Encouraging SME’s participation in Public Procurement

Background

The Department of Public Expenditure, NDP Delivery and Reform (the “Department”) has issued “Circular 05/2023: Initiatives to assist SME’s in Public Procurement”.  The circular replaces the previous initiatives contained in circular 10/14.  The aim circular of 05/2023 is to ensure that Small Medium Enterprises (“SME’s”) can remain competitive when tendering for public sector contracts.

The primary changes introduced in circular 05/2023 include the following (all figures listed below are exclusive of VAT).

Updated Advertising and Award Thresholds for all contracts for Supplies or General Services:

• Contracting Authorities (“CAs”) are not required to advertise supplies or services contracts below an estimated value of €50,000, as opposed to the previous threshold of €25,000.
• Before awarding supplies or services contracts with an estimated value between €5,000 and €50,000 CAs must seek:

-Three written quotations in response to a written specification; or

-Three quotations in response to an electronic request for quotes issued via eTenders.

• Contracts with an estimated value below €5,000 can be awarded on the basis of verbal or written quotes from one or more competitive suppliers.
• CAs may still opt to carry out a formal tendering process on eTenders even if the estimated value is below €50,000.

Advertising and Award Thresholds for Works Contracts

• CAs are not required to advertise works contracts below an estimated value of €200,000, as opposed to the previous threshold of €50,000.
• Before awarding works contracts with an estimated value below €200,000 CAs must seek:

-A minimum of five written quotes from interested and competent contractors.

• CAs may still opt to carry out a formal tendering process on eTenders even if the estimated value is below €200,000.

Advertising and Award Thresholds for works-related services

• CAs are not required to advertise works-relates services contracts below an estimated value of €50,000, this threshold has not changed.
• Before awarding works-related services contract with an estimated value below €2,000 CAs must seek:

-A minimum of five written quotes from interested and competent consultants.

• CAs may still opt to carry out a formal tendering process on eTenders even if the estimated value is below €50,000.

The following table summarises the current national advertising and awarding requirements for public contracts.

Good practices to promote SME participation

In addition, to amending the above-mentioned thresholds the Department has also highlighted a number of good practices to encourage SME participation:

• Preliminary Market Consultations: CAs may undertake preliminary market consultations to better understand the capabilities of SMEs, such as their range of goods and services and their potential for innovation.
• Greater use of lotting: CAs can encourage SMEs to bid for contracts by ensuring contracts are in line with their capacity, specialism and location by subdividing contracts and framework agreements into lots.
• Consortium bids: SMEs can choose to form a consortium where they would not be of sufficient scale to partake in a tender in their own right. CAs are encouraged to consider the use of a Prior Information Notice (“PIN”) to provide SME’s optimum time to consider and arrange consortium bids.
• Greater use of Open Tendering: CAs should utilise the open procedure more frequently to make the tendering process less burdensome and restrictive for SMEs.
• Technical ability and Economic and Financial Requirements: Selection criteria for tenderers should be relevant and proportionate to contracts, while ensuring that they do not unfairly exclude SMEs.
• Turnover Requirements: CAs should consider if high turnover levels may provide a barrier to SMEs participation, and whether the required turnover levels are proportionate to the level of risk involved.
• Innovation: CAs are encouraged to take an output orientated approach which facilitates tenderers to take more innovative approaches.
• Feedback: CAs should provide thorough feedback to unsuccessful tenderers. This will highlight to tenderers what aspects of their bids need to be improved.
• Life Cycle Costing: CAs are encouraged to use this approach due to its social value. However, CAs in utilising this should not seek overly burdensome information that would create a disproportionate cost for SME’s.
• Insurance Requirements: Insurance requirements should be proportionate and reasonable to the risks and value of the contract. CAs should be mindful not to let insurance requirements act as a barrier to SME participation where possible.
• In addition, Tenderers should only be asked to declare that they can obtain a level of insurance cover but should not be required to have it in place at the time of tendering.
• Dynamic Purchasing Systems (“DPS”): The use of the DPS as opposed to a Framework Agreement is becoming more prevalent on the market.  A Framework Agreement allows for a specified number of operators to provide the works, goods or services to a given CA for a maximum period of 4 years.  If for instance an SME fails to obtain a place or does not have the requisite experience in time it is likely blocked from providing the relevant works, goods or service to that CA for 4 years.  However, if the CA opts to set up a DPS instead, an SME, can apply or reapply to join at any time.
• No charging for tender opportunities: CAs must ensure that tenderers do not have to pay to access public tender competitions. This charging may act as a barrier for SME participation.

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