Smes Can Win Public Sector Contracts!
'Public sector contracts are unattainable for SMEs'
. This is a notion that has been placed firmly in the minds of SME owners, so much so that they are hesitant about coming forward and bidding for government tenders. Many companies that have the potential to take on public sector contracts do not bid, thinking that winning a public sector tender is too remote an opportunity. This negative approach to public sector tenders needs to be rectified at the earliest opportunity.
There are many business opportunities in the UK public sector that can be taken on quite effectively by the small and medium-sized enterprises more commonly referred to as SMEs. But these companies have fallen prey to myths like:
Myth #1 Public sector contracts can never be won by SMEs!
Myth #2 The public sector is remote and unapproachable!
The obvious question in this case is why does this perception exist? Why do the owners of SMEs think and even believe that they cannot sell to the public sector? We tried to explore answers to these queries. The faulty perception lies at the very root of the SMEs their existence and definition. There is a lot of uncertainty surrounding the basic orientation of SMEs- what constitutes an SME? There are many definitions, but the most authoritative source, the European Commission, defines an SME as an organisation with fewer than 250 employees and less than 50 million turnover. Under this definition, 99% of UK and European companies are SMEs. Does this mean all these 99% are not bidding for the public sector? Obviously not! Only that the European Commissions definition is of a broader category.
So which are the 'small businesses' that we are talking about? Well, these are defined as micro-SMEs, with fewer than 10 employees and a turnover of less than 2 million. These companies are the ones that find it nearly impossible to win a government contract. The reasons, as gathered from the micro-SMEs, for their not being able to get a public contract are:
* Micro-SMEs are ill-equipped to take over huge requirements of public sector contracts.
* Public sector tenders are not advertised openly.
* The tendering process is too complicated and lengthy.
* Subcontractor opportunities are difficult to access.
These concerns of micro-SMEs can be addressed through a simple approach called 'value banding'. This cost-free approach is beneficial for both the seller (SMEs) and the buyer (government bodies).
How does value banding work?
Value banding addresses the biggest problem that these small businesses face: that they cannot estimate the value of a public contract when it comes out and therefore miss out on potential opportunities thinking they are too big for their business to handle. The key here is to understand the value of a government tender. Now, central government bodies must advertise through the Official Journal of the European Union (OJEU) when they put out a tender for a contract worth more than 100,000.This figure is not the annual value of the contract. It is the potential value of the contract for its entire lifetime. This means that a government contract with a value of, lets say, 150,000 for three years is really valued at 50,000 a year. Now isn't this a figure well within your reach as a micro-SME?
The public sector bodies categorise the tenders into the appropriate value band themselves. Some are not keen on this as it tells the bidders exactly what amount to bid but value banding is beneficial for government departments and other public sector buyers as they get bids from the most appropriate organisations for the opportunities offered. The UK Ministry of Defence is among the bodies which use value banding. If every public body followed this example, then it would be easier for micro-SMEs to estimate the accurate value of a contract and participate in the
tendering process uninhibitedly. The longstanding misconception that public tenders are not suitable for SMEs would then be dispelled.
by: Fiona Campbell
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