Workshop on Consortium Working in Newcastle

14 May 2012

CONSORTIUM MODELS & STRUCTURES

Neil Coulson
Different Collaborative Models

There are a number of possible collaborative models:

Informal network
Loose partnership structure with lead body
Formal consortium set up as a new company
Existing Managing Agency infrastructure for
contract management purposes

Informal network

Key features

Informal partnership working

No separate legal status outside of the members
Possibly partnership agreement
Members separately bid for and manage own funds
Doesnt address rationalisation agenda

Description

Service providers could decide to collect into a loose consortium or

network. In other words, all the agencies would agree to work
together and this might be subject to a written partnership
agreement, but the consortium wouldnt have a separate legal status
outside of the partners (though it could be constituted as an
unincorporated association).

This would mean that all the providers would have to tender as
independent units to the commissioning bodies (such a loose
consortium would not be able to tender in its own right precisely
because it is not constituted as an independent legal entity).

Within this scenario each member of the consortium could then

contribute some of its contract income (and possibly other resources)
towards the operation of some form of support body or organisation,
in return for which they would receive general support, help with
quality assurance etc. This would be a form effectively of

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outsourcing some of the key functions of individual providers to the
support body.

Loose partnership structure with lead body

Key features

Loose consortium with lead organisation

Lead organisation applies for contract funding on behalf of
consortium members
Uses some of the funding to deliver own services and to
manage contract
Distributes rest to other members

Description

Service providers could come together to form a consortium and

then agree to work through one of those organisations as a so-called
lead organisation or agency (this is sometimes referred to as a
managing provider - see footnote). The lead organisation will be
legally constituted, typically as a company limited by guarantee and
possibly with registered charitable status, so that it has the capacity
to hold contracts.

The lead organisation applies for funding on behalf of all the

consortium members (including itself), receives the funding, uses
some of it to deliver its own direct services, retains a further element
as a management fee or top slice in recompense for its
management role, and then distributes the rest to the other
consortium members via formal sub-contracts to deliver designated
services and associated outputs.

Footnote

A Managing Provider is defined as an organisation that delivers directly a

proportion of the delivery/client centred elements of a contract itself but also
sub-contracts some elements to other organisations.

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Formal consortium set up as a new company

Key features

Formally constituted as an independent legal entity

Single point of contracting
Hub & Spokes structure

Description

A formal consortium involves providers coming together to establish

a partnership that is then formally constituted as an independent
legal entity (usually as a company limited by guarantee, and possibly
with charitable status). The partner organisations become formal
members of the consortium, creating a single point of contracting.

The elementary structure of a formal consortium of this nature is

based upon a "hub and spokes" model.

Provider

Support Unit

Provider Provider

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The hub is the central management unit that carries out certain
executive functions on behalf of the partnership or membership
network and also provides certain support and development services
for the member organisations. This hub is sometimes described as a
Support Unit. The spokes, on the other hand, are the various
member organisations.

The hub is an internal mechanism that acts as the intermediary

between funders/regulatory bodies and grass roots service
providers.

The Hub as an internal mechanism

Management
Group/Board

Hub
Membe Membe
r r

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Intermediary Infrastructure

Commissioning bodies

Contracting Infrastructure/Hub

Grass roots advice providers

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Existing Managing Agency infrastructure for contract
management purposes

Key features

Need available managing agent that can hold contracts and

distribute sub-contracts
Managing agent charges management fee

Description

This requires an existing management agent/accountable body that

can hold contracts and then sub-contract these to the service
providers. In recompense for its work, the managing agent would
charge a management fee by top slicing contract funding.

Special Note on Clustering

A consortium is not just a mechanism for channelling funding into

service providers, but acts as an instrument for encouraging and co-
ordinating collaborative delivery of services and initiatives.

Delivery clusters would describe groups of consortium member

organisations coming together around a particular specialism. This
might be, for example, a specialist service area, such as provision of
advice in the field of immigration, or a specific client group with
particular needs, such as people with mental health problems.
Typically, it could also involve mixing and matching different remits
and areas of expertise, with providers within the cluster delivering
services at different levels, for example.

In such scenarios, there would be a cluster lead body that would

have some specific responsibilities. Indicatively, these
responsibilities would include:

cluster co-ordination
cluster-wide strategic and operational planning (including on-
going needs assessment and output/outcome profiling)
maintaining strategic overview of output-related performance
across the delivery cluster

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 service/activity planning and development
ensuring contestability i.e. responsiveness to new providers
coming into the cluster in the future, with particular emphasis on
meeting identifiable service gaps
liaison with relevant agencies external to the cluster

Where this type of lead agency role is being undertaken there would
be an expectation that funding is provided from the consortium (via
the hub sub-contracting mechanism) to help to resource it.
Additionally, of course, as a member of the consortium, the cluster
lead agency would also be entitled, just like any other member
organisation, to (a) negotiate for a sub-contract to deliver specified
direct services and (b) benefit from the full range of capacity building
services available through the central hub or Support Unit.

The cluster lead agencies would not sub-contract to other cluster

members for service delivery. This would remain the function of the
consortium, via the Support Unit, so as to avoid 2 step sub-
contracting which would add an unnecessary link into the contract
chain and would be counter-intuitive within the current climate of
contract rationalisation.

Clustering, in this respect, would be designed to encourage

differentiation and diversification within the consortium membership
network, and should help to increase the vitality and dynamism of the
consortium structure overall.

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 Pros and Cons of the Different Models

Model Pros Cons

Loose Builds on existing patterns of Doesnt address rationalisation agenda
network partnership working Doesnt create economies of scale
Path of least resistance No critical mass
No joint bargaining power
Procurement agencies are less likely to
support it
Lead Builds on existing contract Mitigates against full member ownership and
agency management/accountable control
body infrastructure Members may not get to agree management
Less vulnerable to top slice
fluctuations in output Risk of institutional baggage associated with
performance lead body perceptions of members
Risk is managed by lead More difficult to establish separate identity
body and brand
Could be perceived as less Inherent tension within Managing Provider
risky by funders at outset function
Embedded track record
through lead body profile
Formal Optimal ownership and Some members want money without
consortium control by members management
Members agree internal Difficult to establish effective accountable
resource allocation ratio (i.e. body infrastructure from standing start
contract management top No established track record as de facto new
slice) entity
Easier to create an Could be perceived as more risky by
independent, clearly defined funders at outset
identity and brand Support infrastructure vulnerable in early
No risk of institutional stages due to unpredictability of output levels
baggage associated with lead Can still get Support Unit/hub acting as
body perceptions of independent entity, dictating to members
members

Existing Uses existing infrastructure Infrastructure may not be available

managing Less vulnerable to Sub-contractors not in control
agent fluctuations in output Sub-contractors do not get to agree
performance management top slice
Risk is managed by Managing agent may not understand
managing agent nuances of service profile of sub-contractors
Could be perceived as less Risk of institutional baggage associated with
risky by funders at outset managing agent perceptions of sub-
contractors
Much more difficult to establish separate
identity and brand

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Advantages and Disadvantages of working as part of
consortium structure

ADVANTAGES

It is useful to collate the advantages into 4 main areas:

Client-centred services
Funding and Financial
Strategic
Operational

Client-centred services

The key reference point for any form of partnership working within
the not-for-profit sector obviously has to be the need to
protect, consolidate, improve and, if feasible, expand
services to clients. Although consortium-working is focused
directly on organisations, the indirect beneficiaries of better
co-ordinated, more effective and efficient service providers
are the clients on the receiving end of those services. This
needs to be reflected in the vision of any third sector
consortium, while the mission describes the impact the
consortium will have on the frontline providers.

Funding and Financial Advantages

There are a number of benefits of consortium working that can be

linked together under what might be categorised as funding and
financial advantages.

Securing contract and grant funding

Access to funding through commissioning agencies and grant-

making bodies is a driving force for consortium formation.

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 Enhanced Bargaining Power

Several organisations working together in a partnership, as opposed

to working in isolation, would increase the bargaining power of those
organisations.

Economies of scale leading to efficiency savings

Due to the creation of economies of scale, the member organisations

would benefit from efficiency savings. Put simply, they would have to
spend less time and resources on contract management and
associated bureaucracy as these functions would be, at least by
some degree, diverted into the central management unit.

Strategic advantages

There are a number of benefits of consortium working that can be

categorised under the heading of strategic advantages.

Mechanism for consultation

Consortia have the capacity to act as mechanisms for consultation

between the funding and regulatory bodies and grass roots service
providers.

Needs analysis and programme planning

Joint needs assessment and programme planning could be

undertaken. Ultimately, this might lead to the joint delivery of
services and activities through cluster arrangements.

Strategic planning

Linked to joint programme planning and needs assessment,

corporate strategic planning would also be co-ordinated through a
centralised function that stimulates, guides, collates and shapes the
different, separate strategic aims and objectives of each member
organisation.

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 Research & Development

A consortium could establish more concerted and sustainable

research and development capacity through new hub infrastructure,
with greater resultant focus on innovation and new ways of working

Single, coherent voice

A consortium creates the framework for a unified voice for service

providers.

Operational advantages

There are a number of benefits of consortium working that can be

linked together under what might be categorised as operational
advantages.

Focus on core activity and objectives

Consortium arrangements are by their very nature designed to divert,

at least by some degree, what is often perceived by relatively small
voluntary sector organisations as intrusive and superfluous
bureaucracy into a specialised enabling and support infrastructure.
This, by the same degree, frees up organisations to maintain,
consolidate and enhance their core focus of activity in working with
disadvantaged client groups and addressing social and economic
need.

Joint approaches to marketing and promotion

Instead of relying solely on services being advertised discretely by

each individual organisation, promotion could also be done jointly as
a central, co-ordinated function.

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 Human resource management and development

The practice of establishing networks across the consortium

membership to facilitate and co-ordinate the exchange of skills and
expertise between organisations would be possible within this
collaborative working scenario. There would also be the possibility
for developing and maintaining shared pools of peripatetic front line
workers etc.

Capacity building

Linked to human resource development, consortia can act as

vehicles and mechanisms for building the capacity of member
organisations.

Quality assurance and improvement

A consortium would be in a good position to drive up the standards of

service provision across the provider network. Strategies for
continuous improvement, self-assessment and managing external
reviews/inspections could be co-ordinated through the consortium.

Access to information

Generally, consortia can be information-rich bodies. All types of

useful information can be assimilated centrally, by the hub, and then
disseminated across the consortium network.

Data handling and reporting functions

Data collection and reporting would be a key function of the hub with
appropriate primary source, complementary management
information systems and procedures set up within the various
member organisations.

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 Output Trading

The establishment of a consortium can bring technical benefits

through efficient contract management. For example, consortium
formation would make contractual output trading possible between
member institutions. Within a consortium structure, varying
conditions of under- and over performance could be balanced.

This will mean that it will be possible for funding to be retained within
the consortium that otherwise would have been clawed back in a
scenario of individual organisations not achieving the scheduled
outputs; and, conversely, extra funding being gained for
organisations that over-achieve against target, when, in a non
consortium structure, this would have gone unrewarded.

DISADVANTAGES

Attenuation of ownership and control

Even though consortia are designed to be self-managing and rooted

firmly in democratic principles, there is de facto some degree of
reduction or attenuation of ownership and control by individual
member organisations over the funding and contracting process.

New object of dependency

Related to the notion of attenuation of ownership and control, but

taking it a stage further, the consortium may end up becoming to
small service providers merely a substitute for the funding regimes
that it is designed to interface with.

Displacement

Central to the idea of a consortium way of working is the re-focusing

of certain executive functions away from direct service providers and
into a specialist consortium management unit. This may imply a
danger for some member organisations, particularly those that have
well established internal systems, of displacement of existing staff.

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 Management responsibilities and burdens of smaller
organisations

Consortia (or at least formal consortia) tend to be founded on the

principle of democratic self-management or governance. This
implies that each member organisation, just as it has a right to co-
manage the consortium, also has an obligation to do so. Many of the
potential members of consortia, especially (though not exclusively)
the smaller organisations that are perhaps lacking in capacity, staff
resources and management expertise, may feel daunted or even
intimidated by this obligation.

Difficulties associated with partnership-working

There are a range of specific disadvantages and difficulties

connected with partnership-working itself. There may be personality
clashes between the personnel of different organisations. Smaller
member organisations may feel threatened, overwhelmed or even
disenfranchised by the larger, more powerful consortium members.
The inherent vested interests of member organisations in securing
their own pot of funding may undermine adherence to common
objectives.

Standardisation: the lowest common denominator

syndrome

Within a formal consortium structure, external reviews or inspections

of quality and standards would take place within the context of a
unified partnership framework. In other words, there would be one
inspection for the consortium as a whole, not a number of
inspections co-incident with the number of member organisations. In
this scenario organisations would lose their separateness and
independence in terms of quality and standards. Just as this might
be viewed positively as an opportunity to drive up standards across
all advice providers, it might also be regarded as having potentially
negative or damaging repercussions in reducing everyone to the
lowest common denominator.

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 Making democracy work

With large and expansive consortia, like those that are organised on
a sub-regional basis, there are often endemic difficulties relating to
the notions of inclusivity and representativeness. A consortiums
member recruitment policy could be underpinned by a host of
complicated and potentially conflicting eligibility criteria and
determinants that reflect these notions.

Deflecting pressure onto the centralised support

mechanism

By the same token that the burdens and responsibilities attached to

securing and managing funds and meeting the related regulatory
requirements are diverted, if not entirely then at least by a significant
degree, away from the direct providers and into centralised
infrastructure or the hub, then the pressure associated with those
burdens also gets channelled into that central unit.

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