How are these mechanisms used in Colombian companies?
In recent years, many companies in Colombia have opted to partner strategically through structures such as consortiums and temporary unions. These structures allow several companies to temporarily combine their technical, operational, and financial capacities to participate in public or private procurement processes, without losing their autonomy or legal personality.
Unlike a merger, where companies are permanently integrated, in a consortium or temporary union each company retains its identity, but they commit to jointly executing a specific project, generally of a large scale, such as an infrastructure work, the provision of a specialized service, or the large-scale supply of goods.
A case in Colombia...
A well-known case is that of the CCC Ituango Consortium, responsible for building the Hidroituango hydroelectric project, the largest in the country. This consortium was initially comprised of the companies Conconcreto S.A., Constructora Coninsa Ramón H S.A., and the Brazilian firm Camargo Correa. These companies joined technical, operational, and financial efforts to execute the megaproject contracted by Empresas Públicas de Medellín (EPM), maintaining their legal independence but acting as a single unit for contractual purposes.
How are these mechanisms regulated?
Law 80 of 1993, which governs state contracting in Colombia, mentions the figures of the consortium and the temporary union, although it does not regulate them in detail.
Both are used when two or more companies or individuals decide to jointly submit a proposal to participate in a public contract. The main difference lies in how they respond to potential breaches:
- In a consortium, all companies are equally and jointly and severally liable for all obligations of the contract. That is, if one fails, the others must also answer for that failure.
- In a temporary union, they also act together to present and execute the contract, but if an obligation is breached, each company is liable only for the part that corresponds to it, according to the percentage of participation agreed upon at the time the union was formed.
If the contract is with a State entity (public entity), Article 7 of Law 80 of 1993 applies: all members of the consortium or temporary union are jointly and severally liable for the obligations of the contract. This joint liability is mandatory and cannot be changed by an agreement between the parties.
In contrast, if the contract is with a private party (a private sector company or individual), joint and several liability is also presumed, but in this case, it is based on Article 825 of the Code of Commerce. Here, it is possible to agree otherwise; that is, it can be expressly stipulated that each party is only liable for its share (known as a non-solidarity pact).
When a temporary union or a consortium signs a contract with a third party, the contract is not entered into by a single entity, but by each of the companies or individuals that are part of the group. However, to facilitate management and streamline the process, members usually appoint a common representative, granting them the necessary powers to negotiate, modify, or act on behalf of the group during the execution of the contract.
Furthermore, it is important to note that neither consortiums nor temporary unions need to be registered with the Chamber of Commerce, as they do not constitute a new legal entity. However, they must register in the RUT and obtain a NIT from the DIAN, as in many cases they will have to comply with certain tax obligations.
