To achieve their economic goals, independent organizations and enterprises often resort to joining forces. This helps to successfully fight for receiving production orders and fulfill them efficiently. One of the forms of such integration is a consortium.
Consortium: definition and characteristics
A consortium is understood as a temporary association of several economic entities created by banks and enterprises for the implementation of any large projects or financial transactions.
State and private structures, as well as entire states can become members of the consortium. All of them remain fully independent subjects of economic activity. Very often, banks that start lending to large projects unite in consortia. In the field of industry, the creation of a consortium is often resorted to by enterprises that jointly undertake serious military orders.
When combined into a consortium, its members draw up an agreement where they set the share of each in both costs and profits. The forms of participation in the implementation of a project are also determined. The head of the consortium is selected from among the members of the combined structure.
Recently, this form of association has become widespread in the construction industry, where unique and large-scale engineering projects and a high level of competition arise. The creation of a construction consortium makes it possible to increase the reliability and economic efficiency of work.
At the beginning of the last century, consortia were mostly agreements between banks and were created primarily to carry out financial transactions in the domestic and international markets. Only by the middle of the 20th century did the influence of consortia spread to large industrial and scientific and technical projects. For example, many nuclear power plants have been built with the participation of consortia. Modern consortia are often created to carry out complex research projects.
Industries where consortia are of great importance:
- defense;
- building;
- space and aviation;
- telecommunications and communications;
- Computer techologies;
- biotechnology.
Types of consortia
Three types of consortia can be distinguished according to the degree of integration of its participants. In the first, a large object is divided into a number of independent modules, where the work is performed by each of the contractors independently. This is where the potentials of independent partners are connected. One can lay railway tracks, the other equips the electrical facilities, the third is engaged in laying communication lines. The degree of integration in this type of consortia is minimal and usually limited to the formation of oversight structures.
Complex objects that do not lend themselves to division require advanced integration and a higher degree of cooperation. The participants in the second type of consortium usually jointly prepare an application for participation in the tender, jointly provide bank guarantees and insurance for the project, are jointly responsible for delays and defects in the execution of construction tasks. Income between the members of the association is distributed depending on the volume of work performed. This type of consortia is more characteristic of Russian reality.
The third type of consortia is most often used in countries with developed market economies. For the duration of the project, its participants combine their equipment, transport facilities, working capital and labor resources. This approach guarantees the maximum efficiency and intensity of using the potential of companies. Such a merger is in many ways reminiscent of the creation of a temporary unified company with high competitiveness and profitability.
Consortia activities
The basis for joining a consortium is an agreement between a number of organizations, which may include enterprises, banking institutions, research centers, companies. Having concluded an alliance, the members of such an association can carry out large financial transactions for the implementation of scientific and industrial projects, for the placement of securities. Consortia contribute to the merger of industrial and banking capital, although the participants in the combined structures fully retain their legal and economic independence. The main goal of creating a consortium is to gain competitive advantages over other market participants.
The most common forms of consortia are:
- joint stock companies;
- simple partnerships;
- limited liability partnerships;
- associations, unions.
Associations can be both temporary and permanent. A temporary consortium is more common; it allows you to place bonds and carry out short-term transactions without unnecessary organizational efforts and costs. Permanent consortia work with the securities of large joint stock companies and can participate in the implementation of large-scale investment projects.
In many cases, the consortium is headed by a large banking structure with a wide network of branches through which it is easy to distribute the securities issued by the consortium. Each member of the consortium is entitled to a commission, the amount of which depends on the degree of participation in the production and financial activities of the association.
Both large and small enterprises can become members of the consortium. Very often, such subjects of economic activity have interesting entrepreneurial ideas, but do not have the opportunity to translate them into reality. The consortium is just becoming the structure where you can get access to personnel, production facilities, and financial resources. It is when uniting into a consortium that it is possible to carry out projects with high profitability.
Consortium management and responsibilities
The members of the consortium elect a leader from among its members, who coordinates the activities of the association and represents its interests before other participants in economic activity. The leader acts strictly within the framework of the powers given to him, but all the consortium members bear responsibility for the obligations, taking into account their contribution to the total volume of supplies. Various liability options are possible, including joint and several liability.
Each of the members of the association submits to the management their proposals on the areas of activity of the consortium, from which a general system of supplies, works or services is made. If the consortium members perform a certain part of the work, then they take on the associated share of the financial risk.
Agreements concluded between the consortium members may provide for joint capital investments and other forms of cooperation. At the same time, relations can be formalized not by one agreement, but by a number of agreements of various orientations. The agreement may not contain specific conditions that are significant for future transactions of the consortium, but in this case, such a document has legal force.
Features of consortia activities
One of the important features of the consortium is its commitment to internationalization. Banking structures of different countries actively cooperate in financing issues for trade development, pooling financial flows. This allows you to place loans and investments in capital projects anywhere in the world. Banking consortia actively provide loans to exporters and attract deposits in any currencies. The internationalization of consortia presupposes broad international representation.
As a form of joint venture, the consortium is faced with the need to coordinate the interests of the participants, to resolve conflict situations. Discrepancies most often arise in the definition of management methods, forms of remuneration, aspects of personnel policy.
By the specifics of financial activities, consortia are:
- banking;
- warranty;
- export;
- by subscription.
In Russian economic practice, a consortium is understood as a temporary association of state or commercial organizations that occurs on a contractual basis. In this case, the goal of common activity is the implementation of well-defined projects of production or technical orientation, and the means is to combine resources of different types (production, human, monetary). Consortiums of banking institutions, industrial enterprises, research centers, government agencies are admissible.
Having completed the tasks before it, the consortium either ceases its activities, or turns into one of the other types of contractual association of enterprises.
