Consortium bidding guide
What is consortium bidding and why is it useful for SMEs?
Consortium bidding enables small and medium enterprises (SMEs) in Ireland to collaborate and tender jointly for public contracts. Many times, this can be competitors working together. This approach allows SMEs to join forces and helps overcome limitations in turnover, experience, or technical capacity to meet procurement requirements. This page outlines the benefits, legal considerations, and best practices for consortium bidding.
Consortium bidding allows SMEs to join forces and submit joint tenders for public contracts. This collaborative approach is particularly beneficial when individual firms lack the scale, turnover or technical capacity to meet procurement requirements on their own.
What is the difference between a consortium and a cartel?
A consortium involves two or more independent firms openly coming together to submit a ‘consortium bid’, i.e. joint bid, for a contract. A consortium may consist of two or more SMEs, or, for example, one large firm and one or more SMEs.
A cartel involves competitors coming together in secret to agree not to compete.
What are the benefits of forming a consortium?
A consortium allows SMEs to:
- Pool their knowledge, skills and expertise.
- Come together to meet minimum levels of experience, annual turnover, geographic reach and/or technical capacity set out in the call for tenders.
- Offer higher quality products and more innovative solutions in their joint bid.
- Potentially cut costs, for instance if individual members can reduce the consortium’s costs in particular geographic areas or product lines.
Consortiums are good for competition because they:
- Allow smaller firms or new entrants with innovative solutions to bid for a contract.
- Potentially reduce the cost of goods and services purchased by the State.
- Increase the overall number of firms that can take part in a tender competition.
- Encourage new firms to enter the market, broadening the field of potential bidders for future tenders.
How does consortium bidding align with Irish procurement policy?
The Office of Government Procurement (OGP) in Ireland encourages SMEs to consider forming consortia to access procurement opportunities.
Why might firms choose to form a consortium?
Consortium bidding may involve firms that are actual or potential competitors coming together to submit joint bids for public contracts, giving them an advantage when tendering for public contracts.
This can help firms to:
- Meet minimum turnover requirements collectively.
- Combine experience and technical capacity.
- Access larger or more complex procurement opportunities.
What legal considerations must SMEs follow?
Consortium bidding must comply with Irish competition law. The CCPC has published a guide to help SMEs understand and adhere to these legal requirements.
What should you consider when forming a consortium?
Sometimes consortium bidding involves firms that are actual or potential competitors. This may be allowed under competition law once the consortium meets all the following conditions:
- None of the parties of the consortium could fulfil the conditions or no subset of the consortium could fulfil the tender requirements.
- The members of the consortium must still ensure they compete vigorously as normal in all situations outside the joint bid.
- Consortium members – and only relevant staff within each company – must only share information that’s strictly necessary to put together the joint bid and carry out the contract, if it’s awarded. This includes limiting the sharing of information to relevant staff on a strictly “need to know” basis.
These conditions are specifically relevant where consortium members could otherwise compete independently. They are generally not required where the members are not competitors, as the cooperation does not remove independent competitive pressure.
Even if these conditions are not met, a consortium may still be allowed after a competition law assessment balancing pro and anticompetitive effects.
Key questions to consider
When forming a consortium, it can help to consider the following questions carefully:
- Could your company meet all the requirements of the tender on its own?
- How much competition is there already in the market where you are operating?
- What are the market shares of the consortium members?
- What effect would the consortium have on prices and product quality?
- Will the consortium bid generate real efficiencies, for instance cost savings or greater productivity?
- Will consumers benefit from those efficiencies?
- Are any restrictions in competition absolutely essential to achieve any cost savings or improved productivity?
- Will your involvement in the consortium change how you behave with other customers or in future bids?
How can SMEs ensure compliance with competition law?
It is essential that consortium members avoid anti-competitive behaviour. Collaboration must be limited to the scope of the joint bid and should not extend to market activities outside the consortium. Firms must ensure that their joint bidding does not become a vehicle for collusion or market manipulation.
What practical safeguards should SMEs put in place?
There is no ‘checklist’ that applies in every case, but the following guidelines can help:
- Notify the purchasing body that you’re submitting a consortium bid.
- Clarify the scope of cooperation between consortium members before you start discussions. Limit it only to the products, services and customers involved in the contract for which you’re bidding.
- Don’t discuss anything that strays beyond the specific tender requirements. For example, don’t discuss any share of customers, any future pricing or any prices or other terms you will offer in future tenders.
- When discussing how to price the bid, don’t discuss your general commercial strategy or share detailed information on your costs or pricing models.
- Remove yourself from any discussions if a competitor reveals sensitive commercial information, even if this information was not requested.
- Make sure the people working on the consortium bid in your company treat all bid-related information as strictly confidential and only share it on a ‘need to know’ basis.
- Limit access to bid information and carefully dispose of all information and materials related to the bid once it’s completed or the contract is carried out.
- Consider requiring specialist sub-contractors or any consortium members taking part in multiple tenders to sign confidentiality agreements to stop them disclosing sensitive information.
- Tell the purchasing body if a consortium member is in more than one consortium to bid for the same contract. The purchasing body may want to take action to resolve any conflicts of interest.
If discussions go beyond what is permitted
If your consortium starts discussing anything beyond what is permitted for the joint bid:
- Voice your concern that this could breach competition law.
- Remove yourself from the discussion.
- Don’t use anything that was discussed.
- Seek independent legal advice and/or contact the Competition and Consumer Protection Commission to tell us what has happened.
