Rethinking public procurement for SMEs: Making Spend Matter partners explore why business size does in fact matter.

As part of their network activities, Making Spend Matter partners are examining ways they can put in place an eco-system which will support SMEs to both bid for, and potentially win, contracts.

There is no simple plan and no quick fixes: it takes time to create a supportive procurement eco-system. But that doesn’t mean it isn’t worth doing. Rethinking procurement processes in light of the way in which SMEs work, and the barriers they confront, is essential. Before starting to think about the procurement process itself, it is useful to first understand the SMEs in a local area.

Understanding the local SME base

Gathering information about local SMEs into a business database can be done using a range of different techniques: from working with local chambers or federations to business surveys. Whichever approach is adopted, the focus is on identifying the potential SME supply chain within an area. This can be used to identify sectors where SMEs are already participating in procurement, and where there are gaps that SMEs could fill. Understanding the potential supply chain can then help with the examination of how the procurement process may be problematic for SMEs, and the potential areas where SME engagement may have an early positive, impact.  

A supportive procurement eco-system for SMEs: overcoming barriers

Putting in place a procurement eco-system that supports SME involvement demands a rethinking of often long-standing ways of working. That rethinking should start with a recognition that procurement is not simply about expenditure; it is expenditure that has the potential to create wider, positive economic and social impacts, including contributing to a more inclusive, more innovative economy. What is too often seen as an administrative role actually has the potential to have a strategic function, contributing to strong local economies.

Barriers to SME engagement can take many forms and developing an understanding of those barriers – by talking to SMEs and reflecting on ways of working – is essential to creating a positive eco-system.

Procurement activities can be daunting, and take up significant time for SMEs, with seemingly little likelihood of return. Overly complicated procurement processes, including the failure to use digital tools, act as barriers for SMEs. As do pre-tender requirements, such as minimum capital or turnover, which are too often be deemed ‘standard practice’ rather than embedded in any real need. Streamlining the procurement process and removing unnecessary requirements will support SME engagement.

A further barrier can be found in the size of the opportunity. Large procurement opportunities may make contract management easier from an administrative perspective, but exclude SMEs who may lack the capacity to deliver them. Rethinking the size of contracts and breaking them down into smaller lots is part of a supportive eco-system. Even where contracts cannot be broken down easily, it is important to question if there are other options to support SME involvement, such as by encouraging groups/consortia of SMEs or facilitating the inclusion of SMEs in local supply chains.

It is not only removing barriers where action is required. Putting in place opportunities for SMEs to be supported through the procurement process, such as through the provision of training, telephone help-lines, and opportunities to meet with procurement staff have also been shown to help support SME involvement.  There are resource implications to such activities but too often using resources in this way is seen as inefficient. However, if the potential wider impact of procurement is recognised, the resource implications become seen as part of an investment into developing local economies rather than simply costs to be borne.

As mentioned above, there are no quick fixes for creating a procurement eco-system that supports SMEs. Making Spend Matter partners will meet in Kavala, Greece, at the end of June 2019, to discuss barriers facing SMEs in their cities and explore new ways of working and building relationships. By investing in the process of creating a supportive eco-system for SMEs, partners expect that it will bring significant returns over the longer term, particularly given the wide economic and social benefits that accompany successful SME involvement in procurement.

Written by Emma Clarence