What is a Consortium Bid?

Jul 7, 2021Bid Management, SME Champions, Tender Process

Have you ever come across a tender opportunity and thought, ‘We can only do part of that but I know a company that could deliver the rest?’ It is situations like that which call for consortium bids.

When two or more companies come together to create a joint solution to the needs of a procurer, it’s called a Consortium bid. As you can imagine there are pros and cons to bidding in this way, both for the organisation that is buying the goods or services and for your business. Here are just a few of them.

Pros for You

Bidding as part of a consortium can be a great way to win that first contract without taking all the costs and responsibility on yourself. Instead, you can pair up with one or more other companies, and share the workload between you. You’ll then be able to use that contract as an example for future bids, it’s a great way to ‘get a foot in the door’. It isn’t just the buyer you will be able to use as a reference, though – your consortium partners can be used as references too.

You will need to consider who is going to be the ‘Lead economic operator’ (LEO) and who will be additional parties to the tender. For some bids, the LEO has to supply more information/proof as they are taking that lead position, but all parties will have to provide financial and insurance information as well as any necessary certifications.

Cons for You

what is a consortium bidThere will be some negotiation to be done if you’re successful in winning the contract to ensure that you’ve got the proper legal structures and agreements in place to cover all parties. While your agreements can be fairly loose while you are putting the bid together, once you’ve been awarded the contract you will need to give the legalities more thought – common formalised agreements include creating a Special Purpose Vehicle or SPV or having a subcontracting arrangement.

You’re also putting your reputation on the line through the people you choose to work with. If one company lets the contract down, you’ll all have to explain what went wrong to the client, and for any future tenders. The same goes for bankruptcy or other unforeseen events; what happens if one of your team goes under. Contingency plans need to be considered.

Pros for the Buyer

The government has a target to spend £1 in every three with Small and Medium-sized Enterprises or SMEs, and it’s currently failing to meet it. That target was in place before COVID had such an impact on small businesses. Many publicly funded organisations, particularly local authorities, are putting an emphasis on the circular economy and prioritising spending in their area with SMEs and Voluntary and Community Enterprises, or VCSEs.

Consortium bids give them a way to do this, with multiple SMEs coming together to provide a service that is spread across a wide geographical area (for example gas servicing or domiciliary care services) or that can be split between multiple firms, e.g., roofing, scaffolding, and guttering companies coming together for a roof repair service.

Working with multiple businesses can also give rise to greater innovation. While bigger companies take longer to respond to changes in the industry, smaller companies are more agile and able to take on new techniques or create innovation themselves.

Cons for the buyer

When a buyer is assessing a single company then they can assess one set of risks. When multiple companies come into play it makes that process more complicated. They need to do the due diligence for multiple sets of companies, but they also need to work out the legalities in terms of who is responsible for delivering what in terms of KPIs for the contract.

Questions about a Consortium Bid?

Is there anything else you want to know about consortium bids, either in general or specifically? If you do, we will do our level best to answer them. Just get in touch today and we will give you our best advice on how to approach a tender, whether you’re flying solo or forming a consortium.

 

Adrian Corcoran

Adrian Corcoran is Managing Director and Founder of Bid for Success. Passionate about working with great businesses to win them new work, she and the Bid for Success team are here to help you with your bidding and work winning needs.

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