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Public procurement: SMEs disadvantaged

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Public procurement represents 19 percent of European GDP. SMEs are the heart of our economy and should have their fair share of public contracts.

A new study published by the European Commission has found that SMEs are not obtaining a percentage of public procurement contracts proportionate to their economic importance.

The 'Evaluation of SMEs’ access to public procurement markets in the EU' report found that despite winning an estimated 60% of public procurement contracts published in the Official Journal of the EU, SMEs are securing only 34% of the overall value of these contracts.

This is between 14 and 21 percent lower than their overall weight in the economy. Whilst medium-sized enterprises are not unduly underrepresented in this regard public procurement access for micro and small enterprises is clearly limited. Micro-enterprises secured a share of 6% of public procurement contracts, small enterprises 11% and medium-sized companies 17%.

The percentage of procurement contracts awarded to SMEs differs widely:

  • Smaller countries such as Bulgaria, Latvia, and Malta are characterised by better margins for SMEs and public procurement contracts.
  • A number of larger Member States such as France, Spain and Italy have managed to increase the share of SMEs in public procurement in the period 2005-2008
  • The share of successful SME applications for public procurement contracts dropped in most new Member States during the same period.

The analysis of successful applications demonstrates that the specific procedure and the type of procurer do not seem to hamper the chances of SMEs:

  • SMEs win more public workconstruction and engineering contracts than supply contracts. However, when looking at the value share secured SMEs seem to perform better with supplies and services contracts.
  • The size of the contract is relevant for SMEs and they perform better in public procurement when public buyers divide their tenders into lots. Cyprus, Slovenia, Poland and France are the most proficient at dividing cutting tenders into lots, whereas Czech Republic, Austria, Malta and Luxembourg rarely use this technique.
  • In 2008, direct cross-border procurement accounted for 1.5% of all published contracts, corresponding to about 3.7% of their combined value. In general, local and regional authorities engage less frequently, and public utilities more often in direct cross-border transactions. German and Cypriot companies, together with Austrian and Estonian enterprises were particularly successful in winning contracts abroad.
  • The domestic market was almost exclusively the source for revenues from public contracts for Romanian, Slovenian, Bulgarian and Polish companies.

The report highlights a number of procurement techniques that could be used by public buyers in view of facilitating SMEs’ access to procurement:

  • Simplifying tendering procedures by allowing the presentation of certain administrative documents only when the offer was shortlisted or selected.
  • Improving the quality of information regarding public procurement available for potential bidders through various channels of communication.
  • Strengthening the dialogue between SMEs and procurers through face-to-face meetings on supplier events.
  • Debriefing unsuccessful bidders is important to help them understand how they can submit better offers in the future.
    Measures helping to overcome the limited technical and financial capacities of SMEs, allowed by the Public Procurement Directives should be further encouraged.

The number of contract award notices (CANs) published on TED has increased steadily between 2002 and 2008, from 58,427 to 122,653. The rate of growth accelerated between 2007 and 2008, to an average 19% per annum.

Authorities from France published the largest number of contract award notices. They accounted for 27.5% of all notices (88,033 in the 2006-2008 period). Since 2005, Poland is the second largest publisher of CANs (37,688 notices in the 2006-2008 period or almost 12% the estimated total). Germany, Spain, the UK and Italy remain large contributors, providing a combined estimated share of about 34%.

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