Opening public procurement to SMEs

The public procurement market in the EU - covering all levels of government and public agencies - is estimated to be worth around one-sixth of total GDP in the EU. This represents a huge market, and one from which Europe's SMEs ought to be deriving a significant share. Yet although SMEs are not specifically excluded, the procedures and practices used in many tenders have the effect of disadvantaging SMEs over larger competitors. The 2004 EU Directives reforming the public procurement rules provide a good basis to facilitate SMEs' access to public contracts. The European Commission is further contributing to the process by pooling Member States together and stimulating the exchange and dissemination of SME friendly practices.

Judge's hammer

Public procurement covers a wide range of supplies, services and works required by governments, local authorities and public organisations, utilities and agencies. The size of such contracts varies hugely, and so whilst some are clearly beyond the capabilities of SMEs to fulfil, a significant proportion of the public procurement opportunities in Europe are well within the scope of SMEs.

The SMEs' access to public procurement varies from one Member States to another. However, overall SMEs secure 42% of the value and 64% of the number of contracts above the thresholds fixed by the EU directives on public procurement. (2005 data) The directives cover roughly 16% of the EU public procurement market. It is interesting to note that medium sized companies are performing much better that small and micro companies.

But even when if these figures might look encouraging, there are still many barriers which discourage SMEs from responding to tenders or even lead them to avoid such opportunities altogether. These include:

  • difficulties in obtaining information;
  • lack of knowledge about tender procedures;
  • the large size of the contracts;
  • too short time span to prepare the proposal;
  • cost of preparing the proposal (since many costs are fixed, SMEs face disproportionately high costs in comparison with larger enterprises);
  • too high administrative burdens;
  • unclear jargon used;
  • high qualification levels and required certification;
  • financial guarantees required;
  • discrimination against foreign tenderers, in other words, favouring local and national enter-prises;
  • finding collaboration partners abroad.

Changing practice

Whilst these difficulties that SMEs face are now widely understood, significant efforts are still required to change public procurement practice across the Union. After all, those responsible for awarding contracts on behalf of governments and public authorities are required to safeguard public funds, and many need to be convinced that reforming their procedures will not jeopardise this. In the context of the Lisbon Strategy, the European Council has underlined the importance of public procurement for SMEs' economic performance, calling for SME access to public procurement markets to be improved.

The current package of directives on public procurement is designed to reduce the administrative burden and costs related to tendering, make procurement systems more transparent and easier for SMEs (in particular) to access, and to encourage the use of information technology systems (e-procurement) to simplify the process. To optimise the use of the possibilities given by the directives by the Member States and respectively their public buyers, within the framework of the "Small Business Act" for Europe, the European Commission proposed a Code of best practices in opening public procurements to SMEs, taken both from Member States and elsewhere. The Code will therefore help public authorities to develop 'strategies', 'programmes' or 'action plans' with the specific aim of facilitating SMEs' access to public contracts. It also encourages Member States to learn from each other as they implement the new rules under the public procurement directives.

Last update: 12/12/2009 | Top