One of the strategic priorities from the National Procurement Policy Statement is driving economic growth and strengthening supply chains by giving small and medium-sized enterprises (SMEs) and voluntary, community and social enterprises a fair chance at being successfully awarded public contracts.
This article focuses on some of the ways that contracting authorities can achieve this and improve their procurements using tools from the Procurement Act 2023 (PA23).
Considering SME engagement from the outset: the business case
This is probably the most important step to including SMEs in a procurement and, ultimately, a supply-chain. The client should, when a project is still in its infancy, set out comprehensive and coherent reasons as to why the contract should be delivered by SMEs.
Without considering them at the earliest planning stages, SMEs are unlikely to get a look-in to the final procurement opportunity. Without this, there is a risk that SMEs either see the ensuing competition as irrelevant or unsuitable to them; or end up in competition against larger companies with resources well above what the SME could possibly dedicate to the competition.
Chapter one of the PA23 sets out preliminary steps that contracting authorities may take prior to advertising an opportunity. The terminology has changed, but the concepts remain very similar to life under the Public Contracts Regulations 2015 (and its equivalents for utilities and concession contracts).
Contracting authorities may publish a planned procurement notice to inform the market of its intention to publish a tender notice. Planned procurement notices may be published at any time, though if the contracting authority wishes to rely upon one to shorten tendering periods it must be published at least 40 days but no more than 12 months before the tender notice publication.
Planned procurement notices are useful for SMEs as they allow for future planning in terms of resource needed to undertake a procurement, including initial work that could be done to "get ducks in a row" for the preparation of bid responses. They also encourage SMEs to look for further information, including whether any pre-market engagement is going to be undertaken in respect of the opportunity, and how they may be able to get involved with that.
Getting a wide range of opinions: pre-market engagement
Another step that contracting authorities may consider is pre-market engagement, which is also included in chapter one of the PA23. The extent to which the client consults its potential bidders ahead of a procurement will often dictate the level of competition for a contract and who bids for it – even if the contract opportunity is ostensibly designed to be bid for solely by SMEs.
One new element of the PA23 is the introduction of a pre-market engagement notice which must be published prior to the tender notice (but not necessarily before the pre-market engagement itself) where pre-market engagement is undertaken. This is a valuable tool for contracting authorities to set out thier intentions for pre-market engagement and inform potential suppliers how they can be involved.
The pre-market engagement process should be very much a two-way flow of information between the client and the marketplace. The client is able to undertake intrusive questioning and research as to what potential SME bidders think about the packaging of the opportunity, but not only that – market engagement can cover the timing and design of the competition itself. For example, engaging with potential suppliers on when the procurement will come to market, how long might be reasonable for suppliers to respond to the opportunity, and how the procurement itself will be undertaken. With the PA23's new competitive flexible procedure, contracting authorities have more flexibility than ever to design competitions that will suit the types of bidders they most want to hear from.
Putting knowledge to use: competition design with SMEs in mind
Section 16(1) of the PA23 sets out specific purposes for which pre-market engagement may be undertaken, including designing a procedure, conditions of participation and/or award criteria. Using the knowledge gleaned from pre-market engagement to develop a procurement competition which both encourages SMEs to participate and also sets them up for success is arguably one of the best ways for contracting authorities to meet the National Procurement Policy Statement policy regarding SMEs.
What the client asks of the bidder in terms of scope and scale of submission needs to be proportionate to the value and complexity of the contract, and easily compiled by the bidder. This is never more important than when trying to encourage SME participation in a procurement process. A poorly designed or overly complex process may be discouraging to any bidder, no matter their experience and size, but it is generally a death knell for SME participation.
Whilst the competitive flexible procedure introduced by the PA23 is a great opportunity for contracting authorities to flexibly design procedures to suit their needs, sometimes the simplest solution is the best. As such, the first step should usually be for contracting authorities to consider whether the open procedure could meet their needs and be the easiest option for SMEs. This involves a single-stage procurement where all information required from the bidders is submitted to the contracting authority in one go.
Another important factor is the setting of conditions of participation and ensuring these are balanced between providing adequate protection for the contracting authority against supplier failure and ensuring a wide and appropriate range of bidders are able to bid. Pre-market engagement can be valuable to help contracting authorities learn, as an example, what levels of insurances are readily (and affordably) available to the market.
Key takeaways
- Use notices to keep SMEs informed of opportunities coming up and allow them time to prepare.
- Use pre-market engagement to find out what will encourage (and discourage) SMEs from submitting a bid.
- Consider the structure of your procurement to minimise the time and money needed for bidders to participate.
For mor information on engaging SMEs in public procurement, contact Louis Sebastian, Rebecca Rees or Andrea Leigh.
