It is easy to underestimate just how huge the public procurement market is. The public sector purchases some £250bn from private sector suppliers each year, meaning that roughly one pound in every five is spent by a public authority.
Despite recent reforms, public procurement still has a bad reputation with many businesses. Frustrations can include the costs of preparing bids and authorities being perceived as inflexible and overly cautious.
However, with government now recognising that improving SME access is vital for economic development and value for money, now might be the time to take another look at this market. The biggest handicap for small businesses may simply be lack of familiarity with how public procurement works.
- £12.2bn – amount SMEs benefited from central government spending between 2015 and 2016
- 27.7 per cent – the government’s overall percentage spend with SMEs (without Network Rail and MoD)
- £5bn – how much more is spent with SMEs by the government when compared to 2011-12
- 33 per cent – 2022 government target for SME spend
Public authorities are required to advertise larger opportunities in the Official Journal of the European Union (OJEU). These advertisements can be viewed at the Tenders Electronic Daily website. Smaller contracts are frequently advertised at on the government’s website. These advertisements explain where further information is available. It is now increasingly normal for procurements to be carried out entirely on online portal systems, which helps to cut down on logistical costs and delays.
Keep a particular eye out for future opportunities. In the OJEU, these are called “prior information notices”. Public authorities often issue these when they wish to engage with potential suppliers before launching a competition. This can be particularly valuable for SMEs, as they can ensure the authority is aware of the sorts of potential interest in the opportunity and adapt the procurement accordingly.
Taking part in competitions
After advertising an opportunity, public authorities typically choose their suppliers in a competitive tender exercise. There are a number of procedures that can be used, but the general aim of any exercise is twofold: firstly, to ensure that the successful supplier is suitable for the contract and, secondly, to award the contract to the supplier which made the best offer.
Suitability is tested using “selection criteria”, which relates to matters such as turnover, experience and qualifications. SMEs have historically struggled to compete with larger organisations on selection. New rules have aimed to improve this by limiting minimum turnover requirements to twice the contract value.
It used to be routine to run a separate selection stage at the outset of a competition to shortlist bidders. This is now discouraged, but businesses should still keep an eye out for selection criteria to avoid investing time in an opportunity for which they are unsuitable.
Because of the limited time available during a competition, businesses should consider preparing a public tendering file in advance, to avoid rushing important decisions. Preparing this file might include:
- Making sure ready access to their financial figures and accounts is possible
- Drawing up a “corporate CV” of previous successful projects to use as references in questions about experience
- Speaking to an insurance brokers to establish what levels of insurance may be economically available if required
- Thinking about what guarantees might be possible to arrange if a financial standing is low
- Thinking about possible partners for joint bids, if their field of specialisation is narrow
Winning public sector contracts
Award decisions are made by testing written tenders against published criteria – usually a mixture of price and quality. It is important to review these criteria and any marking scheme carefully, as we see many bids that score poorly by answering a subtly different question to the one asked. If anything is unclear, queries should be raised with the authority before submitting a tender.
On the contract itself, public procurement tends to operate on a “take it or leave it” approach. Even if a company is used to trading on its own terms in the private sector, on all but the most complex procurements the contract is fixed. Bidders are commonly excluded because they seek to change or reject parts of the contract with their bid. It is possible to raise queries before bid submission, but generally the art of bidding well is to identify if and how to price and deliver to the requested contract. Part of this is establishing contractual “red lines”.
Businesses should not expect to succeed on every occasion and, in practice, should treat the first few attempts as learning experiences. Feedback should always be provided to unsuccessful suppliers and authorities are usually willing to provide more detail if requested. Although tendering is an investment, it does get easier with practice and as a business develops a library of previous tenders to draw on. Winning public sector contracts really is a case of try, try and try again.
Jon Baldwin is a partner at London-based law firm Winckworth Sherwood.