Small businesses hit hard by costly public sector tender process

UK firms bidding for public sector contracts face the second highest bidding costs in the EU, finds research.

The findings from the Centre for Economics and Business Research (CEBR) are bad news for small and medium-sized enterprises (SMEs) which tend to lack the resources of larger firms, and therefore can be less willing or able to compete in expensive procurement processes to secure public sector contracts.

Procurement processes in the UK incur the second highest costs (£5,800 per bid) to tendering firms.

Of the other European Union member states, only Denmark has higher tender costs (£6,000). Both Denmark and the UK are well above the European average of £3,200.

The average total cost of a competitive procurement process (or competition) is £45,200, with £37,200 of those costs falling on the private firms tendering for contracts.

The European average cost of a competitive process is £23,900, meaning that public sector procurement processes in the UK are 90 per cent more expensive than the EU mean.

CEBR also studied the length of procurement processes. The UK public sector purchasing process was found to be one of the longest in Europe, a full 53 days longer than the EU average and some 20 days longer than the Italian process, the next longest.

The research also isolated the costs of holding a competitive procurement process to public bodies. The average cost to a UK public authority of attracting each bid from a potential supplier is £1,260, making the UK the fourth most expensive place in Europe for public bodies putting contracts out to market.

Only Denmark, Norway and Italy record higher costs for this measure. The UK’s high costs contrast sharply with the EU average of £800, making the UK’s public procurement process 58 per cent more costly than that of its European neighbours.

Pedro Vaz Paulo, CEO of Gatewit, which commissioned the research says, ‘Lengthy procurement processes tend to discriminate against smaller firms which can lack the required resources to commit staff to a time-consuming, and therefore expensive, procurement process.

‘Longer, more difficult processes dissuade some firms from submitting bids, meaning that the eventual winner comes from a smaller pool of bids which is less competitive. This is bad news for businesses and bad news for the public sector, which suffers from reduced competition as a result.’

The European Commission aims to combat these problems through a mandate requiring all public bodies to implement e-procurement platforms by 2016.

Further reading on procurement

Ben Lobel

Ben Lobel

Ben Lobel was the editor of from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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