The procurement process can often be complex and daunting, even for the most experienced of professionals; so it’s no surprise that many SMEs up and down the country sometimes feel uncomfortable when it comes to bidding for public sector tenders. But, encouraging SMEs to participate in procurement can actually bring significant benefits to your business. They’re often more agile, innovative and competitive than larger suppliers. However, many SMEs still face barriers when bidding for contracts.
In this blog, we’re going to look at what SME tenders bring to the table, as well as the barriers smaller businesses are facing. We’ll also explore the steps you can take as a buyer to increase SME supplier engagement.
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Firstly, SMEs are often at the forefront of innovation. They’re usually small startups that have grown, through thick and thin, and so are often able to adapt to new challenges quickly. By involving SMEs in procurement, your business can gain valuable access to these innovative solutions, which may not be available through larger, more established suppliers.
It’s also a perfect opportunity to look at your bottom line. Often SMEs have lower overheads than larger suppliers and tend to be keen to secure long-term contracts. This places your organisation in a pole position when it comes to contract negotiation, meaning you can look to drive down costs; and the smaller structure can often result in being able to work together to develop a more high-quality product.
Finally, consider how important working with an SME could be for your local economy. Many have a workforce with strong local ties, and allowing their business access to the procurement process means the chance to create more jobs and support entrepreneurship. Your organisation may also have a social value target, and partnering with an SME can contribute to these objectives.
Despite all the benefits, organisations have to ask themselves why they may be seeing a lack of SMEs bidding for contracts when they go out to tender. Many SMEs face challenges that hinder their ability to secure procurement opportunities, with some of the most common barriers including:
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Complex and lengthy procurement processes – Many SMEs find tendering procedures overwhelming due to excessive paperwork, legal complexities, and unclear requirements, which can put them off from participating.
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Limited awareness of opportunities – SMEs frequently struggle to access information on available contracts, particularly if they lack the networks or resources to monitor procurement portals regularly.
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Resource constraints – Many SMEs operate with limited staff and financial resources, making it difficult for them to invest the time and expertise needed to complete detailed tender applications.
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Strict eligibility and experience requirements – Some tenders have high financial thresholds, extensive past performance criteria, or insurance requirements that exclude smaller suppliers from consideration.
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Concerns over payment terms – Long payment cycles can create cash flow challenges for SMEs, making it difficult for them to take on large contracts without risking financial strain.
These barriers might not apply to your organisation, but it’s important to recognise the potential difficulties all SMEs face across the country when it comes to the procurement process.
Recognising these wider challenges is the first step towards creating a more inclusive procurement environment that encourages SMEs to get involved.
If you’re looking to broaden your procurement net and make your organisation more attractive to SMEs there are some easy things you can do to make the process more appealing.
1. Simplify the process
One of the most effective ways to get SMEs participating is by streamlining procurement processes. This includes:
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Reducing excessive documentation needed.
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Using plain language as much as possible instead of complex jargon.
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Offering clear guidance on how to complete tenders successfully.
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We have a dedicated supplier Relationship Manager that supports SMEs, whether new or existing.
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We have an onboarding process and keep SCPs up to date through regular meetings, updates and newsletters.
2. Make opportunities easier to find
Many smaller organisations struggle to find procurement opportunities until it is too late. To address this, consider:
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Advertising tenders on multiple platforms, including SME focussed websites.
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Use social media and newsletters to communicate upcoming opportunities.
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Create supplier portals where businesses can register their interest for future contracts. Here at Procurement Hub, we offer procurement solutions where suppliers can pre-register, allowing organisations access to SMEs that are pre-approved
3. Break contracts up
Large contracts can be intimidating for some SMEs due to the finance and resources needed. By breaking contracts into smaller lots, you’ll be able to:
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Make opportunities more accessible to SMEs.
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Encourage collaboration between SMEs and larger suppliers through consortium bidding.
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Reduce the reliance on a few large suppliers and promote diversity within the supply chain.
4. Offer training and support
Many SMEs lack the experience needed to navigate the procurement process, therefore think about what support you can offer them. At Procurement Hub, we focus on supporting SMEs through training and guidance.
For example:
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You could arrange a series of webinars or workshops focussing on the best practices when tendering.
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You could run an advisory or consultancy service providing them with advice on the procurement process.
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You could offer to give them guidance on writing successful contract bids.
5. Ensure fair payment terms
Cash flow is a significant concern for SMEs, therefore long payment terms can discourage smaller suppliers from bidding for contracts. You could consider:
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Offering prompt payment terms, ideally within 30-60 days.
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Implementing policies to make sure subcontractors are also paid fairly.
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Consider early payment schemes for SMEs in order for them to improve cash flow.
Encouraging SMEs to participate in your procurement process is not just good for the economy, it’s a strategic advantage that will bring innovation, agility and cost efficiency to your supply chain.
By simplifying processes, increasing visibility and breaking up contracts your organisation can create a procurement landscape where SMEs thrive.
At Procurement Hub, we work with lots of SMEs that tender and secure contracts through the opportunities that we create for our public sector customers. Find out more about our opportunities and the procurement services and solutions we offer.