Also known as ‘joint bidding’, consortium bidding involves two or more organisations joining forces to submit a tender. This differs from a contractor–subcontractor relationship in that a subcontractor is not seen as a ‘bidder’ during the tender process – no contract is signed between the buyer and subcontracting partner.
When bidding as a consortium, all members will be relied upon to deliver the works or services and will enter into a contract with the purchasing authority.
The benefits of Joint Venture Bidding
Even if you have had success bidding as a lone organisation, there are multiple reasons why you may choose to submit a bid as a consortium. However, they usually occur when individual companies cannot meet all of the requirements within the invitation to tender (ITT) document.
For instance, there may be a mandatory minimum turnover threshold your business cannot meet on its own – forming a consortium with other suppliers could satisfy this requirement. Some other reasons for consortium bidding may include:
- Access to a larger pool of resources and geographic coverage to deliver against the scope of works
- One of the organisations fulfils a mandatory condition to submit a compliant bid – for instance, a particular certification or accreditation
- Leveraging specific experience from member organisations across different contracts. This is particularly relevant if the contract is very high value or requires different services.
For these reasons, bidding as a consortium is usually reserved for large-scale contracts, including those requiring nationwide coverage. It can also allow small- and medium-sized businesses to access opportunities for which they may not have been able to qualify if they were bidding alone.
Structuring your consortium bid
Beyond a single-supplier or consortium bid, there are also different forms of a consortium bid. This usually depends on whether the consortium has been formed for a single contract or on an ongoing basis.
The most common methods of consortium bidding are:
- ‘Lead bidder’ model: Consortia members nominate a lead supplier as a contact to complete the bid on behalf of all members. Final responsibility for completing quality responses and submitting the bid will remain with that supplier.
- ‘Special purpose vehicle’ model: Also known as an SPV or joint venture company, members of the consortium will set up a separate company and submit the bid under that name. This is more typically employed for consortium bidding on a more frequent basis.
It is important to note that there are financial and legal commitments stemming from a consortium bid. The buyer will assess the overall financial health of the consortium, and if you are providing any guarantee arrangements to other members, you will be held liable over the contract term.
For this reason, consortium bidding is a considerably ‘high-trust’ activity. You should only enter into an agreement or partnership with organisations who have been properly vetted. A bidding agreement – separate from the authority – should be signed by all members to ensure any deals made are legally binding.