Options - working collaboratively Options - working collaboratively in competitive tendering in competitive tendering
situationssituations
Robin Fallas, MacRoberts LLP
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 approachBenefits of collaborative approach
Shared costs Access to broader competencies Better meet DWP expectations?
Increased chances of success
Potential drawbacks with collaborative Potential drawbacks with collaborative approachapproach
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 successKey considerations for success
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 contextProcurement rules context 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 contextProcurement rules context 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 contextProcurement rules context
CA may request a statement of any proportion of the contract which the services provider intends to sub-contract 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 contextProcurement rules context
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 contextProcurement rules context
Pre-procurement consideration Contract Notice Pre-qualification Invitation to Tender Bid submission Evaluation and award
DWP ContextDWP Context
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 ContextDWP Context 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 OptionsLegal Form Options
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 ConsiderationsSome Initial Considerations 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 - ContractualConsortium - Contractual
?
[DWP]
Lead Partner
??
Consortium - Contractual Consortium - Contractual 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 Consortium – Contractual with Joint Steering GroupSteering Group
?
[DWP]
Lead Partner
??
Joint Steering Group
Consortium - Contractual with steering Consortium - Contractual with steering groupgroup
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 Contractual Frameworks Advantages
May be easier to set-up
Independent decision making for each party
Avoids additional formalities
Costs Exit Flexibility
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 EntityJointly Controlled Entity
?
[DWP]
JCE
?? ?
Jointly Controlled EntityJointly Controlled Entity 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 EntityJointly Controlled Entity Advantages
Closer relationship More robust
governance Clear decision
making Limited liability Separate entity -
employ/hold property;
Financial flexibility Minimal disruption if
change in partners
Disadvantages Regulation “Limited”? Set-up costs / audit Administration Reporting/Minuting Separate Accounts Company Law Harder to disengage Separate Resources
Forms of Jointly Controlled EntityForms of Jointly Controlled Entity
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 sub-
contract
Co Ltd by sharesCo Ltd by shares
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
LLPLLP 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 guaranteeCo Ltd by guarantee
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?How to choose?
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 Contractual Frameworks – Key considerationsconsiderations
Clear objectives Duration Responsibilities
lead? service levels? Timetable?
Decision-making process
Point(s) of contact
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 Jointly Controlled Entity – Key ConsiderationsConsiderations
Where CLS: Share capital Capital Voting Further issue /
transfer of shares Meetings Board composition Remuneration Powers/
proceedings
Shareholders/Members Agreement:
Resources Property Borrowing Business Plan Reserved matters Disputes Confidentiality Terms of main
contract Terms to be included
in sub-contract
ConclusionsConclusions
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?