The role of public procurement in supporting SMEs towards sustainable recovery

On 23 March 2021, EU and global experts discussed obstacles faced by SMEs in accessing public procurement, the role of policy and decision-makers to reduce these barriers, and how governments can use public procurement as a strategic tool to foster sustainable and innovative growth, at a joint ACCA, SMEunited and EBRD event, attended by over 370 participants from all over the world.

In an attempt to support struggling SMEs hit by the COVID-19 pandemic and the vast number of jobs they provide, governments around the world put in place unprecedented measures. In the EU, together with Member States, the European Commission has responded to these emerging needs by adapting EU legislation and facilitating financing for European businesses to help them weather this storm and stay alive. But in order to achieve a recovery and a strong and inclusive economy, we need to restart economic growth rapidly.

Part of the solution could lie in another tool that governments have also at their disposal, and which is often overlooked – public procurement, which can be used to achieve multiple goals at once through the vast amount of public money spent on these contracts. The EU Council recently adopted a set of conclusions centred on how efficient public procurement rules and practices, combined with increased public spending, can accelerate the economic recovery from the COVID-19 crisis and lead to a sustainable and more resilient EU economy.

However, many SMEs currently face significant barriers, both regulatory and non-regulatory, to bidding and winning public procurement contracts – lengthy and difficult bidding processes (very large contracts, expensive standards and certification requirements, etc), lack of knowledge about upcoming contracts and knowledge asymmetry between large and small enterprises, limited resources and experience to bid on contracts, among others.

How can policy and decision makers help reduce these barriers and promote better SME inclusion in public procurement contracts? And as a result, how can governments use public procurement as a strategic tool to foster sustainable and innovative growth, while reducing administrative burdens and compliance costs at the same time?

This was at the heart of the discussions of an online conference organised by ACCA, SMEunited and the European Bank for Reconstruction and Development (EBRD), with public procurement experts from the European Commission, the European Parliament, the OECD and from Cyprus and Ireland.

Transparency, simplification of the process and professionalisation of the procurement function were the key words of the debate. The event was attended by over 370 participants from all over the world.

After a welcome speech by Aleksandra Zaronina-Kirillova, Head of SME Affairs, ACCA, a presentation of the New models of Public Procurement : a tool for sustainable recovery report by Rachel Bleetman, ACCA’s Public Sector expert, and a keynote speech from Katharina Knapton- Vierlich, Head of Unit, Public Procurement, DG GROW , European Commission, the panel moderated by Gerhard Huemer, Director Economic Affairs, SMEunited welcomed Matthieu Cahen, Senior Policy Analyst, Public Procurement & Infrastructures, OECD; Eliza Niewiadomska, Senior counsel in charge of the public procurement sector at the Legal Transition Programme, EBRD; Philippos Katranis, Public Procurement expert, Treasury of the Republic of Cyprus and Paul Quinn, Government CPO and CEO, Office of Government Procurement of Ireland. Keynote concluding remarks were delivered by MEP Ondřej KOVAŘÍK.

Discussions confirmed that representing in average across OECD countries 12% of GDP (14% in the EU), public procurement can steer SMEs’ economic development. While many practices exist across the world to support SMEs, more remains to be done on measuring the impact of these strategies on SMEs’ economic development.

As part of SME supporting policies, there are “push factors”, ie measures to require public bodies to open business to SMEs - such as national tendering rules for all goods and services; single national electronic tendering platform; strong audit and governance standards- , as well as “pull factors” , ie measures to attract SMEs to government contracts, such as competitions that attract SMEs ( eg open tendering, transparent selection and award criteria, etc) ; proportional requirements (insurances and financial criteria, experience, consortia), process ease ( standard simple documentation, online) and liquidity (prompt payments legislations, e-Invoicing, etc).

The success of public procurement also depends on key enablers, including the professionalisation of buyers, central purchasing bodies and education of bidders. Implementation, support and oversight are key. Accountants and accountancy practices supporting SMEs have also a vital role to play, navigating the SMEs through the existing support measures, supporting the application processes, but also helping the small businesses rethink their business models and transform.

Rachel Bleetman, Public Sector expert at ACCA and author of the report New models of Public Procurement: a tool for sustainable recovery report said: ‘The SMEs we interviewed for the report told us that they faced a number of challenges around public procurement: insufficient in-house capacity to bid on contracts, limited awareness about upcoming bids and bidding processes being too long or difficult. Our report therefore focuses on a number of key reforms needed to improve public procurement particularly around greater transparency, dividing large tenders into lots, having free online training for SMEs and providing better supplier feedback for unsuccessful bidders. Open and transparent data, particularly through implementing the Open Contracting Data Standard, not only helps reduce bribery and corruption and creates a better auditing trail but also allows for wider competition‘.

Ondřej KOVAŘÍK, MEP said: ‘Public procurement should be seen as a tool to achieve European recovery and will be one of the key pillars coming from the public sector. Modernisation and digitalisation are key to make sure that public procurement is done in a more efficient, transparent, competitive and secure way. We need to understand how the procedures can be made faster, less burdensome and cheaper. This will involve the promotion of competition and transparency in public procurement. Potential corruption risks can also be decreased by implementing such tools. As part of the recovery efforts, it is essential to make sure that SMEs are fully on board, and various stakeholders should make this a priority’.