Businesses should make procurement ‘SME friendly’

17 December 2012

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13 December 2012 | Anna Reynolds

SMEs are discouraged from bidding for contracts with large organisations by complex tendering processes, according to a guide published by the Institute for Sustainability.

Stella Okeahialam, programme director at the Institute for Sustainability told SM: “Making procurement ‘SME-friendly’ is not only good for smaller businesses who are able to access more opportunities - the benefits for the demand side are equally persuasive. SMEs tend to provide more flexibility, greater creativity and innovation and better risk management, as well as helping deliver local skills and jobs.”

The guidance warned many SMEs are put off by the bidding process due to having less mature business policies and procedures in place. SMEs may also carry lower levels of insurance. The guide recommends procurement professionals and contract managers engage with SMEs by changing the way they deliver procurement.

The guide provides advice for more appropriate wording in contracts and pre-qualification questionnaires regarding SME involvement. Further, businesses should allow for alternative proof of credit history or financial stability such as references from a bank rather than audited accounts to overcome the barriers to SMEs.

The report said businesses need to collaborate with their first-tier contractors and encourage them to diversify their supply chain. Companies should also analyse supply categories according to risk and spend, and the impact on profit. This will enable them to identify which categories are appropriate for sourcing from SMEs.

By assigning minimum requirements to these categories and making them publicly available on company websites, SMEs will be aware of the levels of performance and compliance needed to become part of the supply chain.

The guide also suggested businesses assign a mentor to SMEs to ensure delivery of the contract obligations and any other requirements set out in the contract. Businesses could also host SME bid-writing seminars run by local businesses to aid successful tendering.

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