Written by Werner van Rooyen
Consortia are frequently viewed as viable options for responding to tenders in South Africa. A key consideration is whether to opt for a Consortium or a Joint Venture when submitting a tender. To assist you in making this decision, we have prepared a list of the advantages and disadvantages of both Consortia and Joint Ventures. This article focuses on the pros and cons of Consortia, while you can expect a similar discussion on Joint Ventures soon.
Advantages of Consortia:
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They are simple to establish, as there are no formal procedures to follow. Most consortia are created through a written consortium agreement, and no capital is needed to form one.
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Members can modify their contractual agreement at any time to adapt to changing circumstances.
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A consortium can be set to dissolve on a specified date or upon the occurrence of specific events, without formal requirements.
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While the consortium itself is not directly subject to taxation, the individual members are.
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Some consortium members may opt to remain ‘undisclosed’ in dealings with external parties.
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Operating costs for a consortium are typically lower than those of a joint venture.
Disadvantages of Consortia:
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Members may find it challenging to restrict or limit their liability, as they could be held accountable to third parties for the non-performance or debts of other consortium members in a shared project.
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Third parties often face difficulties when trying to contract with a non-legal entity like a consortium, making funding more challenging.
Consider attending our “Become a Tender Expert” two-day workshops and webinars. You can register online at www.howtotender.co.za/workshops/. If you need further information, please reach out to us at info@howtotender.co.za.