Working in a Consortium

A guide for third sector organisations involved in public service delivery

The Office of the Third Sector has produced this publication in conjunction with the Social Enterprise Coalition, NAVCA, Futurebuilders England, NCVO and National Children’s Bureau. In Summary the publication covers and details the following in regard to consortiums:

Before taking any steps in the development of a consortium to tender for a public service contract, or extending you operations to working closely with others, there are some key questions for you, and others you may be considering working with, about which you should be clear –
• Who you are
• What is your aim?
• Why you want to extend your operations
• How will you measure your success?

Tendering for public sector contracts is highly regulated. The rules which guide most public sector procurements are the Public Contract Regulations 2006, known as the PCRs. Depending on the type of services it may be that only some of the Regulations apply. Aspects of health, education and social care services for instance need only apply with ‘Part B’ service Regulations.

The Key Regulation regarding tendering as a consortium is Regulation 28. The Regulation defines a consortium as being two or more ‘economic operators’ – that is to say contractors, suppliers or service providers. The PCRs also make clear that all economic operators must be treated equally in a non-discriminatory way. The purchaser must also act in a transparent way. The rules which apply to, and the standards required of, any single organisation tendering for a contract also apply to EVERY member of a consortium.

In forming a consortium organisations also need to consider the requirements of competition law. It is important that specialist legal advice be taken from the earliest stages in the development of a consortium, not just in relation to the detailed drafting of the legal documentation but also in ensuring the formation of the consortium and the way in which the contract is to be delivered does not breach competition law.

Strategies for working together include –
• Scaling up – Pursuing a growth strategy to become a large scale regional or national organisation that can compete at scale with the current large scale operators.
• Sheltering – A third sector organisation could shelter under a larger ‘umbrella’ organisation as a subsidiary.
• Merging – Similar to ‘sheltering’, third sector organisations could pursue a strategy of merging with related organisations to achieve sufficient scale to compete in the market.
• Sub-contracting - Third sector organisations could sub-contract their services to other organisations who submit the tender.
• Consortium – Third sector organisations could agree to work together and form a consortium to tender for contracts to deliver public services.

Before starting it is essential that the organisation leading the development obtains legally binding agreements for Sharing of Information and a Confidentiality Agreement. All potential consortium members should be invited to sign up to these agreements before there is any serious discussion regarding the formation of the consortium.

Some consortium models include –
• Steering Group – A contractual framework consisting of an agreement among the members of the consortium to work together and setting out their legal rights and obligations but without any additional legal entity being formed.
• Lead Contractor – The lead contractor is identified as being willing and able to undertake this role and accepts full responsibility and liability for the delivery of the contract as specified.
• Prime Contractor – Organisations tender to be the Prime Contractor and undertake the management of a contract or a range of services on behalf of a Government Department, Primary Care Trust (PCT), or Local Authority (LA). The role of the prime contractor is to then manage the supply chain.

To read the full publication download this pdf.
For the summary guide download here.