How SMEs can secure public sector work

Two businesspeople looking at desktop computer monitor and discussing work at desk

(Image credit: Getty Images)

published 20 August 2024

There is good news and bad for small and medium-sized enterprises (SMEs) when it comes to bidding for public sector work. On the positive side, new government data shows that SMEs won £39.7 billion worth of such contracts last year; less happily, the proportion of public sector work awarded to smaller businesses has remained stuck at around 20% for the past five years. The new Labour government says it wants SMEs to get more public sector work, but its predecessor said the same thing. And while both the national government and councils have made efforts to encourage SMEs, the reality is that the onus remains on businesses themselves to go out and win these contracts.

In practice, this means getting to grips with the way that public sector procurement works. One advantage of focusing on public sector contracts is that there are strict rules and processes governing how they are awarded. Small firms that understand the system can then engage with it. Most contracts are advertised on Contracts Finder, a public online portal (localised versions of it operate in Scotland, Wales and Northern Ireland). You can use this portal to search for opportunities in your sector and to set email alerts so that you are automatically notified as new opportunities come up.

As new work is advertised, the awarding authority will also set out details of how it will manage the selection process. Often, companies are asked to go through a pre-qualification stage, where the authority assesses their capability and suitability for the requirements of the project. This assessment is typically conducted online through a selection questionnaire or pre-qualification questionnaire. All the SMEs that pass the checks then go on to the formal tendering stage of the procurement process, where they make a formal proposal, including pricing. In other cases, these two stages will take place simultaneously in a single exercise. Either way, bids must be assessed against the methodology and award criteria set out in the contract documentation. Public sector contract awards are expected to go to the most economically advantageous bidder.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

It is therefore vital that you read all the documents carefully to give yourself the best possible chance of a successful bid. Check that you have the skills and experience necessary to meet the requirements, rather than wasting time assembling a bid for work that you have no chance of getting. If you’re not sure about an aspect of the contract, seek clarification from the authority offering it. In some cases, it may make sense for SMEs to work together to bid for public sector work, particularly as contracts can be too large for a single small business to handle on its own. Pooling resources and expertise may be a way to ensure your bid meets all the requirements and that you have sufficient scale to deliver the work.

The key is to make your bid as compelling as possible. Give the authority every reason to award the work to an SME rather than a larger firm. Set out your strengths, capabilities and experience as clearly as possible, and provide evidence for the claims you are making about your performance. Some SMEs find it useful to engage the services of a professional bid writer, particularly when they are first competing for public sector contracts. Remember, public sector authorities are actively looking to award work to SMEs, so play to your strengths. For example, your size may enable you to be more flexible or to offer better value for money. Make these points in your bid. Finally, if you don’t succeed initially, keep trying. It may be possible to get feedback on why a bid has come up short – learn from such feedback and adjust your next bid accordingly.

David Prosser is a regular MoneyWeek columnist, writing on small business and entrepreneurship, as well as pensions and other forms of tax-efficient savings and investments. David has been a financial journalist for almost 30 years, specialising initially in personal finance, and then in broader business coverage. He has worked for national newspaper groups including The Financial Times, The Guardian and Observer, Express Newspapers and, most recently, The Independent, where he served for more than three years as business editor.