The Benefits of Winning Government Contracts for SMEs

More and more SMEs are entering the public sector procurement market, bidding for government contracts alongside established suppliers and those with big budgets who traditionally led the supplier to government field. The primary motivating factor is obvious when you consider that SMEs make up 99% of the UK’s businesses across all industries and sectors. The untapped economic potential can’t be ignored.

To this end, the UK government has developed the Procurement Act that has many regulations designed to increase opportunities for small to medium sized suppliers by lowering traditional barriers and simplifying the tender process.

The government’s commitment to growing public procurement in the UK is further evidenced by its goal to ensure that £1 out of every £3 goes to SMEs to help them compete fairly when submitting tenders for UK government tenders.

6 Advantages For SMEs In Public Procurement

The Procurement Act has multiple benefits for suppliers that win local and central government tenders, making the public procurement process worth every effort. Let’s look at six of the biggest benefits of public sector contracts below.

Steady Income

According to regulations, public sector buyers must pay invoices within 30 days of receipt. This assures suppliers that they will have a reliable cash flow from government tenders. They can invest the money back into the company to improve upon or add to their service offerings or bolster one of their other projects on the go.

Drives Innovation

Government contracting is fiercely competitive, which means suppliers are in a constant cycle of one-upmanship. The most effective innovations with the best implementation strategies are likely to win government tenders in the UK.

Innovative solutions for external and internal challenges

It might seem as though buyers get the most out of the above process, but it’s not true. 

Innovation breeds innovation. When you’re elbow deep in innovative solutions for one government contract, you could unintentionally (and fortuitously) reveal innovations that address internal and external challenges. 

For instance, an internal benefit occurs when a side effect of one solution reveals an efficient way to reduce overhead costs.  

Alternatively, an external benefit occurs when one solution also solves a recurring problem with a different manufacturer.

Diverse Buyers, Diverse Market

Once you’ve broken into the public sector and have a few successful government contracts under your belt, you might find that buyers in related fields show interest in your business and service offerings.

As a result, your products, works, or services are exposed to a greater variety of procurers in a much wider public sector market. The enables you to be more discerning when choosing public sector tenders on which you think you can most successfully bid.

You could even find yourself competing on an international level. The public sector procurement market doesn’t get much more diverse than that.

Note: You don’t want to spread yourself too thin, but try to have a few other local or central government contracts on the go. It’s never a good idea to rely on a single income stream. Diversify your contract opportunities as much as you can.

Increase Credibility  

The public sector has strict requirements when it comes to UK government contracts, especially regarding compliance and confidentiality. As a result, winning a contract proves to other buyers that you already have a degree of credibility. 

Every subsequent contract you win (and deliver to high-quality standards) builds upon your credibility. 

This has a wonderful impact on your brand’s reputation – which leads to more opportunities to win government tenders.

It’s the kind of cycle you want to keep going for as long as possible.

Optimise Flexibility and Adaptability

Occasionally, a project is thrown a curveball that requires adjustments to the contract. Your small business is likely to adapt faster than larger business organisations. 

The UK government appreciates this quality. Buyers will remember the (relative) ease with which you adapted to the change, which will enhance your credibility and the reliability of your brand.

Build Robust Business Relationships and Networks

This is twofold. 

You can establish and grow a network of public sector bodies, which is great for your credibility and exposure.

You can establish relationships with other SMEs that would ordinarily be competitors but with whom you collaborate instead. 

Collaboration increases your service offerings and allows you and your collaborators to bid on bigger government tenders.

All of these benefits are fab, but there is one question all SMEs need to ask before they begin reaping the benefits of public sector tenders.

How Can I Win Government Contracts?

Is your business up to the task of delivering all the requirements in a government contract?

There’s no point pouring body and soul into a bid if you fall short somewhere along the way. In public sector procurement, there is no such thing as “close enough.” It’s all or nothing.

Are You Ready?

Here are five important questions you need to answer before you put pen to paper.

1) Do you have the capacity and capability?

Plain and simple: Do you have enough staff, equipment, space, time, resources, money (etc. etc.) to meet all the requirements?

Is your staff properly trained to carry out the procedures necessary to meet the requirements?

Do you have the management skills to ensure the whole process remains on track?

Questions like this are difficult to answer honestly. There’s often the feeling that you’ll make it work – somehow. But “somehow” is “close enough” and won’t win you any government tenders.

2) Can you afford the tender?

Sounds like a silly question? Well, it’s not.

This is about financial thresholds and whether you have enough capital or ready money to exceed the minimum threshold as set by public sector bodies.

It’s got to do with financial stability and whether you can take a couple of knocks without worrying about your bank balance. 

According to Hudson Outsourcing, you should only bid on a contract if your turnover is more than half the contract budget. The budget is £135k. Your turnover should be at least £270k.

Don’t include money that you’re owed. You can’t rely on your debtors to come through for you.

Again, be brutally honest. You do not want to get caught short here.

3) Will you come out ahead, financially speaking?

Have you considered all the expenses and costs that will allow you to complete the contract?

This includes overheads, transport, salaries, wages, utilities, and maybe even wastage and possible overtime.

You want to earn a profit, even if it’s on the small side and you definitely don’t want to incur a loss.

A loss for a first contract?

Many SMEs that are new to the public sector and government contracts are tempted to risk a loss in exchange for experience. 

It’s a big risk indeed, with far-reaching ramifications. For instance, you’ll be on the back foot for subsequent contracts and will need to make up the loss somewhere along the line.

You could also get into the habit of bidding low to win contracts and then find that you can’t afford all the costs. 

You end up digging a deep hole and it’s not easy to get out.

4) Can you prove your claims?

Anyone can claim to have a 95% success rate in similar agreements. The government wants you to prove it. Case studies are the best evidence of real-world success.

It’s not a matter of typing up the arrangement and attaching it to the central government tender documents for submission. You must exercise your creativity to create an attractive, eye-catching, attention-retaining case study with graphs and charts – and your brand.

It helps to have the customer provide some comments that you can place throughout the case study or a testimonial at the end.

It’s not the end of the world if you don’t have proper case studies. You could use the customer’s name and the challenge and explain your processes to overcome the challenge, ideally backed up by analytics and a testimonial.

5) Do you have social value strategies?

Social value is big news in the UK’s public procurement sector. It’s transformed bid selection from price-based (Most Advantageous Tender) to value-based (Most Economically Advantageous Tender). 

It’s this change that is primarily responsible for levelling the playing field and enabling SMEs to compete with – and beat – bigger businesses in government tenders.

It’s for this reason that you, as an SME, need to put a lot of work into creating social value strategies. Craft your strategies around:

  • COVID-19 recovery
  • Tackling economic inequality
  • Fighting climate change
  • Equal opportunity
  • Wellbeing

Buyers will specify which theme they want you to address in the tender, but it helps to have an outline of several strategies for different scenarios that you can build on. That way, you’re always prepared. 

Keep Ahead Of Competitors With Real-Time Tender Notices

As you can see, SMEs that enter the public sector as suppliers can reap many rewards that not only grow their businesses but also their brands. As long as you are 100% certain that the contracts you bid on are a perfect fit for your company’s products, works, and services, as well as its values and ethics, you have a better than even chance at being awarded government contracts.

One way to stay ahead of your competitors and capitalise on contract opportunities is to discover new tenders as quickly as possible. Supply2Gov (S2G) has an extensive contracts finder database that provides immediate notice as soon as new tender opportunities are published. 

You can choose a package with a range that best suits your business (and your budget); for example, free alerts cover your local area only, but you can purchase a package that covers the UK and Ireland. Register now, try the free version, and when you’ve experienced the benefits of our real-time notifications, purchase the package that’s perfect for you.