STRUCTURING A JOINT VENTURE by ProQuest

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By Demetrius Carney, Joseph McCoy, & Sid Bale, Perkins Coie                                  or that the ACDBE partner is partici-       the landscape of historical joint venture
                                                                                             pating in the front scheme.                 structure and operation. The regulations

STRUCTURING A                                                                                     The prime and the ACDBE must
                                                                                             exercise control in proportion to its
                                                                                             ownership interest. Control is gener-
                                                                                                                                         increased benchmarks for participation
                                                                                                                                         by disadvantage business owners. This
                                                                                                                                         participation is one of the factors con-

JOINT VENTURE                                                                                ally demonstrated and exercised by
                                                                                             membership and voting power on
                                                                                             management committees. The joint
                                                                                             venture agreement or operating
                                                                                                                                         sidered by airport authorities when RFP
                                                                                                                                         submissions are evaluated.
                                                                                                                                              Among other provisions, FAA
                                                                                                                                         restricted a prime’s ability to capture
Attorneys offer advice for those considering                                                 agreement should clearly address the
                                                                                             responsibility for each management
                                                                                                                                         the profits and interests of their JV
                                                                                                                                         partner through layered multiple
teaming up for concessions contracts                                                         committee, the partners participating
                                                                                             on the committee, and most impor-
                                                                                                                                         management and administrative fees
                                                                                                                                         or specified mandated control tar-
Anxious to meet the deadline to the Airport Authority’s request for propos-                  tantly the voting structure for the         gets; and it provided guidance on the
                                                                                             committee.                                  management responsibilities of both
als (RFP) for a concession operation, a prime concession operator and its                         The management committee may           JV partners.
politically correct airport concession disadvantaged business enterprise                     designate an operations manager to               To ensure compliance with fed-
(ACDBE) partner quickly agree to respond to the RFP as a joint venture                       run the company’s day to day affairs.       eral guidelines, FAA began auditing
(JV). The partners execute a basic joint venture agreement; and agree that                   However, all major decisions should         concession JV relationships. Federal
                                                                                             be the responsibility of the primary        authorities are not the only agencies
they will work out the details of the JV if their proposal is accepted. Big                  management committee. It might              monitoring such joint venture rela-
mistake. This scenario lays the foundation for decertification of the ACDBE,                 serve the partners well to establish an     tionships — airport authorities now
debarment of the JV, investigation of the JV by the local airport authority,                 organizational chart as an exhibit to       review the three primary aspects of any
and possible indictment by the feds. Let’s start over.                                       the JV agreement. The organization-         JV arrangement prior to any award,
                                                                                             al chart should clearly delineate the       renewal, extension, or material amend-
     Responding to a concessions                 to simply include a disadvantaged           responsibility of each partner, identify    ment to a concession agreement.
operation RFP as a JV requires plan-             business as a passive partner will not      each partners’ participation on each             Because the burden will always be
ning as to 1) the selection of the right         survive the scrutiny of an audit by the                                                 on the venture to demonstrate com-
business partners; 2) all the business           airport authority or regulatory agency.                                                 pliance with any and all FAA regula-
aspects for operation of a profitable                 The first step in structuring a JV      Authorities now review the                 tions, JV airport concessionaires do
and successful airport concession; and           is to have the venture properly capital-    
								
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