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No SME’s Need Apply – When Awarding Tenders Price Is King

The support which Irish Businesses receive has hit an all time low as government and semi-state tenders awarded to non-Irish companies have risen from a previous high of 18% to a staggering 28%. These tenders have a significant impact on the growth of Irish SME’s as well as having a major impact on potential job creation. Despite this the government has structured its procurement policy in such a way that deters SME’s from competing for public sector contracts. Something has to change.

Price still key criteria

SME’s in Ireland are effectively prohibited from tendering for government contracts as price continues to remain the key criteria when awarding tenders. In the majority of cases our SME’s simply cannot compete with their international counterparts who leverage their buying power to force SME’s out of the tendering process. This is further supported by a recent survey conducted by the SFA who found that 82% of small firms found a strong emphasis on price rather than value for money to be a predominant difficulty when tendering.

But this isn’t the only factor hampering small businesses. Other discriminatory conditions such as the size of the business and excessive insurance requirements can block SME’s from tendering for these elusive contracts, despite their ability to deliver the required product/service in question at competitive pricing.

Turnover can also be another discriminatory condition which eliminates SME’s from tendering. My business, Kendlebell Naas, which provides Virtual Receptionist and Call Centre Solutions, experienced this first hand when we requested to tender for the Saorview contract. The call levels per annum were only 15% of the number of calls we handle for our largest client. However because of a clause which restricted tenders to companies with a guaranteed turnover for the previous three years, a condition deemed to be an accurate measure of financial and economic standing we were excluded.

Profitability and cash flow

Despite our portfolio of international clients who rate us very highly we were deemed not good enough to deal with our state bodies. Profitability and cash flow is a far stronger measure of one’s financial and economic standing; however our civil servants prefer the vanity of turnover and with that they prohibit many SME’s from tendering.

A recent report by the Dublin Chamber recommended that the Government breaks down large tenders to allow SME’s to compete but they have done the opposite, making it both easier and more attractive for foreign competitors. I fully support the SFA when they called on the Public Accounts Committee to investigate procurement processes. Ireland needs a new procurement system. We need a system designed around SME’s, one that removes the numerous barriers raised against them. The government must align its job creation and procurement policies and it’s only when such an overhaul occurs that we will reach our full job growth potential.

Read SFA Chairman AJ Noonan’s report below:

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One Response to No SME’s Need Apply – When Awarding Tenders Price Is King

  1. Mike McGrath May 10, 2014 at 6:45 pm #

    Well written point Tony. I think the opposite is true too though, Irish companies are not making the most of public procurement opportunities across Europe.
    While you are correct to question the pricing of public tenders, I would also question their effectiveness e.g.

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