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The Challenges SMEs Face When Bidding for Goverment Work

The Challenges SMEs Face When Bidding for Government Work

There were 5.98 million private businesses in the UK at the start of 2020 and 99.8% were SMEs with less than 250 employees.[1]

It was assumed that COVID-19 would devastate the SME market, however the rate of business creation from the ONS shows business start-ups were 24% higher in Q4 2020 compared to Q4 2019[2].

While the public sector continues to undergo digital transformation as part of wider government work to involve SMEs as a driving force for innovation and business employment, a further task exists in helping SMEs to overcome procurement challenges.

The recently released government green paper, ‘Transforming Public Procurement’, which tackles the question of how to transform public procurement with increased process transparency and consideration of social value in tenders, offers hope for future change.

A recent survey of SMEs bidding for public sector work stated 92% of respondents feel that government buyers do not have sufficient understanding of how small businesses can meet their needs[3].

What does the government’s recent ‘Transforming Public Procurement’ green paper mean for SMEs?

The government hopes its green paper will encourage widespread change within the lifecycle of public procurement. This in turn will create a fairer playing field for smaller companies to take on new business. However, it is one thing to promise a new and improved procurement process with openness and consideration for the position of SMEs, but it is quite another to implement an overhaul where public organisations are actively applying the new recommendations.

Is buyer behaviour a significant obstacle?

The challenge for SMEs in entering a procurement process in the first place is one that requires fundamental change to the way businesses support their buyers.

Buyers setup procurements to meet the requirements of their sponsors. These requirements are often complex and can be unsuitable for the SME market for several reasons including:

1. Budget and time to advertise and procure multiple smaller opportunities rather than one large transaction

2. Capability to manage multiple contracts concurrently

3. Insight into the SME market

4. Definition of requirements and where SME value can be added and

5. The organisational change required to adopt a more equitable risk position with the private sector

The dilemma with maintaining the status quo is that there is less room for competition and growth of emerging businesses with fresh ideas. As such, public sector organisations need to assess whether their organisational structure compliments agile procurement practices and encourages SME engagement.

Where do organisations start with transforming their SME procurement practices?

1. Identify where smaller opportunities exist and analyse which of these will add value to the buyer’s organisation vs. what can be managed internally? This should start with an analysis of your contract requirements.

2. Be more transparent and consistent with your pipelines of work, set goals and objectives for SME engagement.

3. Produce more agile and frictionless routes to market.

4. Analyse pre-existing contract strategies to evaluate past performance and test the market to make informed decisions for risk apportionment.

5. Set procurement opportunities that encourage dialogue to help buyers to establish contracting requirements that meet their budgets.

What can SMEs do to win work within the public sector?

1. Identify key organisations and whether they have agile procurement systems and regular opportunities for SMEs.

2. Establish a bidding model to target maximum benefit and mitigate against low rate of return opportunities.

3. Challenge opportunities that are not SME friendly, such as disproportionately high insurance levels or limits of liability.

4. Consider partnering arrangements and joint venturing with other SMEs.

If you are a buyer or SME looking for public procurement advice, take a look at our dedicated services page.

[1]Merchant Savy UK SME Data, Stats & Charts [2] Merchant Savy UK SME Data, Stats & Charts [3] Govtech SME Survey

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