Ms. Ferdouse Tuly
The government of Bangladesh conducts tendering for various constructions or infrastructures through contracts. There are some standard documents of these Tenders. In order to get some Tenders, some eligibility criteria have to be fulfilled. There are some pre-qualification processes for Tenderers in the “Standard Pre-qualification Document for Procurement of Works (International) provided by the CPTU (Central Procurement Technical Unit) website. Both Tenderer and Procuring Entities may get benefit from this process. The process enables prospective Tenderers, who may be insufficiently qualified on their own, to avoid the expense of Tendering. Conversely, it is an incentive for these potential Tenderers to form a Joint Venture that may give them a better chance of success and it also encourages local firms to form Joint Ventures with other local or international firms, thereby benefiting from their resources and experiences.
Law regarding Joint Venture: As per Section 27 of the Public Procurement Act, 2006, any person may, individually or in the joint venture along with another person or persons, national or foreign, submit an application, an expression of interest, a proposal, or a tender. However, in the pre-qualification, expression of interest or tender or proposal document under this Section, no such condition will be imposed making it mandatory to submit an application, an expression of interest, a proposal, or a tender under the joint venture. All such persons will be jointly and individually liable to the procuring entity in case of a joint venture among persons.
Rules in respect of Joint Venture: As per Rule 54 of the Public Procurement Rules, 2008, the Procuring Entity may allow any persons to participate in Procurement proceedings individually or by forming Joint Venture, Consortium or Associations (JVCA) for contracts involving the Procurement of works, physical services, and intellectual and professional services provided that only the Letter of Intents for the formation of a JVCA will not be enough to prove the existence of JVCA (Sub Rule 1). This JVCA agreement will be executed on a non-judicial stamp or value or equivalent as specified in Schedule II of the Rules and signed by all legally authorized representatives of the persons who are parties to such agreement (Sub Rule 2). As an alternative to Sub Rule (2), a Letter of Intent to execute a Joint Venture Agreement, in the event of a successful Tender or Proposal, will be signed by all partners and submitted with the Tender or Proposal together with a copy of the proposed agreement provided that the Letter of Intent signed by all partners of the JVCA is authenticated by a Notary Public (Sub Rule 3).
However, in respect of liabilities, each partner of the JVCA will jointly and severally liable for all liabilities and ethical or legal obligations under the contract (Sub Rule 4); and a representative will be nominated who will have the authority to conduct all business the receipt of payments for and on behalf of all the partners of the JVCA (Sub Rule 5).
Minimum qualification requirements, for the leading partner of the JVCA and the other partners, may be specified in the Prequalification Document, Tender Documents, or the Request for Proposal Document (Sub-Rule 6). If there is a dispute that results in legal action being taken in court then action will be taken against all partners of the JVCA, if there are available and, if only one partner is available, then that partner alone will answer on behalf of all partners and, if the complaint lodged is proven, the penalty will be applicable on that partner alone as whatever penalty all the partners would have received provided that if the other partners of the JVCA subsequently become available before the legal action has been completed, the Procuring Entity will have the right to take action against those other partners of the JVCA as well (Sub Clause 7).
As per Sub Clause 8, a JVCA comprising only national partners may be eligible for domestic preference subject to fulfillment of conditions as specified in Sub Rules 6, 7, and 8. The composition or the constitution of a JVCA once formed will not be allowed to be altered prior to execution of the Contract but alteration at a date later than execution of the Contract may be done subject to the prior approval of the Head of the Procuring Entity (Sub Rule 9). Alteration of partners will only be allowed if one of the partners is found to be incompetent or has any serious difficulties which may impact the overall implementation of the work, whereby the new partner will require to have higher qualifications than that of the outgoing partner (Sub Rule 10). If any partner of the JVCA has been debarred from participating in any Procurement activity due to corrupt, fraudulent, collusive practices in accordance with Section 64 of the Act, that JVCA will not be considered eligible for participation in any Procurement activity and similarly if any JVCA has been debarred in accordance with the above-mentioned section of the Act, that debarment will equally be applicable in the case of each partner as well (Sub Rule 11).
In the case where a JVCA partner nominated for a particular component meets the minimum qualifying requirement of that component, the past experience and other capacities of such partner will be combined together for summation to determine the total qualifying requirements of that JVCA (Sub Rule 12). However, Sub-Rule 13 provided some examples where specific technical experiences of JVCA partners or their key staff may not be aggregated to fulfill minimum qualification requirements. Finally, the performance security, insurance coverage, indemnity, contracting, and sub-contracting will be furnished or executed on account of the JVCA legally formed (Sub Rule 14).
To get Tenders through forming Joint Venture, Standard Pre-qualification Document for Procurement of Works (International) will be followed where Section 1 which provides Instruction to Applicants (ITA) for relevant information to help Applicants prepare for their applications; Section 2 provides Application Data Sheet (ADS) for the information that is specific to each object of procurement and that supplements the information or requirements included in Section 1; Section 3 provides all Application Forms that Applicants must complete and submit together with their applications; and Section 4 provides Scope of Works.
If anyone wants to get Tenders through forming Joint Ventures, he/she has to go through some pre-qualification process, which is as follows:
Eligible Applicants: As per ITA Clause 5, Section 1 of Standard Pre-qualification Document for Procurement of Works, applicants may be a physical or juridical individual or body of individuals, or company, association, or any combination of them in the form of a JVCA invited to take part in public procurement or seeking to be so invited or submitting an applicant in response to an invitation for Pre-qualification. As there is a requirement in eligibility criteria that applicants with poor performance, insolvent will not be eligible for pre-qualification. So, in that case, applying for pre-qualification through forming Joint Venture will create the way much easier. However, the applicant’s requirements for eligibility will extend, as applicable, to each Joint Venture partner and Specialist Subcontractor proposed by the applicant.
As per Clause 18, Section 1 of the Standard Pre-qualification Documents for Procurement of Works, applicants may participate in the pre-qualification process and subsequent procurement proceedings by forming a (JVCA) or alternately with the intent to enter into such an agreement supported by a Letter of Intent (Sub-Clause 18.1). The Joint Venture agreement, indicating at least the parts of the works to be executed by the respective partners, will be legally entered into case-by-case in the Applicant’s Leading Partner’s country of origin, as specified in the Application Data Sheet (ADS) and duly signed by all legally authorized representatives of the Persons who are parties to such agreement (Sub-Clause 18.2).
However, Applicants, as an alternate to Sub Clause 18.2, may intend to enter into a Joint Venture agreement case-by-case in the form of a Letter of Intent along with the proposed agreement, indicating at least the parts of the works to be executed by the respective partners, duly signed by all partners of the intended Joint Venture and authenticated by an authority of the Applicant’s Leading Partners country of origin, as stated in the ADS, with the declaration that the partners will execute the Joint Venture agreement in the event the Applicant, in the first place pre-qualified and then successful in the subsequent Tender (Sub Clause 18.3). The Applicants will submit the Letter of Intent and the proposed Joint Venture agreement along with the Application (Sub Clause 18.4). For a Joint Venture under Sub Clause 18.1, the precise minimum qualification requirements of Leading Partners and other partners will be as specified in the ADS (18.5). In cases where Joint Venture partners, personnel capacity, equipment capacity, and financial capacity individually fulfill the precise minimum qualifying requirement if that particular component as specified, capacities of such partners in the Joint Venture will be combined together for summation to determine the total precise minimum qualifying requirements criterion of that Joint Venture as stated under Sub Clause 18.5(Sub Clause 18.6).
In respect of taking liabilities, each partner of the Joint Venture will be jointly and severally liable for the execution of the Contract, all liabilities, ethical and legal obligations will be borne in accordance with the Contract terms (Sub Clause 18.7). This criterion is also discussed above in Rule 54(4) of the Public Procurement Rules, 2008.
The Joint Venture will nominate a person as a representative who will have the authority to conduct all business for and on behalf of any and all the partners of the Joint Venture during the tendering process and, in the event, the Joint Venture is awarded the Contract, during contract execution including the receipt of payment for and on behalf of the Joint Venture (Sub Clause 18.8).
Each partner of the Joint Venture will complete the Joint Venture Partner Information (Form PQW5-3) for submission with the Application (18.11). Once the composition or constitution of a Joint Venture is formed, no alteration will be allowed prior to the signing of the Contract (Sub Clause 18.9).
Alteration of Partner: Sometimes the partners in joint ventures do not continue or respond or leave the work in the middle of the project and other partners suffer losses because of this. We have dealt with many issues where the Partners of Joint Venture have left the work in the middle of the Project and other Partner suffered loss financially and lost good reputation in front of the Procuring Entity.
The Public Procurement Act, 2008 provides the way how any person can alter their partner if they do not want to continue in the project or leave the work in the middle of the project. As per Rule 54(10) of the Public Procurement Rules, 2008, alteration of partners will only be allowed if one of the partners is found to be incompetent or has any serious difficulties which may impact the overall implementation of the work whereby the new partner will require to have a higher qualification than that of the outgoing partner.
The alteration process is also discussed under ITA Sub Clause 18.10. As per Sub Clause 18.10, alteration of partners to the composition or constitution at a date later than the singing of the Contract during execution will be allowed by the Employer only when any of such partners is found to be incompetent or has serious difficulties which may impact the overall implementation of the proposed works, where the incoming partner will require to have qualifications higher than that of the outgoing partner.
Domestic Preference: As per ITA Clause 20, for a Joint Venture the requirements of a pre-qualified national Applicant to qualify for ‘domestic preference’ in the subsequent Tender : (i) it is registered in Bangladesh; (ii) the individual partners are registered in Bangladesh and have more than fifty (50) percent ownership by the nationals of Bangladesh; (iii) it does not sub-contract more than twenty (20) percent of the Tender price, excluding the provisional sums, to foreign contractors; and (iv) it meets any other requirements specified in Standard Pre-qualification Documents for Procurement of Works.
The purpose of a joint venture is to fulfill the requirements for winning the Tender. In many cases, applying as a single proprietorship can lead to inequitable qualification or disqualification but through joint venture, it is convenient to get the Tender by fulfilling the requirements. In that case, anyone can form a company through Joint Venture and open a bank account in that name or two individual entities can apply for this pre-qualification by forming Joint Venture.