SMEs and Public Procurement: How To Overcome Obstacles and Get Real Opportunities?

Thursday, August 4th, 2016

ProcurementGovernments and governmental organisations are in need of services and supplies like any other association. The market to provide those services and goods to public authorities is overall quite substantial as every year, according to a European Commission study, over 250.000 public authorities in the EU spend around 14% of GDP on external procurement, with a total market offer that can come to more than 1.500 billions euro per year. In the EU, almost the totality of these services and jobs is acquired through a procedure of public procurement, most often taking the form of tenders for offers.

Historically, this procedure was problematic for SMEs as it presented a number of different obstacles they had to overcome to be able to participate in the tender. On one hand, the procedure of both applying for the tender and the conditions for providing services and for receiving payment put SMEs under a burden significant enough to make them ignore the call. On the other hand,  SMEs  face barriers such as lack of knowledge about calls, limited tender skills and experience and little dialogue with procurers. The combination of procedural and other type of obstacles has kept SMEs participation in public tenders low: in the period 2009-2011, SMEs only won 29% of procurement through direct contracts. When other factors are taken into account (e.g. joint bids, subcontracting) the percentage grows to 46% but this is till a low figure given that they represent  58% of the contributions to GDP in Europe.

The European Commission has published a directive to ease the procedural burden faced by SMEs. It includes limitations on the annual turnover of participating bidders based upon the contract value and the obligation to split contracts in the procurement call in different lots to make the tenders more accessible to SMEs. Moreover it also tries to streamline the application procedures, so to make it easier for SMEs to apply. This new framework should enable SMEs to participate in public tenders more often but there are still other obstacles to overcome. While the EU is currently working in finding a solution by studying what could be done to make SMEs more aware of tenders and of their value, SMEs can build international network that could give them more information about public procurement calls. One way to do this is to participate in the MobiliseSME scheme for the exchange of employees across borders.

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