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Bringing more SMEs into the supply chain requires only small changes in the way buyers operate, but it is an initiative that can’t be ‘tacked on’ to a procurement. Making a tender friendly to SMEs (small and medium enterprises) is something that has to be considered at the outset of the project. Here are ten steps that buyers can implement to help them open up their procurements to SMEs.
Don’t let contracts that are out of the scope of small business. The size of a contract is the biggest barrier to small businesses. Clearly some contracts cannot be split up or reduced, the construction of the garden bridge won’t be going to an SME and nor will the next national framework for mobile telephony. However, does your CRM upgrade need to be combined with five or six other IT projects into a large-scale programme? Expanding contracts reduces the number of potential suppliers that can bid and locks out smaller bidders. There is a tendency in procurement to want to manage large tenders, but ten £1m contracts could deliver much better value than one £10m contract, it just depends on the nature of the supply.
Make the case for using smaller suppliers. There is often resistance to using smaller contractors because they are perceived to be higher risk and the smaller contracts create more work as each has to be managed. In fact the opposite is true, larger contracts carry greater risk and greater instances of failure or overspend. Although having fewer suppliers to manage may reduce the work of contract management, it is worth questioning whether this should be the case, as the same amount of work will be required to deliver the project and contract managers should be monitoring outcomes, regardless of whether they come from different teams in one company or from completely different companies.
Use the Social Value Act. Your social value reviews allow you to consider the impact on the local economy in your tenders. Take the time to consider the likely fiscal impact of using either local supply, local jobs and companies that are entirely on-shore. Use this to frame your scoring mechanisms, so that if you estimate that a project will provide employment for ten people for six months, you’re quite within your rights to ask where those jobs will be created as well as how the taxes related to the project are likely to be paid.
Don’t put up unnecessary barriers to entry. It is easy to err on the side of caution, requesting a long trading history, specific professional standards or certain types of experience, but each of these can be problematic for SMEs. You need to weigh up your need to counter risk with your need to create competition. After all does having an ISO standard really guarantee quality, or does it suggest that a supplier is capable of adhering to a standard? Do you really need to see a public sector reference or would a private sector one do? Suppliers should always be validated, but project failure through insolvency is much rarer than project failure through poor performance or confused specifications. Manage your risk, but be mindful of the barriers you put in place.
Make your documents friendly to SMEs. A document with hundreds of questions, a pre-set contract running to over one hundred pages and a long raft of additional evidence will simply stop SMEs in their tracks. Tenders can be like velcro, they just pick up bits of lint and fluff as buyers and legal teams continually add new requirements and new questions to handle different outcomes and problems faced previously. Apart from the resources needed to respond to these documents, there is problem of comprehension and complexity, quite often SMEs struggle to really understand what is required of them. Simplifying your contracts will allow more SMEs to compete for your business. If you want more on this, follow the excellent work of Warren Smith and the GDS team here: https://digitalmarketplace.blog.gov.uk/2015/06/29/redesigning-digital-services-creating-simpler-and-clearer-contracts/
Be mindful of the resources available to SMEs. So you’ve got your specification together for a relatively small contract, but you’re behind schedule, so you can only afford to give the suppliers ten working days to respond to your tender. Again, you’ll be excluding companies that don’t have the resources to respond to your tender, especially if you’ve landed hundreds of pages of documentation on their desks. In most small companies, bids will be written by the senior team so they will have to juggle your tender against existing client work. Do what you can to give them a reasonable amount of time to form a response, it will increase the quality and volume of your responses.
Be transparent. Being transparent helps you to build a level playing field for all of your bidders, if you publish the details of your existing contracts, including who supplies them, how much they’ve been paid and what was delivered, it is far more likely that competitors will be able to provide lower-cost alternatives for you. If you want SMEs to make use of your data, make it accessible and easily interpretable.
Be clear. What is a tender for? Too often public sector buyers forget that a tender is there to elicit the best response they can from the businesses that are able to comply with your requirements. Yes, there are legal requirements that shape a tender, but the primary purpose is to get good responses from suppliers. With that in mind, speak plainly about what you need, shy away from acronyms and, crucially, take the time to communicate why you need it. Get non-experts to review your documents and ask them if they understand what is required. This is not about dumbing-down, it’s about communicating well and thereby increasing competition for your business.
Look further afield. spendnetwork.com is a great place to find out more about who is trading with whom, but it is now relatively easy to find out which companies are capable of delivering for your organisation. Take the time to look for companies that have successfully traded with other areas of Government and invite them to tender.
Build partnerships. Make it clear to your bidders that you’re working to build a partnership. This is encouraging to SMEs who are looking for stability, and will help to ameliorate some of the up-front cost and effort that goes into winning a public sector contract. The right companies will see this as an opportunity to build their reputation across the sector and so will be more attendant to your needs and more flexible when adapting to any contract changes. Realising that the benefits for SMEs are slightly different to the benefits that large companies enjoy from public contracts will help you to build better partnerships and deliver better outcomes.
The Government has appointed a new Crown Representative for SMEs, Emma Jones: (https://www.gov.uk/government/news/leading-entrepreneur-emma-jones-appointed-as-new-small-business-crown-representative). We wish her luck in her new role and hope that she can help buyers direct more of their business to some of our fantastic small companies.