supply & Sanitation, etc). Its objective is to stimulate reflection, learning, convergence to balanced contracts and positive dispute resolution. You can subscribe to our newsletter by writing to “”. You can also connect to our LinkedIn page. Engagement with the readers is what keeps us going. So, don’t hesitate to exchange with us by commenting here below, liking our publication on LinkedIn and writing to us “”. 

Contract Risk Scoring: how does a World Bank contract for PLANT score?

Contract Risk Scoring is an effective way to analyse contracts for their risks on commercial and contractual issues. But how can you do this?

AfiTaC has developed a free tool, available to all, TRaCRs, to rapidly obtain an objective analysis of the commercial & contractual risks. By replying 20 questions covering the whole spectrum of contractual and commercial issues you get an overall Contract Risk Scoring. You will also have identified specific risk areas on your project.

In previous posts, we explained what is Contract Risk Scoring and how works TRaCRs. We recommend you to read these:

TRaCRs will rate your contract on 20 different subjects from 0 (very low risk) to 5 (very high risk). A score below 30 means the contract has low risk. Between 30 and 50, we find the projects with moderate contract risk. Above 50, we can speak of a high risk project that should be followed-up with special care.

Now I am curious to see this applied on a typical World Bank Contract for PLANT (click here to access the reference contract on the World Bank site). I am a big fan of these WB contracts! They strike a good balance between the rights and obligations of Employers and Contractors.

Here are the results:

  • You can access the TRaCRs report here: TRaCRs report for World Bank PLANT project
  • The Contract Risk Scoring is 25. Not surprisingly, this is a low risk contract. With these limited risks, we would recommend you to provision 2.5% for general contingencies. The golden rule is to provision 1% of contract price for each 10 points scored.
  • The worst score for an individual question is 4. This is for the question related to the payment terms. Indeed, the payment terms of “10% for advance payment, 80% on shipment and 10% on acceptance” lead to a substantially negative cash flow on projects where the supplies are not off-the-shelf but specifically designed and manufactured for the specific project.
  • One answer scores 3: Contractor may have to implement variation orders without prior agreement up to a total value of 15% of contract price (for all variation/change orders jointly). This is quite harsh for the Contractor when a lot of disagreement exists on the price adjustment or the extension of time.

Such a report will enable you to proceed to a risk board meeting to get the green light to submit your tender. Also, the portfolio of ongoing contracts can be scored to identify risk areas and deal with risk with anticipation.

You can now try TRaCRs on your specific contract. And don’t hesitate to let us know your thoughts about the results.

You can contact AfiTaC in case you want to customize TRaCRs for your specific business.

IACCM is promoting tools to score the risk of your contract portfolio

IACCM, the International Association for Contract & Commercial Management, is promoting that we would start risk scoring our contract portfolio. Here is an extract of what they state on their website:

We’ve all heard stories about bad contracts that caused a crisis, cost a fortune and killed careers.  Yet despite these scandals, most people still have little insight into the good, the bad and the ugly of their own contract portfolio.  Many of us will still suffer serious financial pain because of contractual weakness that reveals itself too late.  But what if we could get ahead of the problem?  What if we could analyze, measure and score our contract terms, and flush out the weak links? Well now you can.

With contract scoring, […] you can benchmark your contracts against your peers and demonstrate measurable improvements in performance.  You can ensure that higher risks are factored into pricing and commercial decisions.  And you can demonstrate how contracts make hard, measurable contributions to the financial performance and health of you business.  

At AfiTaC we fully agree with the above words. Even more, with TRaCRs, the Tender Risk and Contract Review system, we have developed a tool for contract scoring. This tool will rate your contract on 20 different subjects from 0 (very low risk) to 5 (very high risk) enabling you to identify the problem areas, subject by subject, and also in the aggregate for your project. A score below 30 means the contract has low risk. Between 30 and 50, we find the projects with moderate contract risk. Above 50, we can speak of a high risk project that should be followed-up with special care.

We recommend you to:

In case you would like a demo on your specific contract, the AfiTaC team is willing to fill out the tool with the relevant answers for your contract for the 5 first candidates that request us to do so on the following e-mail: Free of charge, of course!

By doing the above actions, at AfiTaC, we hope that we can contribute to your objective to negotiate and execute balanced contracts. Please don’t hesitate to write us, in the location foreseen here below, with any reaction you have on this subject.

Contract Risk Management for SME ‘s – Manage your risks like big companies do!


This article provides useful information about contract risk management for SME ‘s.

Give a contract to anyone to read and see what they comment afterwards…

Most of us will find this a boring exercise, not sure what to look for. About half of us will find the contract conditions “quite OK” and the other half “absolutely unacceptable”. This has more to do with the personality of the reader than the actual contract conditions:

  • optimist vs pessimist;
  • more trustful or rather suspicious. 

Unless you are a contract expert with a solid experience and capacity to compare, in your head, against benchmark contracts, you will have a hard time to give a solid opinion and identify risk areas after a first reading.

How big companies work

Big companies have a solid staff to analyze such contracts. The commercial manager will look at the overall picture and will be supported by the legal department and several specialists (fiscal/tax, finance, insurance). They will systematically set-up a risk review system in which the team can identify, track, mitigate, establish value (risk provisions) and, last but not least, validate the risks that necessarily have to be taken by the company in order to secure a good deal.

Contract Risk Management for SME ‘s

TRaCRs – free tool for Contract Risk Scoring

What can you do as a small or medium size company (SME)? … Certainly not a massive recruitment.

But how then can contract risk management for SME ‘s be done without additional resources? … Having commercial managers with a broad enough spectrum is the objective but also a challenge. A good start is to have your commercial manager fill out the contract information in TRaCRs, which is an on-line tool that can be used free of charge (accessible at the following link: TRaCRs).

Twenty questions, carefully chosen to cover the whole spectrum of commercial and contract risk, will be asked. You just have to select the most representative answers. Automatically, this will establish the corresponding risk level on a scale from 0 to 5 for each topic. And also the Contract Risk Score for the overall project. 

Click here to get answers on 10 usual questions regarding Contract Risk Scoring.

With the Contract Risk Scoring report, you can hold decisive meetings

By e-mail, you will immediately get a report, listing the answers with their rating. Based on this report, good practice is to set-up a review board including the managers that will execute the contract and that are capable of judging the overall risk. Typically, you will start with “red flag” issues, having a rating of 5, and try to mitigate the risk, working down the list towards the lower ratings needing less attention. You can:

  • while still in tender stage, consider a deviation to the contract.
  • look for mitigation measures (e.g. establish an action plan to avoid that the risk materializes; measures that will keep the consequences of a risk event under control; insurance etc).
  • provision the risks based on their probability of occurrence and impact.
  • build a consensus within your team on risk-taking, which is a good foundation for successful project execution.

You can click here to get more information on typical decisions made with the Contract Risk Score.

The project’s Contract Risk Score

A Contract Risk Score for the whole project of below 30 means the contract has low risk. An example of this are projects with World Bank conditions.

Between 30 and 50, we find the projects with moderate contract risk.

Above 50, we can speak of a high risk project that should be followed-up with special care. 

Next steps & conclusion

If you find that the current questionnaire doesn’t match with the risks your company is facing, you can write to and ask for a more adapted version.

Most of us know that contract risk management for SME ‘s will be a “must have”, sooner or later.  To be a successful company in the long run, pro-actively managing the risks is essential. So, better to start now and not miss the boat!

You can find other articles on Contract Risk Scoring on this blog by clicking here. is the blog on commercial and contractual subjects for the Project Businesses (Construction, Infrastructure, Oil & Gas, Power & Renewable, Water Supply & Sanitation, etc). Its objective is to stimulate reflection, learning, convergence to balanced contracts and positive dispute resolution. You can subscribe to our newsletter by writing to “”. You can also connect to our LinkedIn page. Engagement with the readers is what keeps us going. So, don’t hesitate to exchange with us by commenting here below, liking our publications on LinkedIn and writing to us ” “.