10 ways to engage SMEs in procurement

Historically Small to Medium Sized Enterprises (SMEs) have faced a range of barriers in accessing procurement opportunities and in winning contracts. These barriers include: contracting authorities being unaware of SMEs and the types of goods and services they can potentially provide; SMEs viewing the procurement process, often rightly, as overly bureaucratic; SMEs not having the capacity to bid for opportunities and compete with large business; and the process of procurement often being undertaken on the basis of cost thus ruling out the ability of SMEs to demonstrate their wider value.

Whilst these barriers still exist, the European Procurement Directives of 2014 have a specific focus on supporting SMEs to engage with procurement processes. There is a specific emphasis upon: contracting authorities simplifying the process of procurement; contracting authorities breaking opportunities down into smaller lots; and reducing the levels of turnover required to participate in tendering exercise. At the last meeting of the Procure network held in Koprivnica, Croatia in March 2017, we wanted to explore how the above principles were translating into reality at the city level and what activities could be undertaken by cities to more effectively engage SMEs and local organisations in procurement. Collectively we identified 10 key ways which relate to common barriers:

Mean 1 – supplier database – contracting authorities could overcome barriers around lack of knowledge of local businesses and SMEs by developing a database of potential suppliers. This could be linked to spend analysis and particularly the goods and services leaking out of the local economy. The database could be used to make local businesses and SMEs aware of upcoming opportunities.

Mean 2 – streamline documentation – contracting authorities could overcome barriers around the bureaucracy facing local businesses and SMEs by streamlining the tender process so that less questions are asked and less complex questions are asked.

Mean 3 – pre-procurement engagement – contracting authorities could overcome barriers around engagement with local businesses and SMEs by involving them in the design of goods and services and holding ‘meet the buyer’ events before the start of a formal procurement exercise.

Mean 4 – use social and environmental criteria – contracting authorities could overcome barriers around the overemphasis upon cost in procurement by embedding social and environmental criteria into the process and additionally considerations around quality.

Mean 5 – provide training – contracting authorities could overcome barriers around capacity and capability to bid for procurement opportunities by providing specific training in coordination with other partners for SMEs and local businesses.

Mean 6 – give greater weighting – contracting authorities could overcome barriers around the inability of SMEs and local businesses to properly demonstrate social value by applying greater weighting to it in the procurement process.

Mean 7 – lotting – contracting authorities could overcome barriers around SMEs and local businesses not being able to access procurement opportunities as a result of their scale by breaking contracts down into smaller lots.

Mean 8 – local portals – contracting authorities could overcome barriers around advertising being cross-Europe by developing their own local portals with opportunities advertised specifically in the local market.

Mean 9 – more flexibility – contracting authorities could overcome barriers around requirements of SMEs in particular by reducing the amount of documentation and supporting evidence they need to provide.

Mean 10 – require local and SME tenders below threshold – contracting authorities can overcome the barrier around the time procurement exercises take, by adopting different process for below threshold opportunities. This could include requiring a certain number of local businesses or SMEs to bid.

Realising the potential of SMEs through procurement is essential to all cities across Europe. In the vast majority of cities the greatest proportion of businesses are SMEs, with the greatest proportion of jobs being with SMEs. However, compared to their scale, SMEs are under-represented in the delivery of public procurement contracts. SMEs can bring a range of benefits for our local economies and procurement is a really important lever in realising their potential.

Matthew Jackson is the Lead Expert for the Procure network and Deputy Chief Executive of CLES.

This article was first published on the URBACT website.