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Consortium Model - A Primer
Consortium Model - A Primer
Consortia can take one of several structures. They are flexible enough to be shaped
around the type of funding you want to win and the service you want to deliver.
However, setting up a consortium takes a big commitment from all partners. There
are also administrative and cost burdens associated with building a consortium.
This means that it’s worth taking the time to carefully consider the work involved in
setting up a consortium before getting started.
2. Identify Partners
Before taking any steps toward the legal set up of a consortium, you need to
consider who will be in your consortium.
You should begin by sourcing appropriate partners. At this stage your consortium
probably doesn’t have a strategic direction, so it’s worth taking an inclusive approach
to identifying possible partners.
The first step to building your consortium is to invite potential partners to a meeting.
Getting people in the same room to start the process of building relationships and
trust is important. Your initial meeting should be the first of many, as you should
meet partners on a regular basis throughout the development of a consortium.
The discussions required in the initial meetings will vary depending on the size and
focus of your consortium, but we recommend including the following items on the
agenda of your initial meetings:
You should take a flexible, participative approach in your first meeting. Each
prospective partner should have an opportunity to ask questions and voice concerns.
With possible partners identified and an initial meeting under your belt, your next
step is to explore the practicalities of running a consortium.
Identify Resources
In order for the consortium to be viable in the long-term, funding will likely need to be
secured.Before moving forward, you should map how your consortium might be
financed. As a group, you should consider contacting possible funders like
commissioners to discuss the proposed consortium. You should also consider
whether or not you’ll require partners to contribute a membership fee to be part of
the consortium once it’s up and running.
Remember, you don’t need to discuss the details of what will be tendered for and the
resource distribution amongst partners right now. At this stage you’re simply trying to
work out whether there is a market for your consortium and whether it is worth
continuing.
Each partner will have its own governance procedures for making decisions. It is
important that these functions are respected and incorporated into the development
process. Before choosing to be a part of the consortium, each partner should seek
authorisation from relevant managers, directors or trustees in accordance with each
partners’ governing document.
For your consortium to be a success, there will need to be a nucleus of partners with
the skills, capacity, time and drive to lead the consortium’s development. We
generally call that nucleus of partners the ‘core group’.
It’s important to note that partners which aren’t part of the core group can still be part
of the consortium.
There are a variety of ways your core group might emerge. In some cases, the core
group can emerge naturally during discussions. In other situations, the group will be
elected. It all depends on your consortium and what you want to achieve.
However your core group is chosen, it’s important to remember that the core group is
not the formal, long-term consortium leader. You’ll make decision about formal
consortium leadership and structure later.
The decision about the core group also doesn’t mean that you can never welcome
another group. Other partners may join at a later stage if the original partners are
open to new additions.
At this stage, you just need to ensure that a nucleus of groups will be driving your
consortium’s development.
At this stage you should have buy-in from a group of possible partners for the
consortium and a core group leading the consortium’s development.
Now you need to take practical steps to develop your consortium.
Terms of reference describe the consortium’s scope and strategic direction. They’re
essential to keeping the partners involved in the consortium’s development on the
same page. At a minimum, terms of reference should include:
As you’re still in the early stages of developing your consortium, the terms of
reference document should be concise. More detailed information can be added later
during the ‘formalising’ stage of consortium development.
Address Confidentiality
Trust and information sharing are common issues when developing a consortium.
You should address these by ensuring there are frequent meetings and workshops
with plenty of time for individuals to get to know each other.
The form of this agreement depends on the unique requirements of your consortium.
Some organisations may want to ensure the information they share, especially its
commercially sensitive information, is not used for a purpose other than for the
development of the consortium.
A Confidentiality Agreement offers organisations the security that all members will
only use information as agreed by the consortium. For other consortiums, a verbal
agreement may suffice.
It is essential that consortium members have shared clarity about what they want to
achieve by working together. A visioning exercise enables members to develop:
It’s important that you’re clear on what standards your consortium will have for
partners.
It’s important to realise that these standards must not be imposed on partners by the
core group. Rather they should be agreed collectively and all partners should use
them to examine themselves.
If a partner falls short of the benchmark, your due diligence process should have
provisions to help them improve.
The findings of the analysis can help you identify steps you may need to take to
strength the consortium. These steps could include bringing in additional
organisations to fill gaps or bulk purchasing training packages to up-skill the
consortium as a whole.
Understanding the consortium’s strengths and weaknesses will also help shape your
consortium’s funding strategy by identifying where you could prepare a strong tender
or grant application.
There are a number of consortium structures available. Below you’ll find an outline of
three broad structures your consortium could take and the positives and the
negatives of each model.
The most suitable model for your consortium will depend on what your consortium
aims to achieve and the needs of your partners. No one model is the best approach
in all cases.
You should bear in mind that these models are flexible and your consortium may
choose to customise a model according to your needs.
Introducing a structure
Up until this point, all of your consortium partners have been on more or less equal
footing. Once you choose and formalise a structure, your consortium will have a
clear hierarchy. In many cases, this may be reinforced by legally binding contracts
between artners.
This means that it’s worth taking time to choose the right structure and going through
the process of formalising with care.
The Lead Provider Model is the most common approach. It operates by having a
lead organisation which bids for funding on behalf of the consortium. The lead
organisation also delivers services.
The Managing Agent Model is very similar to the Lead Provider Model in that it has
a hierarchical structure.
The key difference is that, in this structure, the lead organisation does not deliver
any of the services. Instead it applies for funding, manages contracts and manages
sub-contractors. The lead organisation is called the managing agent in this
structure.
Under this model, the consortium creates a new legal entity for the consortium
called a Hub Support Unit. Organisations then become formal members of the
consortium.
The Lead Provider Model is the most common approach used by consortia. It
operates by having a lead organisation, which bids for funding on behalf of the
consortium. The following illustration shows how this model is set up:
Under this model, the consortium does not have a legal identity. Each partner retains
its individual identity and the lead organisation makes contracts with consortium
partners.
Contracts between the lead organisation and sub-contractors are developed and
managed by the lead organisation. This means the sub-contractors must adhere to
the rules and processes laid out by the lead organisation.
When developing the bid, partners and sub contractors will agree who delivers the
various elements of the service and how the funding will be divided amongst the
members.
If a bid is submitted and is successful the lead organisation is responsible for the
whole contract, including any work they sub-contract out.
A management fee will usually be allocated to the lead organisation to cover their
costs for managing the contract.
Advantages
Disadvantages
This model creates a new legal entity for the consortium called a Hub Support Unit.
Partners then become formal members of the consortium. The following image
illustrates the hub and spoke model:
The Hub Support Unit bids for contracts and is the central management point for
contracts. Service delivery is then sub-contracted to consortium partners and, in
some cases, bodies outside the consortium.
Depending on the nature of the contract and the members’’ experience, all members
of the consortium may deliver services or service delivery may be limited to handful
of organisations.
This model is normally used to bid for a range of different contracts over a longer
period of time rather than one specific contract.
Advantages
Disadvantages
Once you’ve chosen your structure, you need aims and objectives that specify in
more detail what the consortium is aiming to achieve.
Your aims enable your consortium to focus on its strategic direction and assess its
performance against each aim.
You should look back at what you discussed in your visioning exercise and terms of
reference when you flesh out your aims and objectives.
10. Developing: Risk Assessment and Business Plan
Before formalising your consortium, you should consider risks and create a full
business plan.
Risk assessment
While risks vary according to the work of particular consortium there are some
frequent risks you should consider include:
Business plan
Your Business Plan should explain where the consortium is now, where it wants to
be in the future and how it plans to get there in the future. It will bring all of your
planning together into a single document.
The process for formally creating your consortium is largely dependent on the model
structure that has been selected.
You may already know who your lead is by this stage. In other cases a leader may
emerge naturally or by a vote.
It’s also possible that there isn’t a lead organisation within your existing partners, so
you may need to recruit externally.
While there is no one right way to select a leader, it is important that no partners feel
that a leader has been unfairly imposed on them. You should have a system in place
to select your lead that all partners feel is fair.
Consortia seeking to adopt either a Lead Provider or Lead Provider Model may want
to formalise the relationship with either a Memorandum of Understanding (MOU) or a
Partnership Agreement (PA). A MOU or PA details the agreement between parties,
including each organisations requirements and responsibilities.
The process for formally creating your consortium is largely dependent on the model
structure that has been selected.
Consortia which have chosen the Hub and Spoke Model will need to incorporate a
new company.
Once you have your company, your membership prospectus and governing
document will determine how your consortium operates.
This is most common form for small commercial businesses and is sometimes used by
social enterprises. The leaders of private companies limited by shares are called
directors.
Under this structure ownership of the company is issued by shares to directors and
members of the company.
Private companies limited by shares are sometimes confused with Public Limited
Companies.
The key difference is that Public Limited Companies have shares available for purchase
publicly, usually on the stock market. Private companies limited by shares do not.
13. Formalising: Membership Prospectus
The Membership Prospectus sets out the criteria organisations must meet to be
eligible to join your consortium and how they should go about joining.
You should review the information in your Due Diligence discussions when creating
your prospectus.
Your prospectus should set out your consortium’s eligibility criteria. Common criteria
to become a consortium partner include:
✓ Not-for-profit organisation
✓ Geographical area of operation
✓ Service delivery experience
✓ Readiness to deliver contracts, including: strong financial health,
comprehensive policies and procedures, suitable governance arrangements
The prospectus will also include further information to enable potential members to
decide whether they would be interested in being part of the consortium. This should
include information such as:
Fees
When considering whether or not you should charge fees for joining, remember that
partners may have already incurred costs such as legal fees. You may want to
consider a sliding scale of fees based on organisation size or anticipated gain from
the consortium.
Not every consortium needs a membership prospectus. If your consortium is only set
up to apply for a particular contract and will never welcome new partners, you may
not need one. If, on the other hand, you consortium may welcome new members or
will bid for multiple contracts, a membership prospectus may be useful.
Whatever its model, your consortium needs to consider how it will ensure high-
quality service delivery.
Providing cost effective, innovative and high quality services is essential to your
consortium’s success. Additionally, if you’re seeking deliver contracts for government
agencies, including local authorities, you will be required to meet standards laid out
in the commissioning processes and contractual requirements.
As such, they ensure that the quality of service delivery is consistent across
consortium members.
Your quality assurance system should also seek to define what actions should be
taken if a member isn’t meeting quality standards.
Quality assurance also feeds into how your consortium evaluates and develops its
services.
With your consortium set up, you’ll need to start winning funding and delivering
services.
You’ll also need to consider income generation, branding, marketing and managing
your consortium.
This can seem like a daunting task, but you don’t have to go it alone.
➢ Secure contracts
➢ Manage your consortium
➢ Identify and leverage each partners’ strengths