SMEs still cut out of public contracts

There are often times when SMEs will ask if the correct market to channel is the public sector. The first obstacle for SMEs to bid for contracts in the public sector is the 10% rule, which often times the pubic sector uses to exclude, at the Pre-Qualification Questionnaire (PQQ) stage, SMEs.

Rarely is the rule addressed in tender documentation and because of that a good number of SMEs spend time and money bidding for a contract they are never going to win because of a financial check – the bid price reflects more than ten percent of their entire turnover from the previous year.

The UK business community per BIS numbers consists of almost 5 million businesses of which there are only about 418,000 that could hope to compete for £100,000 tenders or more because of the 10% rule.

That number is realistically reduced even further by the number businesses big enough to invest in PQQ requirements that are commonly demanded. There are 81,000 businesses that have staff of between 20 and 50 these are medium size not small.

Additional barriers that help to exclude many SMEs from bids for the public sector are based in the following; environment of the ISO14401 standard, quality of the ISO9000 standard, policy on Equal Opportunities, sufficient insurance, policy on Health and Safety and third party references.

Over and above these barriers than SMEs face there are the hard costs that are incurred selling to this sector. The typical tender process in the public sector takes a much more significant time period than a private sector equivalent process as well as being very much costlier. Win ratios tend to be very poor for SMEs and the ROI or return on investment for the SME is at times very low.