In an age where diversity and choice reign supreme, the recent report by the Joint Committee of Public Accounts and Audit (JCPAA) highlights an irony in the Commonwealth’s procurement approach. The analogy of ‘AusTinder’ – as coined by Julian Hill MP – is fitting. Just as in the realm of dating apps, where continuously swiping left could mean missing out on a perfect match, the Commonwealth’s procurement procedures seem to favour the familiar ‘profile pictures’ of major consulting firms, sidelining smaller players who could offer a refreshing, cost-effective and innovative approach.
The spotlight shining predominantly on big names like Accenture, KPMG, Ernst & Young, PWC, and Deloitte points to a pattern of selecting familiar faces, even when the extensive panels present a plethora of options.
Federal and state government secure panels of consulting firms. The idea is to share the work among them. These panels are designed to provide a comprehensive range of professional advisory services from commercial and financial advice to tax advisory and probity advice, the panel offers:
- A consistent approach to professional advisory engagements
- Pre-negotiated terms ensuring ease of engagement
- Access to expert advice spanning various areas
- A diverse roster of suppliers, including nimble SMEs and robust large corporates.
Yet the consistent ‘swiping left’ on SMEs, despite their potential for delivering value, innovation and specialised services, raises questions about the effectiveness of the current procurement strategy. Indeed, it should make all businesses reflect on their own strategies, and whether they incorporate enough SMEs in their supply chains.
Our experience suggests there is still a long way to go, in the public sector and private. Let’s take a look at why SMEs are so valuable as vendors, and how to increase their participation.
What are the benefits of working with SMEs?
Lower costs
Administrative fees and managerial costs at big firms, like the ones the government seems so wedded to, can be astronomical. These are typically much lower at small to medium enterprises. Obviously it depends on the type of procurement being conducted, but this fact alone can make SMEs far more valuable.
On a broader level, the more suppliers involved and the greater their range in size and capability, the more competition there is. And as we know, nothing creates downward pressure on prices quite like healthy competition.
Service quality
SMEs wield a unique agility owing to their concise management hierarchies and speedy decision-making processes. This nimbleness allows them to swiftly adapt to evolving market demands, a trait that sets them apart.
Often laser-focused on specific markets, SMEs exhibit a remarkable responsiveness to the ever-changing dynamics within those niches. Their ability to pivot swiftly is a testament to their adaptability and market acumen.
For larger entities that choose to use SMEs, a compelling dynamic unfolds. These SMEs recognise the significance of their big clients and, as a result, provide a higher and more personalised level of service, nurturing robust client-supplier relationships.
They also often shine in their capacity to tailor their products or services to precisely meet the unique needs of their customers—a feat that larger, more rigid corporations may struggle to replicate.
Notably, many SMEs excel in delivering top-notch, specialised products or services, a feat often driven by their unwavering commitment and expertise in their chosen fields. This commitment frequently results in the provision of higher-quality offerings compared to their larger counterparts.
Niche expertise
SMEs distinguish themselves by offering a more niche service than their larger counterparts. Their ability to cater to specialised markets stems from their agility and personalised approach. SMEs are often founded by highly skilled and experienced professionals with extensive knowledge of the intricacies of their target audience.
They build strong, enduring relationships with customers by hands-on service delivery from these skilled senior people rather that more junior staff as is often the case with large firms.
By focusing on quality over quantity, SMEs become experts in their chosen niche. Unlike larger corporations burdened by bureaucracy, they thrive on flexibility and can swiftly adapt to shifting market dynamics.
Innovation
SMEs serve as catalysts for innovation on multiple fronts. They lead the charge in embracing cutting-edge technologies, champion sustainable practices and alternatives, explore uncharted markets and wield innovation as a powerful tool to distinguish themselves from entrenched industry giants.
How to increase SME participation
1. Set asides or reserved contracts
Set-asides in government procurement entail the reservation or earmarking of specific contracts for particular types of businesses. These businesses may include Small and Medium-sized Enterprises (SMEs), Aboriginal or Torres Strait Islander enterprises, social enterprises and more. In essence, only those businesses meeting the defined criteria within the set-aside category will be initially invited to submit quotes or tenders for these contracts.
2. SME-Friendly Policies and Regulations
Review and revise procurement policies and regulations to make them more accessible and favorable to SMEs. This may include simplifying procurement processes, reducing bureaucratic barriers, and ensuring fair competition.
3. Education and Outreach
Organise workshops, webinars, and training sessions to educate SMEs about the procurement process, including bidding, compliance and quality standards. Create programs to help SMEs improve their capabilities, such as mentoring, technical assistance and access to financing. These programs can enhance their ability to meet procurement requirements.
4. Simplified Procurement Procedures
Streamline the procurement process for smaller contracts to reduce administrative burdens on SMEs. This includes simplifying documentation and evaluation criteria.
5. Prompt Payment Policies
Implement policies to ensure prompt payment to SME suppliers, and make it known that this is how you operate. Delayed payments can be a significant challenge for smaller businesses, so they’ll be far more likely to bid for contracts with you if they believe prompt payment is a priority.
6. Market Research
SMEs won’t be appropriate at all points in your supply chain. Conduct market research to identify opportunities where they can add value. Tailor procurement strategies to align with SME capabilities.
7. Feedback Mechanisms
Establish feedback channels to gather input from SMEs on their experiences with the procurement process. Use this feedback to make continuous improvements.
Talk to Comprara, a small firm doing big things
When it comes to engaging SMEs, you won’t find better guidance than that provided by us. As an SME ourselves, we know what businesses like us think, what their concerns are, their realities, and how best to work with them. To take advantage of all the unique benefits SMEs present, get in touch with the team at Comprara today.
