Government Procurement

What is government procurement?

Government procurement (GP) refers generally to the purchase, lease or rental of goods, services, and construction services by governmental bodies in fulfilment of their public service responsibilities.

Why does GP matter for MSMEs?

GP typically represents a large volume of domestic public expenditure, amounting to 10-15 percent of a country’s GDP on average. It thus constitutes a highly significant economic opportunity for MSMEs seeking to do business with governments. In most countries, MSMEs are by far the most common enterprises, and hence account for a significant proportion of overall employment. However, MSMEs are generally underrepresented in most countries’ GP markets.

What issues can emerge for MSMEs in their home markets and what are possible policy options to enhance SME participation in government procurement?

• Difficulties in accessing information about GP opportunities
  • Enhancing transparency
    • Providing for electronic access to tender opportunities and information
• Inexperience in tendering for government contracts
  • Building MSME capacity to participate in tenders at home
    • Offering post-award debriefing sessions by procuring entities with unsuccessful MSME candidates
    • Organizing training, coaching and technical assistance activities, including web-based ones, for MSMEs focusing on effective participation in tenders (such as preparing offers and submitting electronic tenders)
• Burdensome requirements and other barriers to MSME participation in tenders
  • Designing MSME-friendly participation-related requirements
    • Reducing the burden of tender preparation, including by relaxing documentation requirements (self-certification, documentary evidence only on request), setting workable time limits for MSMEs and providing for electronic submission of tenders.
    • Minimizing registration-related fees and limiting financial tender guarantees in the case of MSMEs
    • Providing for proportionate and appropriate technical, commercial and financial conditions for participation (e.g. lower annual turnover allowing MSMEs bids, reasonable prior experience requirements, etc.)
• Overly large procurement contracts that MSMEs could not fulfil
  • Designing MSME-friendly public contracts
    • Splitting large public contracts into smaller ones that MSMEs could fulfil (lots) and allowing MSME to bid jointly or to subcontract
• Late payment by procuring entities
  • Promoting good payment behaviour by procuring entities
    • Ensuring timely payment to support MSME cashflow or providing for interim or advance payment

What issues can emerge for MSMEs in markets abroad and what are possible policy options to enhance SME participation in government procurement?

• Obstacles to accessing government procurement markets abroad
  • Implementing a trade policy oriented towards the progressive opening of the domestic government procurement market on the basis of mutual reciprocity
    • Negotiating accession to the plurilateral WTO Government Procurement Agreement 2012 (GPA 2012) and concluding bilateral free trade agreements containing government procurement chapters with market access commitments, which options provide legal guarantees for MSMEs from signatory countries to access covered government procurement markets abroad
  • Inexperience in tendering for government contracts
    • Building MSME capacity to participate in tenders abroad
      • Organizing training, coaching and other technical assistance activities for MSMEs seeking to participate in tenders abroad, organized by their Ministries or official export promotion agencies at home and embassies or helpdesks in their export markets

Where can I access resources on policy frameworks and guidelines?

• The Asian Development Bank’s Guide on SME Development gives an overview on barriers faced by MSMEs in participating in government procurement and options for policy makers.
• The UNDP’s Playbook on Inclusive Public Procurement explores how supplier diversity can be promoted in keeping with important government procurement principles.
• The Open Contracting Partnership’s Guide on Access to Government Procurement by Minority-Owned Small Businesses explores how local governments can expand access to government procurement opportunities for minority-owned small businesses. For case studies, see also the Open Contracting Partnership’s Guide on Inclusive and Effective Public Procurement: Findings and Lessons from Research in 12 Countries.
• The OECD Public Governance Reviews. Report on SMEs in public procurement practices and strategies for shared benefits takes stock of the policy options used in OECD and non-OECD economies to integrate SME considerations in government procurement.
• The World Bank Group/Business Environment Working Group (BEWG) of the Donor Committee for Enterprise Development (DCED)’s Technical Report: Policies that Promote SME Participation in Public Procurement analyses and assesses the impact of various preferential treatment policies benefitting SMEs in government procurement based on a series of country level case studies.
• The International Trade Centre UNCTAD/WTO’s Guide on SME and export-led growth in public procurement programmes identifies how programmes in government procurement can support SMEs in becoming more competitive as far as exportation is concerned.
• Public’s Guide on “Global SME Procurement Benchmark” focuses on good practices for promoting SME participation in government procurement and points to key opportunity areas.
• The WTO GPA Knowledge Series event on “Bidding for government procurement opportunities abroad: the lowdown for SMEs” gives practical advice on how SMEs can take advantage of opportunities to win government contracts abroad and overcome related challenges.
• The OECD SME Policy Index: Eastern Partner Countries 2020 – Assessing the implementation of the Small Business Act for Europe is addressed to European policymakers and their external partners and examines how better SME-support policies can be designed and delivered.