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Beating the downturn with public-sector contracts

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Public sector contracts offer a much-needed new revenue stream for SMEs. Battered by rapidly shrinking private sector spending, many small and medium sized businesses are turning to government bodies to sustain themselves.

Meanwhile, the government is also looking for ways to support the economy through public spending. SMEs can benefit from this, as the government is trying to encourage small and medium sized businesses to participate more actively in the public sector procurement process. SMEs are being urged to start bidding for government contracts that they may, in the past, have thought out of their reach.

Indeed, the government has also committed to spend more money with SMEs. As part of its economic recovery package it has pledged that 30 per cent of the budget for every government body must now be spent with SMEs. This is equivalent to an extra £50m for small and medium sized businesses every year.

Finding public sector contracts

Your first port of call for finding public sector contracts should be Supply2, the “official government lower-value contract opportunity portal.” This is an online database of public sector contracts with a value of £100,000 or less, arranged according to skill sets.

You can search for contracts according to your area of expertise, using the Common Procurement Vocabulary (CPV). The CPV is used to describe skills in a series of eight-digit codes, enabling the database to match buyers and suppliers more efficiently. You will need to detail your skills and expertise using the CPV during the Supply2 registration process. There are comprehensive instructions on the Supply2 website.

The procurement process

Before applying for a contract, it is important to understand that the public sector procurement process is very clearly defined and can be significantly different to that followed in the private sector.

In the public sector, the procurement process broadly follows four steps:

1. Defining the procurement strategyThe buyer will begin by working out a strategy for finding a supplier. If the value of the contract is £100,000 or less, part of this strategy will be a listing on Supply2. You should bear in mind, though, that many such contracts will also be listed in local media – so you may want to keep an eye out in other places.

2. Pre-qualificationIn some cases, for example where a contract requires a buyer with a very specific set of skills, the supplier will require applicants to be ‘pre-qualified’. This means applicants will need to prove that they are capable of fulfilling the contract before applying.

3. Invitations to tender (ITT)Applicants that successfully pass the pre-qualification stage will be given an invitation to tender, meaning that the buyer wishes to receive a bid.

4. Evaluation and awardOnce the deadline for bids has passed, the buyer will evaluate each of the applications and announce its preferred supplier. Following the announcement a ten-day "standstill period" will begin. This period allows unsuccessful applicants to ask the buyer for feedback, and is an important facility for firms new to public sector provision.

Finding the right insurance

Finally, it is important to note that most government bodies demand a particularly high level of public liability insurance from their suppliers. As such, if you intend to take advantage of the significant new revenue stream offered by public sector contracts, you are likely to need to upgrade your existing business insurance.

You should also ensure that your business is adequately insured before entering the pre-qualification stage of the procurement process.

If you are properly insured and well informed about the procurement process, there is no reason why you cannot also take advantage of the government’s significant spending power.Josh Hall is business correspondent at business insurance comparator at SimplyBusiness.co.uk

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