Why bid for government contracts?

Public spending is subject to high levels of scrutiny, as the government is ultimately accountable to the public. To ensure transparency and fairness in awarding contracts, all government departments and agencies must follow strict procurement regulations when procuring goods and services.

These regulations outline the processes for government tenders, which are essentially invitations for businesses to compete for government contracts. Since these contracts have to be published publicly, and any business can bid for the work, this market can help businesses of all sizes build a lucrative opportunity pipeline.

Government contracts are open and accessible

In the private sector, procurement processes are often kept confidential, and decisions are made without external accountability. This means buyers can seek quotes from as many suppliers as they like, and have no obligation to fairly assess suppliers before awarding the work.

Unlike private opportunities, contracts published by the public sector are open to all – where every supplier, regardless of size, has the opportunity to bid for the work. Central government contracts exceeding £12,000 (and wider public sector contracts over £25,000) must be advertised publicly and allow any eligible suppliers to bid for the work. Each bid is scored against the criteria detailed within the original contract notice, ensuring a transparent selection process.

Whether you’re a large corporation or a small enterprise, if you meet the contract requirements, you stand a fair chance of securing the work. This level of openness in Government tenders not only fosters competition but also promotes equal opportunities for all eligible suppliers.

The government wants to work with SMEs

As detailed above, private sector buyers have no obligation to make potential work available to every eligible supplier. They can inform whoever they want and can award work as they see fit – this could be based on existing relationships or the top results from a search engine. Smaller businesses are at a disadvantage with the private sector because they may not yet have a reputation, are harder to find, or are overlooked due to bias.

Government contracts, on the other hand, are made available to the entire market, and anyone can express an interest. The UK government had a target of awarding 33% of their contracts to SMEs by 2022, and managed to award 26.5% of procurements to smaller businesses. There is currently no new target; however, we do expect new targets following the Procurement reform in October 2024.

In 2021, the government introduced new rules allowing the public sector to reserve contracts for local businesses and SMEs. Under the ‘Procurement Policy Note – Reserving
Below Threshold Procurements’, contracts can have restrictions only allowing bids from businesses operating within a certain region, or from Small and Medium-sized Enterprises (SMEs) and Voluntary, Community and Social Enterprises (VCSEs).

Being a smaller company will not hold you back from winning government tenders, in some cases, it can give you an advantage.

Short payment periods

Payment periods within the private sector vary significantly. While you may set limits for your invoices to be settled, many buyers work to their own timescales. Some companies impose 90 or even 120-day payment periods, while others forget to pay on time and force you to waste time chasing payments. Not knowing when you will get paid can make managing a business incredibly difficult.

You will not encounter this problem with the public sector. Across the board, the government has a mandatory 30-day payment period. No matter what the job, however big or small, you will get paid within 30 days.

Imagine if every contract came with that guarantee – it would be easier to take on more work and focus on growing your business further. Create more reliable cash flow forecasts by including some public sector work within your pipeline.

You don’t need to win price wars to secure contracts

It is common in the private sector for buyers to request quotes with no indication of budget, or what criteria will be used for choosing an appropriate supplier. This can force businesses to sacrifice profits by going head-to-head in ‘race to the bottom’ price wars.

This is not an issue when bidding for public sector contracts, where Most Economically Advantageous Tenders (MEAT) is the chosen method of assessment. This means even if a contract has a particular focus on price or quality, which will be stated in the documents, all elements of the proposal will be evaluated and contribute to your final score.

The evaluation process is incredibly fair, and even if you cannot compete on price, you could beat your competitors in other areas. Social Value is incredibly important to the public sector now, and suppliers can make their bids stand out by demonstrating whole-life value – tackling economic inequality, fighting climate change, creating equal opportunities, etc.

With public sector contracts, you know what you are bidding for and can play to your strengths.

You won’t be left in the dark

Private sector buyers are not obligated to provide you with feedback after you submit a quote or even fulfil a contract. This means you miss out on vital information that could help you develop your offering and increase your chances of securing work elsewhere.

Public sector buyers always provide feedback and will respond to any further enquiries you may have. If you did not secure the work, you can find out how close you were and what you could have done better. Even if you win, you can find out what the buyers liked about your bid and use this information to improve your future offering.

Even if your business only bids for a few contracts, you will have access to a lot of valuable information. The contracts clearly state what buyers are looking for, and when combined with feedback requests, your business can create strategies for delivering outcomes in both the public and private markets.