Neil Young, P4P Coordinator, discusses the potential consortia models that social enterprises and other third sector organisations could adopt when forming a new partnership to tender for contracts, setting out the advantages and disadvantages of each as well as other factors you should consider.
P4P is an innovative project, hosted and managed by Senscot, which supports social enterprises (and the wider third sector) to develop new partnerships and consortia to tender jointly for contract opportunities.
One of the most common questions we are asked is about the most appropriate consortium model that organisations should adopt for a tender opportunity.
The answer that we give to organisations is that there are a range of different models you could choose to adopt and that organisations must make a judgment call based on the pros and cons of each model, as well as factors such as format of the tender, timescales and the size of each potential partner. Organisations may choose to adopt features from a combination of models.
It is also worth highlighting that there is a commonly held view within the third sector that partnerships always require a lead organisation. This is not necessarily the case, which I will explain.
See below for a summary of the different consortia models that you could adopt. Please note that there are variations of each model, but these are the main categories in summary form.
A ‘Managing Agent’ consortium is where an organisation bids for a contract and then finds subcontractors to deliver the service in full.
The Managing Agent does not deliver any of the service themselves. Instead they specialise in bidding and then, if successful, managing the contract and liaising with the buyer.
This model particularly suits membership organisations who may decide to act as a managing agent to enable their members to better access tender opportunities. These members may perhaps be too small or specialist to access the tender opportunities themselves. Some notable examples in Scotland include the CRNS Reuse Consortium, as well as Scottish Communities for Health and Wellbeing.
PROS – subcontractors can concentrate on delivery rather than on bidding and managing the contract; managing agents may charge a fee.
CONS – subcontractors will have a lack of control over the management of the contract; and the managing agent will bear all the risk.
This is similar to Managing Agent, but under the Managing Provider model, the lead organisation also delivers some of the services, and subcontracts the remainder of the service delivery.
Typically, the organisation which fulfils the Managing Provider role will be a larger organisation with some prior experience of tendering and with management of contracts and supply chains. This will help the partnership to pass the qualification stage of the tender process.
This is by far the most common consortium model, and is often the model which partnerships are forced to adopt where there is little time to submit a tender.
One variation of this model is to rotate the Managing Provider role between several organisations in the partnership depending on factors such as any specialisms required and/or delivery location(s).
PROS – as with the Managing Agent model, subcontractors can concentrate on delivery rather than bidding for and managing contracts, and again the lead organisation may charge a management fee. Other advantages for smaller providers include an ability to access contracts that usually they would be too small to access.
CONS – the subcontractors have a lack of autonomy and potentially a loss of identity. The Managing Provider will bear all the risk. There could also be a risk to reputation for subcontractors in the case of poor management of the contract.
Under the Super Provider model, organisations come together to set up a separate legal structure which is jointly owned by the partner organisations.
Typically, the new legal entity will be responsible for bidding for the contract, and then if successful, managing the contract and subcontracting delivery of the services to its members, similar to a Managing Agent. One variation of this could be for the new legal entity to deliver the services itself, with profits then divided between the partners as appropriate.
The management function of the consortium can either be carried out by the new legal structure, or alternatively can be subcontracted to one of the partners or an external organisation.
One variation of the Super Provider model is a Joint Venture – which is a type of Super Provider consortium established for a specific tender opportunity.
An example of a Super Provider consortium is a Consortium Co-operative. This could be described as “a group of businesses who have pooled resources to achieve a common goal…run on a shared and equal basis by its members to benefit all their interests, with each business having an equal say”.
Cooperative Development Scotland, part of Scottish Enterprise, offers a fully funded advisory service to help you establish a new Consortium Co-operative.
PROS – this model protects individual members from risk; is owned and run by its members; and can act as a single point of contact for commissioners and clients.
CONS – it can be difficult to meet the financial requirements of tenders if your Super Provider consortium is newly established. Significant funding and time may be required during the consortium’s early stages of development.
An Informal Network is a loose grouping of organisations who come together to bid for contracts, but they do not establish a new legal structure, and there is no lead organisation. If successful, the commissioner will have a separate contract with each provider.
It is important to note that whilst there is no lead organisation, the bid itself must be submitted by one organisation only (but with multiple ESPD submissions). It is also worth noting that in your bid you should clearly detail how the consortium will be managed through an alternative governance structure e.g. a working group or consortium board.
PROS – this model allows organisations to retain control and spreads the risk. It can be one way of collaborating where there is no obvious lead organisation and/or there is not enough time to establish a new legal body.
CONS – there is no single point of contact for commissioners; and the consortium’s performance could be harder to manage without a more formal governance structure.
There is no ‘one size fits all’ approach to choosing the right consortium model for your partnership.
It may be the case that external factors, such as short timescales due to an imminent tender opportunity, could force you to adopt a model which is less time or resource-intensive, such as the Managing Provider, or Informal Network models.
The advantages and disadvantages of each model should be carefully considered by the potential partners, and you may decide to use a combination of models to suit your circumstances and needs.
P4P offers fully funded business support to social enterprises and the wider third sector to help them decide which consortium model to adopt. P4P support also includes:
- Drafting or reviewing a Memorandum of Understanding or Partnership Agreement
- Reviewing a tender response, providing comments/feedback and suggested amendments
- A bespoke collaboration project plan based on the steps outlined in the P4P Collaboration Toolkit
- A range of online self-help resources which can accessed through the P4P website.
Senscot Legal provides legal advice to organisations on the most appropriate legal structures if a consortium wishes to establish a new legal body. They have produced a handy guide on partnership legal structures.