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Development funding

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An outline how much funding is required to establish a voluntary sector consortium, and some of the potential funding sources.

How much funding is required?

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.

Activity

Approximate budget

Business planning

£2,000

Drafting membership prospectus

£1,600

Offer mapping

£1,200

Launch event

£1,000

Recruiting members and undertaking due diligence

£1,200

Marketing plan and website development

£3,000

Total

£10,000

Sources of funding

The main ways to fund a consortium development are:

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

External development grants

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:

Support from local commissioners

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.

Example: Positive Minds Bradford

Positive Minds Bradford is a group of voluntary organisations working together to tackle mental health issues amongst older people. In 2015, Bradford City Council provided Positive Minds with a grant of £10,000 to consolidate the partnership into a more formal consortium arrangement. It did this because it saw the benefits of having a unified approach and single point of contracting within the sector.

Self-funding by members

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.

Example: Peterborough Plus

In 2014, Peterborough Council for Voluntary Service were aware of a local increase in ‘aggregated’ contracts (where commissioners package up a number of existing contracts and re-tender them as one single contract). They began work on developing an independent consortium in order to win large contracts on behalf of the local sector. Time was limited because they had already lost some contracts to large providers from outside of the area.

At an initial meeting of potential partners, it was agreed that 10 local organisations would each contribute £500. This provided starting capital of £5,000 for Peterborough CVS to bring in a part-time worker who began developing systems and policies. The consortium later became known as Peterborough Plus.

Repayable finance (loans)

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.

Big Potential is a grant scheme that supports voluntary organisations to build their capacity and capability to attract social investment.

Example: Sheffield Cubed using social finance

In 2008, the consortium Sheffield Cubed secured an investment of £155,000 from FutureBuilders for start-up, which included an £130,000 overdraft guarantee facility. Through winning a number of contracts, the consortium was subsequently able to pay off the overdraft.

Getting the first 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.

Further information 

Know-How Non-Profit section on commissioning

Next step

Stakeholder engagement

Page last edited Sep 29, 2016

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