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Spotlight: Strategic Procurement and SMEs

Professor Christopher Bovis takes a look at public procurement strategy for SMEs... 🛒

  • Professor Christopher Bovis
  • 2 min read

Public procurement is of utmost economic significance for European businesses. The total value of expenditure by government and utilities on public works, goods and services for 2019 is 2.406 billion euros, representing 19 percent of the EU’s gross domestic product.

The total public procurement market in the UK is £220 bn.

Small and Medium-sized Enterprises (SMEs) are considered the backbone of the European economy. The approximately 20,8 million SMEs registered in the EU represent 99,8 percent of all enterprises and produce more than a half of European GDP.

In the United Kingdom, SMEs represent approximately 92 percent of all enterprises registered.

  • 4.9m UK Businesses
  • 4.5m SMEs in UK
  • 14.3m employment in UK SMEs
  • 84 pence in every £ turned over in an SME stays in local / regional economy

SMEs’ market share in public contracts shows marked differences between EU Member States. For instance,

  • 24% in the UK
  • 48% in France
  • 57% in Germany
  • 63% in Italy
  • 70% in Sweden
  • 62% in Spain

UK Government procurement has been described by the House of Commons Public Administration Select Committee as process orientated and risk adverse, which results in a failure to focus on outcomes, increased costs and delays of approximately 50% longer than Government procurement takes in France or Germany. Recent UK initiatives seek to improve the ability of the Civil Service to gather requirements, specify outcomes, evaluate supplier capabilities and manage a range of supplier relationships.

Strategic procurement embraces the pivotal importance of the SMEs in achieving economic growth. Public procurement is of utmost economic significance for European SMEs. Although the Public Procurement regime deals effectively with sub-contracting issues, prompt payments and the promotion of SMEs in the selection and qualification procurement phase and the award of public contracts, SMEs face barriers to accessing public procurement markets and win public contracts.

The value of public contract is one of the major factors that influence the extent to which SMEs can access public contracts. The larger a contract (i.e. single awards/lots), the less likely it will be awarded to SMEs. Other factors influencing SMEs' share in winning public contracts are the type of contract, the procurement sector, the award procedure and the award criteria.

SMEs' account for a considerably lower proportion of above-threshold supplies contracts than that of public works contracts; SMEs play only a marginal role in the supply of commodities, but they accounted to more than three quarters of the contract volume in other procurement sectors; The share of contract volume awarded to SMEs is sensitive to tenders awarded by central government, regional and local authorities and agencies and utilities; SMEs take a much smaller share of the total value of contracts awarded under the various negotiated procedures than under open procedure or restricted procedures.

SMEs are not likely to win contracts when the competitive dialogue is utilised; and finally, SMEs are not likely to win contracts when the lowest offer is utilised as award criterion.

Professor Christopher Bovis FRSA
University of Hull

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