SMEs encouraged to bid for public sector contracts

Why would the public sector extend opportunities to SMEs?

Tendering for public sector contracts is often viewed as a pursuit for larger companies. Major news stories typically centre on contractors such as Amey, BAM and Mitie, and billion-pound contracts for national infrastructure. However, while a minority of high-value contracts dominate the public perception of tendering, in reality SMEs have a huge role to play in the public sector, with central and local government alike actively looking for ways to extend more opportunities to smaller providers.

Why are SMEs encouraged to bid?

• Local authorities have a duty under the Public Services (Social Value) Act 2012 to consider the economic wellbeing of the local authority when commissioning services and works. By awarding contracts and places on frameworks to SMEs based within the area of service delivery, authorities can ensure that local jobs are protected or even created, and that wealth doesn’t ‘leak out’ of the community to national providers based elsewhere.
• The overarching aim of any tender process is to seek best value for money. SMEs’ innovative or unique approaches to service delivery may support authorities in achieving cost savings or driving forward quality. Creating a level playing field, whereby SMEs are not unfairly disfavoured by the process, means full and fair opportunity for bidders of all sizes to present their proposals.
• Furthermore, widening the playing field and including as many bidders as possible creates greater competition. Bidders are encouraged to sharpen their pencils, with highly competitive pricing improving value for money for taxpayers.

There is clearly a strong argument for opening up opportunities for bidders of all sizes. Buyers throughout the public sector have realised this, and are taking action to include SMEs in their supply chains.

What has the public sector already done?

Central government has already taken great steps to break down barriers that might preclude an SME from participating in a tender:

• There has been a move towards self-certification. Tenderers were previously expected to submit a large number of policy and procedure documents as part of their bids, especially within the PQQ/SQ stage. In most cases, tenderers can now simply ‘tick the box’ to confirm that they meet the required standards, removing a lot of the burden associated with compiling extensive attachments before bidding.
• More generally, greater consistency and standardisation have made the process more straightforward for bidders. Mirroring the success of the PAS91 PQQ used in the construction industry, the Crown Commercial Service issued a standard selection questionnaire, mandating that local authorities use it when creating PQQs. This simplifies the process for bidders, including SMEs who may not have the same resources to bid as their larger competitors.
• Many large frameworks are split into value bands. For example, the current NEPO tender for a major construction framework allow bidders to tender for one of three different lots, based on project values. As well as allowing a more value-appropriate evaluation of bidders’ suitability to deliver the works, this means that SMEs are not ‘blocked’ by larger bidders from accessing opportunities that are suitable for them.

What is next?

While the steps that the public sector has already taken do help SMEs to benefit from public sector tendering, there is still more work to be done before the playing field is truly level. In many cases, buyers still request high volumes of narrative responses for relatively low values of work. While this is a challenge for everyone, SMEs are less likely to have the resources available to bid, and may therefore be unfairly excluded from certain exercises. Ensuring proportionality between the requirements of the contract and the requirements of the tender would help to remove this barrier.

If you are an SME and you need help or advice in the bidding process, contact our team today to discuss how we can support you throughout any stage of the PQQ or tender process.