2.32 A number of arrangements between the public and private sector involve, or potentially involve, joint ventures. In a joint venture, two or more parties make a contribution to a commercial venture, share aspects of control and aim to share risks and return on an agreed basis. Where the public sector is party to a joint venture, there is often a public interest purpose behind the joint venture and without the authority's involvement the venture would not proceed. Box 2.3 sets out different legal forms a joint venture may take.
| Box 2.3: Joint ventures A joint venture can take a number of different legal forms, including: • a company limited by shares - with joint venture parties as shareholders; • an unincorporated partnership - which is an association between two or more entities. It is established by a legal agreement and liability is unlimited; • a Limited Liability Partnership - similar to the unincorporated partnership but where the entity is registered and the liability of the partners is limited; • a Limited Partnership - where a subset of the partners has limited liability; or • a Community Interest Company - where the various parties invest in a limited company which is registered to ensure that any profits are reused for the stated community purpose. |
2.33 A joint venture may exist for a specific project or for a longer duration. Joint ventures involving the public sector have been used in a number of ways and can be a feature of other forms of PPP. Examples include:
∙ LIFTs (see Example 2.3);
∙ LEPs (see Example 2.4);
∙ partnerships between British Waterways and developers to regenerate canal-side property (see Example 2.8);
∙ public private ventures to invest in low carbon technologies; and
∙ joint ventures for the design, development and through-life support of defence equipment.
2.34 In a joint venture, the authority selects one or more joint venture partners with whom it must agree terms. In the case of a joint venture established to invest in infrastructure, the joint venture itself then procures the project. The authority as a result can find itself one step removed from the project procurement process but will nonetheless require significant procurement skills to ensure its interests are protected. The public sector will also need the commercial skills required to negotiate the setting up of the joint venture and manage its long-term interest in the venture. This may involve acting as directors of a company.
| Example 2.8: ISIS Waterside Regeneration ISIS is a waterside property development joint venture, set up in July 2002. It is jointly owned by British Waterways, a public corporation caring for a 2,000-mile network of canals and rivers, in partnership with a private sector developer and a regeneration fund. The partnership was set up to provide value through development of waterside land and to earn income to reinvest in the waterways. ISIS focuses on major waterside developments across the UK with the ambition of delivering sustainable regeneration and housing along with environmental and social benefits for local communities and visitors to the waterways. |
2.35 Guidance on forming joint ventures is provided by A guidance note for public sector bodies forming joint venture companies with the private sector8. This guidance concentrates on issues arising under the Wider Markets Initiative. The Treasury intends to update this guidance, setting it in the broader context of the framework outlined in this document.
8 A guidance note for public sector bodies forming joint venture companies with the private sector, HM Treasury, 2001