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Toolkit
Contents
Introduction The difference between a joint venture and a consortium Why form a joint venture or consortium? Whats right for you? Joint ventures and consortiums - advantages and disadvantages Practical steps what do I need to do? Common pitfalls Top 10 tips Are you ready to establish a joint venture or consortium? 4 4 5 5 6 8 10 11 12
Toolkit
Introduction
Tendering for public sector contracts can be perceived by some to be beyond their reach, due to the size of contract, the range of products or services required, or the level of experience required. Forming consortiums or joint ventures is one way your business can increase its capacity to respond to and deliver public sector contracts. We have designed this toolkit to provide practical support to help you decide if joint ventures or consortiums are appropriate for your business and to make you aware of the steps involved.
Toolkit
Toolkit
Toolkit
Consortium advantages
Easy to establish as there are no formal procedures that must be followed. Most consortiums are formed in writing by the execution of a consortium agreement. In addition, no capital is required to create the consortium. Members of the consortium can change their contractual agreement at any time to suit changed circumstances. The consortium can be set to expire on a given date or on the occurrence of certain events without any formal requirements. The consortium is not directly subject to taxation; however the individual members are. Some of the members of a consortium may choose to be undisclosed in dealings with third parties. The cost of running a consortium is generally lower to that of a joint venture.
Consortium disadvantages
It is difficult for consortium members to restrict or limit its liability. Members may even become liable to third parties for the non-performance of other members of the consortium or the debts of such members in undertaking a common project. Third parties will often find it difcult to enter into contract with a non-legal entity like a consortium. Because it is a nonlegal entity funding is also difcult.
Toolkit
Toolkit
Toolkit
Common pitfalls
Many joint venture and consortium approaches to tendering for public contracts are very successful. However, some of the failures can be attributed to the following: Lack of clear understanding between parties as to roles, responsibilities, titles, commitments and requirements etc. No proper safeguards in place for when things go wrong. No legal advice sought at outset in order to agree the nature of the partnership and its associated structures and management arrangements. Unwillingness to compromise on the part of each or both of the organisations. Inability to manage cultural tensions and different organisational values. Time delays caused by joint decision making can mean that businesses are slower to react to changing circumstances. Lack of appreciation of the costs that can be involved in setting up the new structure. This can also involve signicant operational resources. There is a signicant degree of trust required on all parts. If the new structure or one of the individual elements of it fails, it reects badly on all parties.
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Toolkit
Top 10 tips
1. Trust, openness and honesty between members are essential. Clear communication is required. 2. Choose members carefully. Look for shared values, not just skills or geographical reach. Make sure each member is nancially sound through credit checks etc. 3. Be clear on the purpose and objective of the joint venture or consortium. As a business, what do you expect to gain from the relationship? 4. Be realistic about the risks and the cost involved. 5. Take time to choose the type of relationship: is a joint venture or consortium the best vehicle for your purpose? 6. Use expert help, such as legal advice, appropriately and consider the appointment of an independent advisor. 7. Clearly document what is agreed between members including delivery roles and responsibilities: who will do what, when and where? 8. Manage risks proactively and monitor performance. For example, to manage reputational risk requires openness between members, controls on who can join and robust performance monitoring. 9. Do not neglect your own organisation or businesses in favour of working on the consortium; you will need to make sure that you can spread your time across competing priorities. 10. Ensure owners or senior management are committed to the process.
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BCC 5303
www.belfastcity.gov.uk/consortiums