What's the biggest barrier for SMEs in public tenders?

9 November 2021

More than 90% of UK SMEs say the public sector should do more to remove tendering barriers to bidding for contracts, a study found.

A survey of 200 SME company directors by bidding consultancy AM Bid aimed to find how SMEs could benefit more from the £290bn worth of tenders the UK public sector issues for goods and services each year, in line with the government’s aim to increase the share of spend with SMEs as outlined in last year’s green paper, Transforming Public Procurement.

The study found the barrier most cited by SMEs was the overall complexity of the procurement process (44%), including the time-consuming nature of the process, and difficulty meeting mandatory qualifying criteria. More than a third (34%) said that the process was too costly, based on being unsuccessful in the past.

According to the survey, 70% of respondents said they had previously bid for public sector work with varying degrees of success, with 45% regularly bidding successfully.

Of these companies, only 4% had an in-house bid writer, meaning bids were written by a business development team (41%), directors/senior managers (34%) or marketing teams (15%).

However, one in 10 respondents said they had given up bidding for public sector contracts, while 21% said they had never bid for public sector work.

“This means overall 31% of our surveyed SMEs are not even in the game and therefore missing out on potentially valuable contracts, with the government aiming for around 30% of its annual £290bn expenditure to be with SMEs by 2022, that could transform their business and its reputation,” the study said.

The biggest frustration was the high threshold for qualification, cited by 55%, while short deadlines and overly prescriptive specifications that limited innovation were both named by 41% of respondents.

The study found although 63% said constructive commentary from failed tenders had helped them win future business, a third (33%) said it had still failed to change their success rate.

More needs to be done to encourage tender responses from a more diverse range of organisations, according to 87%.

Benefits of public sector work for SMEs included more favourable payment terms, enhanced reputation, guaranteed income, and helping to attract and retain staff.

The pandemic had provided a catalyst for change, the study concluded. “It has set a fire under the net zero ambition and tackling climate change, the drive to digitisation, to levelling up the country. Procurement policy improvement is inextricably linked to this change, and SMEs, if they prepare themselves properly, will be well placed to take advantage,” said the report.

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