Charity consortia have continued to be popular with funders (particularly public sector funders who want to manage fewer contracts). They can offer a range of benefits (e.g. improved service quality and value for money). For some, particularly smaller organisations, they can make the difference between survival or not as public sector commissioners are increasingly awarding fewer, much larger contracts.
However, getting a consortium right takes time and money, and success is not guaranteed. There can be tensions between consortium members; a strong bond of trust built on shared value is vital to turn those tensions into a positive, creative advantage.
What is a consortium?
A consortium is more than a loose partnership of organisations working and learning together (although they will do both in a consortium). It is a formal arrangement between organisations working together to a defined objective (usually called a Joint Venture Agreement or Consortium Agreement). Clarity of purpose is essential as is getting the right structure.
Reasons why organisations choose to work in a consortium often include:
Gaining access to markets that they cannot access alone.
Simplicity for public service commissioners.
Reducing overheads and sharing capacity.
Learning from each other and sharing complementary skills and expertise.
Service improvements and value for money.
Any joint working can also bring disadvantages, including:
The direct and opportunity costs of set-up and operation.
Joint decision making generally takes more time.
Reputational risk: each organisation is, to an extent, trusting its reputation to others.
Differing values and cultures introduce tensions.
Fear of loss of independence.
There are broadly three types of consortium structure: separate contracts (each partner has a separate contract with the funder), a lead body (one partner is the lead contractor and subcontracts to the others) or a special purpose vehicle (SPV - a new organisation is set up as the lead contractor and subcontracts to the partners). These are illustrated in the diagrams below.
There is no right or wrong option. The separate contracts and lead body options tend to be quicker to set up and have lower overheads but the lead body has unequal risk sharing (because the lead body takes on more) and funders may not like the separate contracts option because they still have to manage multiple contracts. The SPV option takes more time and there can be difficulties demonstrating track record but it shares risks/liabilities equally and can even provide liability protection for the members. VAT issues need careful thought in both the lead body and SPV options.
How to go about it?
Whichever option you choose, you need to take time to build trust, openness and honesty between partners, including developing a shared mission, vision and values. Look for shared values amongst members, not just skills or geographical reach and make sure each member is financially sound through credit checks etc.
Often, getting expert help can be really helpful to facilitate this phase, help you choose the right structure and, once decisions have been made, to document clearly what has been agreed between partners.
If you would like to find out more about how to set up a successful consortium or about our services for supporting collaborations and mergers more generally, please contact us at email@example.com to arrange free initial telephone discussion