Five ways to get small firms to bid for tenders

David Kwiatek is head of commercial at ESPO
posted by David Kwiatek
16 March 2016

Small and medium-sized enterprises (SMEs) have become crucial to the success of our local economies and many organisations are beginning to recognise the benefits of adding SMEs to their supplier lists.

Apart from the fact it’s a CSR requirement, many large organisations are keen to engage with SMEs to take advantage of the low-cost, innovative products and services they have to offer. When you factor in the flexibility, local knowledge and the diversity that SMEs can bring to your supply chain, why then is it so difficult to encourage them to bid for potentially lucrative tenders?

There are a number of barriers that prevent SMEs from bidding for tenders from the outset. The perception that only big suppliers get on tenders still remains.

Many SMEs consider the tender process to be overcomplicated and steeped in red tape, ultimately, a process only big suppliers have the time or resource to manage. Why then should they bother if they feel they have little or no chance of winning?

However, these barriers can be effectively removed and the tender process adapted to encourage SME engagement:

1. Set realistic goals
Think about what SMEs can realistically do. Question whether your specifications include things that aren’t absolutely necessary. If the SME feels at risk from certain types of supply contract, they are unlikely to bid for it. Also, by breaking down tenders into smaller, more manageable lots, for example based on supplying a particular region, will help give SMEs the confidence that they can actually win it.

2. Insurance
As a rule many suppliers will only have 'off the shelf' insurance policies because it’s what they need and can realistically afford. Some sectors will set their insurance requirements very high, thereby immediately creating a barrier. Many SMEs don’t realise this can often be addressed very simply by topping up their current policy. Engage with potential suppliers to ensure they understand your requirements.

3. Simplify processes
SMEs typically have little time to dedicate to lengthy form-filling exercises. Standardising this process using an e-tendering solution will support them in the long term as, once registered, they won’t have to do it all over again. Also, ditch the complex terminology used in tender documents and use plain English.

4. Vetting finances
Think about the financial information you ask for. A new business, or one that hasn’t yet been fully audited, won’t be able to provide three years audited accounts. If you are keen to engage with SMEs, think of different methods to measure their financial capabilities, and ways that are appropriate to the risk you’re seeking to manage.

5. Bidders’ days
Consider hosting a bidders’ day and invite SMEs to come and discuss how they can best engage with you. Opening up lines of communication and demonstrating that you are keen to work with them will show them that it’s well worth responding to that tender.

Breaking down barriers takes a conscious effort to understand the SME community. Adapting usual practices and procedures specifically for SMEs means that these barriers can effectively be overcome.

David Kwiatek is head of commercial at ESPO

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