The Treasurer wants us to buy more from SMEs. Here’s why. (And how).

This week’s Federal government budget included initiatives to make it easier for small and medium sized enterprises (SMEs) to win more public sector contracts. Millions of dollars has been allocated for a range of measures, including reducing ‘pain points’ for SMEs when contracting with government.

Why focus on SMEs?

There are good reasons why Governments try to increase SME access to procurement spend. SMEs form the overwhelming majority of businesses by number and contribute 56% of the total added value to the economy. They are vital to the economic health of our communities, which is why many public sector buyers target local content in their market enquiries, such as Requests for Proposal (RFP).

What are the benefits of engaging SMEs?

There are many benefits for public-sector buyers (and for their private-sector counterparts) in engaging SMEs. Here are our top three:

1. More visibility of your account: A $50,000 contract which may be insignificant to a large firm may be much more significant to an SME. Many clients seek to be a ‘preferred customer’ of their suppliers, and this may be more likely with SMEs than with multinational companies. This translates into more visibility of your account, more senior management attention and greater focus on meeting your needs.

2. Direct access to decision-makers: How many tiers between your account manager and the CEO? When you deal with an SME you may be one or two tiers from the big boss. If there is a problem, when you deal directly with the CEO they may be able to say “yes!”, while a larger company’s account manager may only be able to say “maybe” at best (and sometimes has no discretion at all!)

3. A more responsive supply chain: How often have you heard the phrases “agility” or “pivot” bandied about? If you read the same sources as we do, the answer is likely to be “all the time!”. Agility is valued as we live in uncertain times and businesses need to be able to change direction quickly.

Large companies can be a bit like the Ever Given, the container ship that got stuck in the Suez Canal. They can change direction, given lots of time and lots of nudges to get them moving. An SME can change direction before the morning management team has finished.

What are the benefits of engaging local suppliers?

Not all SMEs may be local, but for many buyers the ability to identify and engage local suppliers is a key source of value. Using local suppliers:

• may shorten supply chains, increasing resilience
• may invest in the community that supports the buying organisation
• may create closer working relationships with key stakeholders

So what are these 'pain points'?

The budget targeted SMEs’ 'pain points', but what are they?

• Some SMEs perceive public procurement processes as long and complex
• SMEs may not have sales staff to scan online sources for tenders to respond to
• SMEs may not even be aware of the large number of smaller, sub-tender RFxs, which are typically suited to their size
• SMEs may decide that the cost/benefit ratio of tendering doesn't stack up, with success rates often around 33%

What's the pain relief?

Tuesday's budget recognises the irony that public sector clients want to do more business with SMEs and that SMEs want to do more business with the public sector. It is the pain points that get in the way! One way to reduce the pain for both parties is by using sourcing tools like VendorPanel. VendorPanel addresses the SMEs’ pain points as well as making life easier for the buying organisation. The VendorPanel solution:

• allows buyers to search for qualified suppliers, including local SMEs
• allows them to ensure that there is competition for their business
• makes it easier for SMEs to access and respond to RFPs
• simplifies public sector procurement processes for all parties
• provides a defensible governance trail that meets probity requirements

If you would like to find out why Councils, State Governments and commercial businesses choose VendorPanel to manage their procurement, get in touch!