Development funding

This will vary depending on the type of consortium. The budget for a typical local consortium development, in terms of funding and direct costs, is around £10,000.

The main ways to fund a consortium development are:

• external development grants
• support from local commissioners
• self-funding by members
• repayable finance.

External funding is ideal. However, you may still need to demonstrate that there are some specific contract opportunities on the horizon that require consortium approaches, and/or some kind of positive engagement with local commissioners. Some current options are:

• Awards for All
• European Regional Development Fund (ERDF) – small grants for social enterprise development

Public sector commissioners want to see their local voluntary sector organised to be able to bid for contracts collectively, but often they fail to provide the resource needed to enable this to happen. We would argue that seed funding to establish a voluntary-sector consortium is an essential way for commissioners to develop their provider market.

If no external funding can be achieved, the initial funding will need to be raised from the founding partners. The advantage of this is that it gives a high level of ‘buy-in’ from a group of organisations that are committed to driving a consortium development forward.

Loans and other forms of repayable finance are increasingly becoming part of the funding mix for voluntary organisations. If you have clear line of sight to a contract opportunity that your consortium can deliver, you might be able to make a case for investment in the development of the consortium, which will be repaid from surpluses on the contract(s).

Care should be taken for the following reasons.

• The lead-in time for negotiating a social investment can be long.
• If you need to recover investment costs from your contract surpluses, this will put up your unit costs, and this is likely to mean that your tender will be scored lower, so you might jeopardise your chances of winning the contract.

This can be the biggest sticking point for emerging consortia. Procurement rules of statutory agencies often require that providers have a financial track record and an existing turnover that shows that they have the capability to manage the contract in question. A brand new entity will not have this. There are various ways you can tackle this.

• Engage commissioners right from the outset of the consortium development process. Better still, encourage them to invest seed-corn funding into it.  In that way, they will develop a vested interest in the consortium taking off.
• Lobby your commissioners to take a more flexible approach to letting the contract. Within procurement regulations there are mechanisms that enable commissioners to let contracts up to a certain value, or of certain types, without going out to open competition.
• Ask your commissioners to take into consideration the combined track record and financial status of the providers that will be delivering the contract.
• Where necessary (as a last resort), work on a system of joint and several liability, whereby the consortium members jointly and severally guarantee the obligations of the lead contractor.