Large companies join consortiums as a matter of course, but it is rare to see smaller enterprises using the same tactic. This tends to be because they think it will be an expensive process – and fear losing control of their businesses. But these nine firms have overcome such issues to create a collective that allows them to take on bigger, riskier projects than they could shoulder alone.
The Confederated Builders Coventry consortium comprises two local developers, Pettifer and Deeley Property, a medium-sized housebuilder and developer, KB Benfield Group, and six general contractors, including Crosbee & Atkins and Daniel Lynch Construction.
Formed seven years ago, the band has members with turnovers ranging from £2m to Pettifer's £40m. It can draw on the services of 600 staff and has a collective turnover of £130m.
How it all began
The consortium idea developed out of discussions with Coventry and Warwickshire councils. They wanted local firms to benefit from regional development projects, but found that they were "eclipsed by national firms", says Bob Macpherson, business developer of Pettifer.
"Our concept is simple – local builders work in partnership to compete for large projects to achieve a greater market share of the work in our area."
Each of the founders put up £1000 to cover set-up costs, including overheads such as company registration, legal bills and hiring an auditor and accountant. The members' first aim was to collectively market their skills and services. Then they decided on how to arrange the bidding process for shared projects.
Clive Benfield, the group's secretary, explains: "It is up to individual firms to decide if they want to be involved in a particular project. Being in our consortium does not restrict members. If five of us are interested in a project and the others are not, those companies will, for the purpose of that job, create a kind of temporary consortium – with our support."
The Confederated Builders' first project, completed three years ago, was Coventry's Eastwood Business Village. The collective negotiated a lease for the 3700 m2 site with the city council – agreeing on the terms of the lease and the construction of infrastructure services. Five of the consortium members were interested in the project and set up a mini-consortium to bid for it. The group included Deeley Property, Pettifer and three smaller contractors.
Trust is the key. Without that, you cannot work together. Nobody has yet run off with a project idea
Clive Benfield, group secretary, Confederated Builders Coventry
"The five of us planned and shared the costs of building a road into the site, which in itself is a huge project. Then, individual members took out a sub-lease on separate plots, which they developed," says Pettifer's Macpherson.
The consortium has now successfully completed its second project; the £6m refurbishment of the 5500 m2 Tower Court office in Coventry. Again, not all the members wanted to take on the job, so Deeley and KB Benfield banded together to form Confederated Builders (Tower Court). The companies have a 50/50 shareholding in the scheme. They did not draw on the Confederated Builders' fund, but Benfield says the parent consortium was there to help put the project together.
The different specialities of each member allow the group to tackle complex developments and even act as client, if need be. "Traditional contractors can only take a slot of work on a development contract, but we can be our own client, construct the building, manage the building and lease it," says Benfield. "We can do this because we all contribute something different. I, as a housebuilder, am used to raising money – contractors aren't – this is my strength in the consortium."
Getting it right
So how has the Coventry team avoided the pitfalls felt by similar schemes (see How not to club together, left)? "Trust is the key," says Benfield. "Without that, you cannot work together. People can be nervous of sharing contracts but you've got to think strategically. Nobody yet has run off with a project idea."
Another useful factor is that the members are already well known to the consortium's main clients – Coventry council and the local housing associations. "We are all second-generation, family-run businesses and together have a level of expertise and local knowledge that national contractors don't always have," says Pettifer's Macpherson. The two projects the group has completed were won because of its close relationship with the council, which in both cases was the owner of the sites earmarked for development.
The consortium's management structure is simple. Its board meets informally about once a month and each member company has a shareholding director on the board. Each director has the same shareholding no matter what the size of their firm. The group has no employees so its costs are very low. "We are run on a shoestring," says Benfield. The members share the costs of promotional material such as a marketing brochure, which is currently being prepared.
The consortium says it has not experienced any problems so far with either its management or the deals it has co-ordinated. In the early days, a large developer decided to leave the group because it believed that it had better opportunities going solo. "This was no problem," says Benfield. "The developer sold its shareholding and left – that was all."
