Options - working collaboratively
in competitive tendering
situations
Robin Fallas, MacRoberts LLP
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Benefits of collaborative approach
Procurement rules context
DWP context
Some Initial Considerations
Collaboration options and legal issues that
attach
 Contractual framework
 Contractual framework with steering
group
 Jointly controlled entity
Benefits of collaborative approach
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Shared costs
Access to broader competencies
Better meet DWP expectations?
 Increased chances of success
Potential drawbacks with collaborative
approach
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Unfamiliarity in market?
Complexity / commercial clarity
 Potential difficulty in explaining approach
Requirement for legal advice/clarity on legal
structures
Cost
Alignment of organisations
Potential issues with IPR / payments etc if
unclear
Reliance on others
Key considerations for success
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Maximise your chances of winning by:
 Understand requirements;
 Ensuring that your choice of
collaboration partners reflects the
Contracting Authority’s (CA’s)
requirements;
 Ensuring that the form of collaboration
reflects the CA’s requirements.
Procurement rules context
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Public Contracts (Scotland) Regulations 2006
Regulation 28: ““consortium” means two or
more persons, at least one of whom is an
economic operator, acting jointly for the purpose
of being awarded a public contract”
 CA cannot treat bidder as ineligible on
grounds that no legal entity formed
(Regulation 28(2))
 CA may require, where justified, a
consortium to form a legal entity before
entering into a contract (Regulation 28(3))
Procurement rules context
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Information as to economic and financial
standing (Regulation 24):
 “Where appropriate an economic operator
may rely on the capacities of other members
in the group regardless of the legal nature of
the link between the economic operator and
other entities” (Regulation 24(4)(a))
Information as to technical or professional ability
(Regulation 25)
 Regulation 25(3) contains a similar provision
reflecting 24(4)
Procurement rules context
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CA may request a statement of any
proportion of the contract which the
services provider intends to subcontract to another person (Reg
25(k))
CA may require indication of part of
tender to be subcontracted and
identity of subcontractor (Reg 45)
Procurement rules context
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Collaborative form/structure
 must comply with Contract Notice and
Contract Document requirements
 must meet pre-qualification
requirements
 should maximise chances of success
by reference to CA’s requirements and
evaluation
Procurement rules context
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Pre-procurement consideration
Contract Notice
Pre-qualification
Invitation to Tender
Bid submission
Evaluation and award
DWP Context
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Partnership between public, private and
third sectors
Integration with community strategies
Multi-client contracts
Stronger more consistent base of top-tier
providers
Fewer larger, longer contracts – Prime
contractor model
Special purpose vehicle or consortium
DWP Context
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Contract Notice for Phase 1 Flexible New
Deal:
 Parent guarantees, performance bonds
(III.1.1);
 No specific legal form but each service
provider to be jointly and severally liable
(III.1.3);
 Restricted procedure with assessment of
capacity and capability at pre-qualification
(IV.1);
 Most economically advantageous tender
(IV.2).
Legal Form Options
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Consortium /contractual framework
Consortium / contractual framework
with steering group
Jointly controlled legal entity:
 Company Ltd by shares
 LLP
 Company Ltd by guarantee
» Charity
» CIC
Some Initial Considerations
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Consider partners / structure in advance
Any restrictions on the model you can use?
Who are suitable partners? Compatible?
Contract specifications (likely to be)?
Risks/liabilities likely in delivering the contract
Risks in different approaches to collaboration
Duration / exit strategy?
Approach to management decisions?
Ensure legal documentation covers off risk / sets out
clear structure
Consider TUPE issues as relevant
Consortium - Contractual
?
?
Lead
Partner
[DWP]
?
Consortium - Contractual
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Unincorporated;
Contractual rights and obligations amongst members
including:
 Duration, rights and duties, scope of project
(flexible), sharing of assets (as appropriate),
financing, restrictions on parties, rights of parties
to participate in profits, exit provisions;
Normally declaration that not a legal partnership
Need for one party to enter into contracts (guarantees
etc to be provided by others?)
Profits generally accrue separately to parties (each
taxed according to its structure)
May take form of prime/sub-contractor model
Consortium – Contractual with Joint
Steering Group
?
?
Lead
Partner
[DWP]
?
Joint
Steering
Group
Consortium - Contractual with steering
group
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As previous but with steering group as
forum for decision making
Higher level of collaboration
Inclusion of provisions – establishment of
joint steering group - status and form
Inclusion of provisions – decision making
between partners and joint steering group
Contractual Frameworks
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Advantages
 May be easier to
set-up
 Independent
decision making for
each party
 Avoids additional
formalities
 Costs
 Exit
 Flexibility
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Disadvantages
 Less “joint” decision
making
 Potential
complications with
third parties
 Potential unlimited
liabilities (reck /neg
etc)
 Risk for lead party
 Potential distortions
in decision-taking
Jointly Controlled Entity
?
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JCE
[DWP]
?
Jointly Controlled Entity
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Dedicated corporate body
Can facilitate clearer legal framework with ability
to adapt
Can allow for clear mechanism for
payments/recycling of returns
Limited liability (though bear in mind parent
guarantee and joint/several liability)
Can assist in governance / management of
contract (higher degree of joint decision making)
Board – can result in high degree of joint
management of risk
Assets and liabilities pooled in single venture
Jointly Controlled Entity
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Advantages
 Closer relationship
 More robust
governance
 Clear decision
making
 Limited liability
 Separate entity employ/hold
property;
 Financial flexibility
 Minimal disruption if
change in partners
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Disadvantages
 Regulation
 “Limited”?
 Set-up costs / audit
 Administration
 Reporting/Minuting
 Separate Accounts
 Company Law
 Harder to disengage
 Separate Resources
Forms of Jointly Controlled Entity
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Profit making/distributing
 Co Limited by shares
 LLP
Non profit-making
 Co Limited by guarantee
CIC / Charity considerations
Option to carry out services or to subcontract
Co Ltd by shares
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Parties are members
Articles contain detail on investment /
decision taking / shares
Can realise stake through shares or
payout of surplus assets
Shareholder Agreement setting out detail
Care with conflicts
Companies Acts apply
Tax considerations on set-up
LLP
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Where two or more members wish to carry on
business with a view to profit
Clear distinct legal entity
Parties are members/designated members
Members free to regulate decision making
Members taxed according to their tax status
Members ultimately responsible for
acts/omissions
Flexibility but no readily transferrable stake
Tax considerations on set-up
Co Ltd by guarantee
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Suitable where no intent to derive
financial return
Clear distinct legal entity
Members are parties
Built in right to representation
Prohibition on distribution of profits
Liability of members limited
Companies Acts apply
How to choose?
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What does DWP want?
What works for you/partners?
 Clarity on decision making
 Dealing with risk
 Returns mechanism
 Exit strategy
 Flexibility
 Resources
Contractual Frameworks – Key
considerations
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Clear objectives
Duration
Responsibilities
 lead?
 service levels?
 Timetable?
Decision-making
process
Point(s) of contact
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Joint Steering Group
Contribution of
funds/assets
Sharing of risk
Profit sharing /
bearing of costs
Monitoring and
review
Termination
Dispute Resolution
Jointly Controlled Entity – Key
Considerations
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Where CLS:
 Share capital
 Capital
 Voting
 Further issue /
transfer of shares
 Meetings
 Board composition
 Remuneration
 Powers/
proceedings
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Shareholders/Members
Agreement:
 Resources
 Property
 Borrowing
 Business Plan
 Reserved matters
 Disputes
 Confidentiality
 Terms of main
contract
 Terms to be
included in subcontract
Conclusions
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Form depends on:
 what DWP wants
 your organisation’s ethos
 approach to risk
 approach to resources
 approach to decision making
 approach to profit (recycling of)
Questions?