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and consortiums
Toolkit
www.belfastcity.gov.uk/consortiums
Toolkit
Contents
Introduction
Common pitfalls
10
Top 10 tips
11
12
Toolkit
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.
A consortium is an association of
two or more individuals, companies
or organisations with the objective of
participating in a common activity or
pooling their resources to achieve a
common goal.
Toolkit
Toolkit
Joint ventures
the pros and cons
To help you to consider the best option for your business, the following
advantages and disadvantages have been designed to help you make the
best decision for your business:
Joint venture
advantages
Provides companies with
the opportunity to gain new
capacity and expertise.
Enables companies to enter
related businesses or new
geographic markets or gain
access to new technology.
Provides access to greater
resources - including specialised
staff and technology.
Shares risks with a venture partner.
Enables flexibility: a joint venture
can have a limited life span
and only cover part of what
you do, thus limiting both your
commitment and the business
exposure.
Offers a creative way for
companies to exit from non-core
business.
Companies can gradually separate
business from the rest of the
organisation and eventually, sell
it to another parent company.
Roughly, 80% of all joint ventures
end in a sale by one partner
to another.
Joint venture
disadvantages
It takes time and effort to
build the right relationships and
partnering with another business can
be challenging. Problems are likely to
arise if:
The objectives of the business
are not 100% clear and
communicated to everyone
involved.
There is an imbalance in the level
of expertise, investment or assets
brought into the venture by the
different parties.
Different culture and management
styles result in poor integration and
co-operation.
The partners do not provide
enough leadership and support in
the early stages.
Creating a joint venture may result in
more complex tax arrangements.
Success in a joint venture depends
on thorough research and analysis of
the objectives.
Creating a joint venture can be more
costly than a consortium.
Toolkit
Consortiums
the pros and cons
To help you to consider the best option for your business, the following
advantages and disadvantages have been designed to help you make the
best decision for your business:
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
difficult to enter into contract
with a non-legal entity like a
consortium. Because it is a nonlegal entity funding is also difficult.
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.
10
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 financially 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?
11
Taking account of the risks and benefits, advantages and disadvantages and
procedural requirements involved in establishing a joint venture, you need to
decide whether either of these approaches is right for you and your business.
In making this decision, you need to:
Review your business strategy is a joint venture or consortium
approach the most appropriate
method for you to achieve your
business aims?
Look at what your competitors
are doing. Are they entering into
joint ventures or consortiums?
If so, has this move been
beneficial to their business?
www.belfastcity.gov.uk/consortiums
BCC 5303