General Procurement

Will we see an increase in SMEs winning contracts in Ireland?

The Irish Public Sector spends €8.5 billion on goods and services annually.  Is your company getting a slice of this cake? Have you considered how to get into this market?

Did you know that if you are among the 99.7% of active enterprises in Ireland defined as an SME, statistically speaking, you have a higher chance of winning a contract than SMEs in the rest of EU? Where the European Commission reports that SMEs win 45% of the aggregated value of contracts, the Office of Government Procurement has previously reported that SMEs win an estimated 66% of contracts in Ireland.

There is potentially even more good news for SMEs in Ireland. The new Procurement Regulations, which came in to force in May 2016, are designed not only to improve SME participation but also increase their chances of winning. Though I am not fully convinced that these initiatives will have the desired effect, I really hope that I am proven wrong.

So let us take a look at some of the changes under the new regulations that are meant to make it easier for SMEs. I will not go into too much detail on each point but please leave a comment if you want more information.

The Public Sector Directive 2014/24/EU was transposed into Irish law and came into effect on 5th of May 2016. It is known as Statutory Instruments NO 284 of 2016 – European Union (Award of Public Authority Contracts) Regulations 2016.

Here are some of the key points affecting SMEs: 

There is a stronger incentive for buyers to split contracts into lots, providing SMEs with smaller contracts that they can bid for. The Public Authority Regulations Chapter 3, S46, (2) reads that a public authority that decides not to split into lots must provide an indication of the reasons for why they are not doing so.

Whether this leads to more lots or not remains to be seen. The new regulations provide a stronger incentive than the old regulations, but the phrasing of the regulations could be seen as being too weak to have any real effect or to enforce compliance. The regulations have not made lots mandatory by default, and the wording on the requirements of describing the justification for not doing so could lead to brief or spurious justifications.

Annual turnover
Perhaps one of the strongest initiatives under the new rules to provide SMEs with better access to procurement contracts is the new rules to limit the annual turnover a buyer can ask for. Under the new rules the required annual turnover should normally not be more than twice the contract value, The Public Authority Regulations Chapter 3, S58, (9). This also applies to lots, so a buyer cannot ask for annual turnover twice the value of the individual lot, The Public Authority Regulations Chapter 3, S58, (14).

We all suspect that some buyers in the past have deliberately asked for a higher annual turnover than was strictly required to perform the contract, so that they could limit the competition to just a handful of companies including their preferred supplier. Hopefully this rule will see an end to this, revising contract requirements so that they are more accessible to SMEs.

The European Single Procurement Document (ESPD)
The ESPD is a fully electronic self declaration, following a standard for set by the commission, to be submitted by a supplier, declaring that they fulfil the criteria and that there are no grounds to exclude them. This is to replace submitting the various certificates issued by public authorities or third parties that confirm this, The Public Authority Regulations Chapter 3, S59.

This will no doubt lessen the administrative burden of suppliers over time, as they can have their answers to the standard questions and accompanying documents saved and securely stored electronically for easy re-use when needed. No more answering the same questions, slightly differently phrased, again and again!  

Until public authorities make the various certificates and documents needed available online by request, suppliers will still need to keep up-to-date copies at hand, as they could be asked to provide these documents without delay upon request. A buyer should only ask to see the documents from the winning supplier(s), but the rules does open up for them to request access at any time during the procurement process.

In my opinion the ESPD is not an instant fix and it will take some time before we will see some the big improvements, however it is a really good start and it has a real potential to be a beneficial tool.

So back to my question, will we see an increase in SMEs winning contracts in Ireland?
I really do hope so. As the numbers already indicate that SMEs win more contracts in Ireland than in the rest of the EU, then perhaps buyers are already inclined to make the contracts more accessible to SMEs where they can. Even if they are not, the rules about maximum turnover requirement alone should have some effect. The long term effect of the ESPD should also bring the administrative cost down not just for SMEs but for all suppliers that submit bids on public contracts.


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