Business

Is there a £3 billion market for micro businesses right on our doorstep?

Tender bidding is a skill in itself, but there is also the need for a micro business to prove it has the capacity and capability to deliver on a public contract
Tender bidding is a skill in itself, but there is also the need for a micro business to prove it has the capacity and capability to deliver on a public contract Tender bidding is a skill in itself, but there is also the need for a micro business to prove it has the capacity and capability to deliver on a public contract

AROUND £3 billion of public money goes on the purchase of goods and services each year in Northern Ireland, which covers public buying for IT, cleaning, construction, office equipment and motor vehicles – to name but a few.

With current procurement legislation most, if not all, of this buying will go out to some form of competitive process and the level of scrutiny by the public purse, will depend on the value of the goods or services being bought. As such, there’s no mistaking the size of the potential opportunity for any small business to secure substantial contracts on the doorstep.

It’s a win-win. Securing even 0.1 per cent of £3 billion would make a significant contribution to the top line of most micro businesses. In return for buying local, the public purse enables our economy to grow, local employment is created and given that some public contracts can last up to three years, our small business owners can make longer term investment decisions on the back of greater cash flow security.

In return, the public buyer usually gets access to an ambitious, motivated and flexible local businesses, many of whom are punching well above their weight on the global stage of innovation, including sectors such as – health-tech, agri-tech and fin-tech. Our universities invest heavily in creating access to innovation for SMEs and spin outs.

What is happening on the ground? There’s published evidence to suggest that small businesses employing between 50 and 250 employees do win public tenders and the success rate is on the rise. Unfortunately, the statistics don’t seem to break this figure down further and since the majority of our small businesses (90 per cent) have less than 10 employees, it is unclear how many of these actually do win work.

Many of the owners of this 90 per cent, believe that succeeding in the required tendering process is out of their reach with limited enthusiasm to try. There is a sense that they are unable to compete with larger businesses especially with regard to skill set, facilities and supply chain.

There is no doubt that there is a need for a change of mindset and perhaps also policy. For micro businesses the opportunity to access such a significant and long-term buyer will require planning and investment in skills development. The ability to move from small private contracts to larger public contracts is unlikely to happen overnight or on the first few tries.

Tender bidding is a skill in itself, but importantly there is also the need for a micro business to prove it has the capacity and capability to deliver on a public contract. To keep costs controlled this could be achieved through partnering up with others to increase, for example, overall equipment capacity, management skill set or access to supplies. Although, understanding this is not always easy, this approach will achieve an increase in both capacity and capability to deliver on larger contracts.

On the other hand, the public buyer is in the interesting position of using its buying choices to drive through policies. For example, with Green Public Procurement (GPP) public bodies are now using their purchasing power to choose environmentally friendly goods, services and works, and therefore make an important contribution to sustainable consumption and production.

Therefore, why not take a detailed look at the micro business sector – the 90 per cent - as opposed to the 10 per cent of larger SMEs, and examine ways to encourage greater success in securing business?

Although training programmes are useful, a practical example could be to ensure that the insurance levels required by the micro business to deliver on a project are commensurate with the size of the contract being delivered. This is just one example, and there are of course many other areas where engagement could be improved through greater scrutiny.

The public purse is potentially a substantial local market for micro businesses but it needs further development by both buyer and supplier to gain much higher levels of success.

:: Michelle Lestas was author of 'Evaluating SME Experiences of Government Procurement in NI' and presented the findings to the Stormont finance committee. She has also supported small business to tender for public contracts for over 20 years and has written SME-friendly practices into local and central government tendering processes both here and in EU.