This article takes a new approach to exploring a problem that raises a common question across jurisdictions, namely why do Small to Medium Enterprises (SMEs) not win more public tenders than their numbers would suggest? Traditionally, the focus of the literature has been on the identification of barriers facing SMEs in public contracting, with findings encouraging public procurement systems to rightly introduce a range of SME-friendly procurement initiatives; yet, despite such efforts SME success rates generally remain low. This focus on the identification of barriers to SMEs accessing public contracts, although laudable, has overlooked a key question: what factors might explain sub-optimal tender submissions by SMEs? This study addresses this gap in the literature, adopting an empirical approach to examine actual tenders, an exercise not undertaken previously, for the purpose of ascertaining reasons that could explain why SMEs’ public tenders can frequently be suboptimal in terms of their quality. Using conventional content analysis, the written content of unsuccessful SME tender submissions was examined, gathered from tenders submitted by SMEs in six European countries. A range of reasons that explain suboptimal SME tender quality is revealed and categorised. While the primary research method was empirical analysis of the tenders, the authors also conducted interviews with the study’s SME participants in order to capture their reflections as to why they felt they were unsuccessful in the tenders they submitted. The study’s findings reveal that SME tender weaknesses can be grouped into five distinct categories and also expose a disconnect between what SMEs think are good tender submissions and what are good tender submissions. Action is required from both sides of the SME supplier / public purchaser interface to remedy the issues identified. To support this process, the authors propose a framework which attempts to capture the core reasons for suboptimal tender quality. An illustrative SME-Public Sector Tendering Charter and Intervention Methodology is also proposed, to help improve SME tender quality. The Charter has been framed to broadly align with the European Commission’s European Code of Best Practices Facilitating Access by SMEs to Public Procurement Contracts. It has the potential to be adapted, as appropriate, to local conditions in jurisdictions that take a proactive stance towards embracing SMEs participation in public contracting.
Many public procurement systems have introduced legal rules, policies, and trainings aimed at empowering small and medium-sized enterprises (SMEs) to access and succeed in public sector tender competitions. However, SMEs continue to remain underrepresented in public procurement despite these interventions. While previous studies have identified barriers and challenges to SMEs accessing public sector contracts, they have not focused on the written content of tender submissions to examine why some SME tender submissions are suboptimal. The study described in this article aims to address this gap and generate insights for research, policy, and practice by focusing on one question: what do unsuccessful tender submissions submitted by SMEs in response to public contract opportunities tell us about SME tender weaknesses?
The authors explored this question by adopting conventional content analysis to examine unsuccessful tenders of fifty SMEs from the United Kingdom (U.K.), Ireland, the Netherlands, France, Spain, and Italy. All SME tenders were gathered by the authors’ participation in a series of international procurement projects funded by the European Union (EU).
To the authors’ knowledge, this is the first time that empirical tender data submitted by SMEs to public bodies has been used to understand the reasons underlying suboptimal SME tender submissions. This research aims to fill the knowledge gap as to why SME success rates in public sector tender competitions can be low, despite substantial legal, policy, and training interventions.
Whilst existing literature has touched upon some relevant issues as part of a broader investigation, no previous study has focused on the tender stage of the tendering process or examined the reasons underlying suboptimal SME tenders. Therefore, no framework for understanding weaknesses present in unsuccessful SME tenders currently exists, reflecting a lack of access to empirical data in previous contributions.
This study overcomes the existing literature and knowledge gap in two ways. First, the authors provide evidence consisting of data from real SME tenders submitted to public bodies that identifies the weaknesses present in the written content of unsuccessful SME public sector tender submissions. Second, using this evidence, the authors have categorised these weaknesses into a framework, revealing the core reasons why SMEs can be ineffective at producing written tender submissions for public procurers.
The research presented herein is also relevant to economic development, procurement practitioners, and procurement policy. One of the major bottlenecks preventing SMEs from winning more public sector contracts is the fact that SMEs themselves do not understand key tendering success factors. Such an understanding would be useful in promoting marketplace access for SMEs, in setting the stage for better value of SME-supplied goods and services, improving SMEs’ sustainability, and also in questioning the value of efforts by well-meaning bodies like the European Commission to make procurement more SME-friendly. The relevance of this article also extends to considerations of transactional and opportunity costs that SMEs and public sector evaluators incur every time that an SME submits a tender that is not “fit for purpose,” as the tender submission process is cost- and resource-intensive.
The conclusions from this article will be useful to a wide range of national and international stakeholders, including the public policy community, SMEs, and public procurement practitioners. The findings will also be beneficial to jurisdictions that have adopted a proactive stance towards embracing SMEs in public sector procurement and removing barriers to their participation. The EU and its Member States, which do not have “positive discrimination” mechanisms at their disposal, such as “SME set-aside” programs to help reduce tendering deficits, may particularly benefit from these findings and the solutions proposed in the Model Charter.
Part II of this article reviews current literature on the barriers and challenges encountered by SMEs in public procurement. Part III details the methodology employed in the study that forms the basis of the article. Part IV identifies five categories of weaknesses and findings from those weaknesses. Part V contains final conclusions, alongside a framework to categorise weaknesses present within failed SME tenders. Part V also provides an illustrative SME-Public Sector Tendering Charter and Intervention methodology to help remedy SME tendering weaknesses.
Previous literature on this topic is reviewed in two strands. First, this section addresses literature pertaining to consideration of the generic barriers relating to SME access to public procurement markets. Second, this section considers literature pertaining to the challenges facing SMEs when actually tendering. While literature on the latter strand is of greater relevance to this article, Part II starts with first briefly considering the generic barriers.
There is an extensive body of literature relating to the barriers SMEs face to becoming suppliers to the public sector. These barriers include lack of knowledge on how to find opportunities, large contract sizes, requirements relating to previous relevant experience, burdensome documentation, and risk-averse attitudes.
Scholar Kim Loader notes that studies have categorised SME access barriers into two broad groups: (1) external obstacles that require public sector action; and (2) internal obstacles that require SME action. Loader further observes that external obstacles to success have been reported on more frequently than internal obstacles to success (i.e., those arising as a result of SME deficiencies), which include factors such as skill and capacity issues, and negative attitudes towards public procurement.
Addressing external obstacles to SMEs seeking to enter the procurement marketplace, reforms of public sector purchasing practices include introducing measures to address barriers to participation from both a policy and legislative perspective. From a policy perspective, for example, the European Commission’s European Code of Best Practices Facilitating Access by SMEs to Public Procurement Contracts deals with different issues relevant to reforming public sector purchasing practice, such as emphasizing value for money as opposed to price alone, and allowing adequate time for SMEs to complete their tenders. From a legislative perspective, the current EU Procurement Directives single out SME promotion as one of five key areas for public procurement reform, suggesting measures such as simplified administrative procedures, division of contracts into lots, and use of eProcurement. As recently as October 2017, the European Commission stated that making public procurement more accessible for companies, and in particular for SMEs, would be one of the six policy priority areas for improvement. While European governments have taken action to address the aforementioned external obstacles, they have made less progress on addressing internal obstacles to SME success.
This section examines existing literature devoted to better understanding potential challenges faced by SMEs attempting to assemble strong tenders that meet the needs of public procurers. It is evident from this review that existing literature does not specifically examine SME tender submission weaknesses. Instead, the existing literature primarily focuses on general barriers to SMEs’ participation in public sector procurement or the reasons why SMEs can face difficulties with the broader tendering process.
Nonetheless, it is useful to summarize the observations and conclusions of the existing literature to provide a broader context and preliminary understanding of the difficulties that SMEs face. The authors first look at inferences that can be drawn from procurement literature, followed by inferences that can be drawn from the wider body of SME literature.
A range of jurisdictions appear to have agreed that the regulatory and legal peculiarities of the public sector tendering process, combined with the typical characteristics of SMEs, can make participation in procurement especially challenging for SMEs, even when tendering for smaller-value contracts. For example, Loader and Norton found in their study of SMEs supplying the publicly funded U.K. heritage sector that firms considered the demands of public tendering to be much more burdensome than tendering for private work. Interestingly, Loader and Norton also observed that, of the various stages of the public procurement process, the preparation and submission of the tender was the most challenging for SMEs. Additional studies have also noted as challenging the burdensome tendering documentation along with the time and cost involved for SMEs in putting tenders together.
This issue of SMEs’ limited resources for tendering and preparing bids extends not just to capacity, but also to the tendering expertise required to participate effectively in the broader tendering process. On this point, existing literature provides some useful insights. For example, Karjalainen and Kemppainen found in a 2008 study that, in Finland, SMEs need legal expertise (i.e., a sophisticated level of regulatory understanding) to meaningfully participate in the public procurement tendering process. In Ireland, Flynn et al. observed in their 2013 survey based research that SMEs often participate in the tendering process with very little knowledge of EU public procurement law. Additionally, Bovis referred to the challenge of understanding technical language as an inhibitor for SMEs in public procurement in a 1998 study. Loader also referred to SMEs’ lack of knowledge and general unfamiliarity with how the tendering process works.
Some authors have touched upon the particular expertise that SMEs require to put forward convincing tender propositions. For example, in Stake’s article researching the merits and drawbacks for SMEs when tenders are evaluated for quality rather than lowest price, he refers to large businesses being “[better able] to produce attractive bids” and more skilled “in presenting their products and goods in a favourable light,” in comparison to SMEs. Similarly, research by Flynn and Davis in Ireland, which looks at a capability-based model of tendering, refers to the arms-length character of public procurement and makes passing reference to the need for a tendering firm to be “proficient at articulating their strengths as a supplier in the written tender submission.”
Looking beyond academic literature, several government reports and consultancy studies over the years have also contributed to the wider understanding of the topic of SMEs and public sector tendering. One such study —commissioned by the European Commission to evaluate SME access to public procurement—analysed 887 companies from nineteen Member States. The study reported that the sixth largest barrier faced by SMEs seeking to participate in public tendering is a lack of clarity regarding how tender documents should be written, with micro-businesses (those with less than ten employees) in particular perceiving this issue as problematic. Some studies criticize SME suppliers for failing to demonstrate sufficient appreciation of the legal constraints that public sector procurers are forced to comply with, along with public sector priorities. Other studies also refer to SME difficulties in understanding complex specialist language, especially for entrepreneurs who may not have necessarily achieved a high level of literacy through formal schooling, when they encounter technical terminology in tender documents that is uncommon within regular business dealings.
Another identified barrier is the complexity of both the submission preparation process and the submission process itself. For example, of the 873 SME respondents surveyed as part of the Call for Evidence for the Glover Review, the tendering process’s complexity was the most commonly mentioned barrier. The fact that the European Commission’s European Code of Best Practices makes a specific reference to the need for training and guidance for SMEs in drawing up their tenders further supports the view that putting together a strong tender document can be a challenge for SMEs. Flynn and Davis draw attention to this problem by suggesting that SMEs strengthen their procedural management capabilities to succeed at public sector tendering. They refer to the skill in question as “a firm’s ability to deal with the administrative and technical demands of the tendering process” and argue that SME success in tendering is dependent to a large degree on “having the capabilities to match the idiosyncratic demands of public procurement.”
It is important to recognise that institutions like the EU have introduced measures that arguably reduce reliance on a single SME bidder’s tendering skills, knowledge, and experience in an effort to allow these firms to enjoy a slice of the public sector cake. One example is the measure that increases the focus on subcontracting within the current EU Procurement Directives, which means that SMEs can rely upon the expertise, experience, and more extensive resource bases of larger companies, serving as prime contractors, to do the tendering. The EU Procurement Directives have also enabled more straightforward collaborative bidding. In this bidding scenario, the tendering skills, experience, and knowledge can be pooled to enhance the likelihood of a strong tender being put forward. Nonetheless, the reality is that collaboration can be challenging and, for this reason, most SMEs bid on their own without collaborating.
Analysis of more general SME literature refers to SME tendencies to lean towards informal or personalized approaches and limited planning. In relation to planning, Wang et al. point out that few SMEs have formal customer acquisition processes.
More general SME literature also refers to management structures in SMEs as being “flat,” meaning that SME employees often have to undertake multiple roles due to scarcity of resources. Furthermore, the literature refers to the culture of small companies as being heavily influenced by owner-managers and business founders, who can vary in style from being ambitious and business-focused to more focused on personal lifestyle. In making observations about SME management structures, it is important to be aware that SMEs are not homogenous and are, by their nature, a diverse group with significant differences in their characteristics, particularly in terms of the resources available to them. For example, Flynn noted in his survey of over 3,000 suppliers that medium-sized enterprises had twice the number of personnel available for tender-related work as compared to micro-enterprises, and double the amount of public procurement experience.
While the literature has revealed some of the difficulties that SMEs face within the wider tendering process, a gap in the literature is evident. Existing literature does not specifically examine the key tender submission stage or the particular challenges that SMEs face in putting together a strong tender document. This gap in insight exists because previous researchers did not have access to empirical data (i.e., data arising from real tenders submitted by SMEs to public bodies) to understand more about actual SME tender behaviour. Therefore, the literature lacks a framework to categorize the weaknesses present in unsuccessful SME tender submissions that may prevent SMEs from winning public sector contracts. The study described in this article seeks to demonstrate how this question can be answered by presenting such data for the first time.
Before doing so, it must be recognized that the existing literature examined above provides useful initial insights into the context underlying suboptimal SME tender quality. Table 1 summarises these initial insights.
In order to parse through unsuccessful SME public sector tender submissions to identify SME tender weaknesses, the authors deployed content analysis. This approach was chosen to understand and make inferences from the data in the tender submissions through the systematic coding and categorizing of the tender submissions’ textual information. The authors could then determine trends and patterns of words used, including their frequency, distribution, and correlation. The data was collected as part of a series of international procurement projects funded by the EU and conducted by the research team between 2010 and 2018.
The research data is comprised of unsuccessful tender submissions and corresponding invitation to tender (ITT) documentation gathered from fifty SMEs. This data was collected from forty SMEs within the U.K. as part of the 2010–2014 “Winning in Tendering” (WIT) project. These forty SMEs participated in separate procurement exercises with twenty different U.K.-based public sector organisations and additionally provided data as part of prior and post tender review interviews. In addition to analysing the U.K. data, the authors sought to collect additional tenders from SMEs in Ireland, France, Italy, the Netherlands, and Spain as part of the 2013–2015 “Transnational Ecosystem Laboratory and Actions” (TESLA) project and 2017–2018 “Public Procurement and Cross-border Tendering” (PPACT) project.
The analysed SMEs reflected a good mix of micro-businesses, small firms, and medium-sized businesses, with the smallest firm having just two employees and the largest having 240 employees, as summarized in Table 2. The SMEs’ sales turnover also varied from £32,000 (approximately $40,000 USD) to as large as £18 million (approximately $220 million USD) per annum. The contrasting sizes of the SMEs was also reflected in the average value of the tenders submitted for review, which varied from £7,000 (approximately $10,000 USD) contracts to contracts worth over £1 million (approximately $1.35 million USD), with a median value of £50,000 (approximately $65,000 USD). The SMEs analysed also came from a diverse range of industries, as summarized in Table 3 below.
See Tables 2 and 3 in PDF download.
To benefit from a Tender Review in the WIT project, SME beneficiaries were required to participate in two separate interviews, one before the review and one after the review. However, only two questions from these interviews are directly relevant to this research: (1) a pre–review open-ended question asking the interviewee why they thought they did not win the tender subject to review; and (2) a post–review open-ended question asking the interviewee what they had learned from the Tender Review Service (TRS) process.
Responses to the two questions were analysed through a process of coding data, with the responses neatly fitting within a number of distinct categories or groupings.
To identify and better understand the SME tender weaknesses based on the procurers’ ITT documentation and evaluation criteria, the narrative contained within each SME tender was analysed independently by each researcher using conventional content analysis. First, each researcher read through the ITT documentation to understand the requirements. Then they studied the response within each SME tender, highlighting key text or practices that showed suboptimal approaches, and making a note at the side of the page of a keyword that captured the essence of the deficiency. Thus, an emergent coding scheme, as opposed to a pre–defined scheme, was used, with the categories and their names arising directly from the data itself.
Following initial coding of ten SME tenders, preliminary codes were agreed upon by the research team. The remaining forty SME tenders were then coded using the agreed-upon codes, with additional codes being added where emerging data did not fit within those existing codes. After coding all fifty tender submissions, the researchers carefully examined the data within each code. Part IV.B discusses the categories of tendering weaknesses identified through the coding process, with the tables therein providing a series of extracts and examples from the tenders examined, per category of tendering weakness.
This section presents the major findings from the analysis of the SME tender submissions data and discusses the implications of these findings.
Before discussing the results from the analysis of SME tenders, the authors examined SME perceptions as to why they thought that their tenders were unsuccessful. The lines of reasoning provided by the SME respondents are grouped into distinct categories or themes listed in Table 4 below.
The most interesting aspect of the categorisation of responses is that only eight percent of SMEs openly suggested that their lack of tendering skills might be a key reason for them being unsuccessful. Other instances where the SMEs acknowledged that they might be responsible for their tendering failures were also rare. Eight percent of the evaluated SMEs stated that their pricing could be uncompetitive, while an additional four percent mentioned that they may not have provided enough illustrations and templates within their methodology statement to demonstrate how their proposed solution could satisfy the buyer’s requirement. A third of SMEs—thirty-four percent—stated that they had no idea why they had been unsuccessful, while the final forty-six percent of SMEs blamed the procurement process itself and/or the practices employed by the public sector organisations. In total, just twenty percent of those SMEs interviewed were of the view that they themselves could potentially be the reason for their lack of success. The remaining eighty percent either (1) felt the public sector was at fault, or (2) did not acknowledge or understand that their tendering approach and/or behaviour might have been suboptimal.
The following quote provides an example of the reasoning used by SMEs who felt the public sector was at fault: “We thought our tender was balanced and reasonable. We think it was a set-up in the sense they went for a larger national company who are less risk [sic].” This finding relates to the tendency of SMEs to pass responsibility on to the public sector for their potential shortcomings, rather than looking inward at themselves. This finding resonates with previous research, which establishes that SMEs are most likely to blame the procurement process when they are non-competitive in tendering. SMEs’ outward-focusing tendency used to justify their tendering failures could reflect a number of different factors. For example, some SMEs may have never seen a best practice example of a tender against which they could compare with their own because of the confidential nature of tendering. Additionally, some SMEs may not be aware of their own failures due to a lack of meaningful feedback from the contracting authorities themselves. Lastly, there may be a lack of trust in the public sector procurement process that results in some SMEs being naturally inclined not to engage in self-reflection on their tendering competencies and knowledge.
The suspected reasons that SMEs provide for their tendering failures raise concerns that SMEs who engage in suboptimal tendering practices may sometimes be slow to recognise their bidding deficiencies. Lack of positive engagement by SMEs with the public sector has been noted by scholars previously, which raises the question of whether SMEs should have a more open-minded and positive attitude when exploring how they can improve their tendering skills.
In this section, we examine the weaknesses identified in tenders across the six European countries involved in the study, and we group them into five distinct categories. A tabular approach has been used to present the codes and examples for each weakness category, thereby illustrating the coding process. The examples included in Tables 5–9 capture rich details that emerged from the analysis of the unsuccessful SME tenders. The examples, and their respective codes, reflect the reasoning behind grouping the weaknesses into the five categories.
As part of the consideration given to each weakness category, the authors have also developed a Model Charter proposing solutions to the weaknesses identified. The Charter provides an illustrative SME-Public Sector Tendering Charter and Intervention methodology and has been framed by the authors to rectify current suboptimal SME and public purchaser practices. It also contains some of the key SME-friendly Best Practice Procurement Principles enshrined within the European Commission’s European Code of Best Practices Facilitating Access by SMEs to Public Procurement Contracts.
Category 1 arises either because of gaps in awareness, knowledge, and understanding and/or a lack of willingness to accept core public procurement principles. This gap inevitably results in SMEs committing elementary mistakes in how they communicate information in their tender submissions. These Category 1 deficiencies were endemic to many of the tenders examined and were often a pivotal contributing factor to SMEs’ suboptimal tendering performance because of their cross-cutting impact on tender submissions. Put simply, without knowledge of these core procurement principles, SMEs stand no genuine chance of success in tendering because they are not tender-ready.
Detailed analysis of Category 1 weaknesses, as supported by the Table 5 examples, illustrate that SMEs do not always sufficiently comprehend or are willing to consider, the following factors when they are tendering: (1) the requirement for evaluators to only consider the evidence presented to them in ‘black and white’ within formal tender documents; (2) the obligation for evaluators not to assume any knowledge of tenderers; (3) the need for evaluators to consider risk; and (4) the EU principle of equal treatment., The results from the post–review interviews indicate the extent of the lack of awareness, knowledge, and understanding in this category—sixty-seven percent of the SMEs specifically referred to at least one of the factors above when asked “what they had learnt from the TRS process?” To address this issue, the Charter proposed herein recommends that SMEs be required to look inwardly and actively reflect upon whether they have optimised their previous tender submissions and routinely question their own tendering knowledge, understanding, and capabilities.
This category of weakness is significant to SMEs since it may have a particularly adverse influence on SME tendering success given its impact on all elements included within a tender submission. This study’s findings signal that more work remains to be done by enterprise agencies, SME representative groups, training bodies, and procurers to educate the SME population about these fundamental principles and why they are important in the context of public sector procurement. Our Charter proposes that SMEs and their representative groups look inwardly and actively reflect upon whether they have optimized their previous tender submissions, as well as routinely question their own tendering knowledge, understanding, and capabilities.
Many reasons may explain why SMEs in this study experienced this tendering weakness; these explanations can be considered in isolation or in combination. One possible explanation, which prior academic research has drawn attention to, is that the SMEs may not have been sufficiently educated about how these key foundations of public sector tendering apply generally.
This weakness category further highlights that some SMEs may simply be accustomed to the less complex process of bidding for private sector work. Other explanations include a lack of pre-tender submission planning and a reluctance on the part of SMEs to fully engage with a process they consider to be lacking in common sense. The Charter proposed by the authors offers several steps that could be taken to address this problem. First, SMEs should actively seek procurer feedback, consistent with European Commission guidance, to help them benchmark whether they are tendering effectively and to take advantage of professional advice and support that may help to remedy any weaknesses (e.g., SMEs can engage in tendering training or use tendering experts’ services).
Interestingly, the procurer invitation to tender (ITT) documentation gathered from the review process showed a distinct lack of focus when reminding tenderers of these core public procurement principles, with only two of the fifty examined ITT documents making any reference to the principles. This inattention raises concerns as to whether this procurer practice is exacerbating this category of SME weakness, particularly given that prior research suggests that SMEs often tender on an infrequent basis and hence may need to be routinely reminded of such principles’ significance when preparing their submissions.
Category 2 weaknesses specifically refer to weaknesses in awareness, knowledge, and understanding relating to the fundamental information necessary to be included within key sections of a tender/responses to tender questions. These weaknesses can assist in determining the causes of tendering failure due to SMEs’ inability to provide evaluators with the range of information sought for evaluation purposes.
Our analysis of tenders, as illustrated by the examples in Table 6 below, suggests that SMEs often do not fully appreciate what they should include within core sections of a tender (or within responses to procurer questions) and/or fail to understand the importance of such information and are disinclined to expend effort in including it. For instance, Table 6 demonstrates that, in response to procurer evaluation criteria requesting tenderers to explain how they would manage the contract they were bidding for, only twenty-five percent of the tenders examined had a project manager named and just five percent of SME tenders included a communication plan to spell out what methods they would use to communicate and interact with the public sector client.
This category addresses common errors that SMEs must avoid if they are to maximize chances of success in areas such as failure to provide an adequate methodology; failure to address risk management issues; failure to convincingly show good track record for their supply of goods or services, among others. The proposed Charter in Appendix 2 suggests that SMEs should address these weaknesses identified in Category 2 and comply with procurer instructions to formally return as part of their submission a “Tender Return Checklist” that confirms that they have given sufficient consideration to these critical tender submission topics. Likewise, the Charter recommends that public purchasers be cognizant of the fact that SMEs can tender on an infrequent basis and include, within the ITT section “Instructions for Completion of Tenders,” a dedicated subsection that should detail the common tendering weaknesses identified in this study and the necessity for SMEs to avoid them in order to have a realistic chance of success.
Table 6 second column header with note: Selected Illustrative Examples
The SME tendencies for Category 2 observed could be attributed to the fact that many SMEs are unlikely to have been trained in procurement and are unlikely to have access to specialist tendering experts who can “speak the language of procurement,” thus placing SMEs at a knowledge disadvantage. While detailed analysis of procurer ITT documentation was outside the core remit of the study described here, it is interesting to note that the ITT documentation examined provided little evidence to suggest that public procurers are proactively addressing these knowledge gaps.
Two rare illustrations of “good practice” were observed from the ITT documents collated as part of this research. In one ITT, four pages of helpful guidance notes were provided to direct tenderers as to how they should answer the questions. In another, each question posed by the procurer was accompanied by additional narrative explanation, such as “your response could include” followed by a list of several meaningful aspects to guide tenderers.
Category 3 weaknesses relate to critical flaws in the way that SMEs approach tendering from the perspective that they place insufficient emphasis on key tendering underpinning strategies for success, either because SMEs are unaware of the strategies or because they do not understand the strategies’ significance. These strategies principally revolve around tender propositions emphasizing client needs and SMEs clearly, comprehensively, and compellingly demonstrating their ability to meet those needs. This weakness category is important because, where these deficiencies are present, SMEs (1) cannot make a compelling case as to their unique ability to meet client needs vis-à-vis other tenderers; and (2) cannot sufficiently demonstrate how they are uniquely positioned to deliver contract requirements.
Our analysis of Category 3 weaknesses is summarized in Table 7, which provides a number of illustrative examples relating to this weakness category. Two of these illustrations underline the significance of this category in terms of restricting SMEs’ ability to compete effectively: first, SMEs’ lack of focus in emphasising the benefits of their experience and expertise in relation to client needs, and second, SMEs’ lack of focus in making their submissions sufficiently relevant to the specification.
While one explanation for this lack of appropriate focus could be a dearth of SME resources or poor pre–tender submission planning, a more likely explanation, given how common this issue was amongst the reviewed tenders, is that many SMEs do not sufficiently appreciate how important it is to address these underlying strategies in order to be competitive.
While this study did not provide any evidence to suggest that Category 3 weaknesses arise as a result of junior personnel being given the tendering responsibility, given 96% of tenders reviewed in this study were primarily authored by SMEs’ senior personnel, the fact that only 54% of those primary authors had previously attended a formal tendering training course provides support for the “lack of focus” weakness.
There was no evidence found to suggest that the public sector is actively seeking to ameliorate such weaknesses by highlighting key tendering strategies for success within ITT documentation or by using carefully phrased questions stressing that such an emphasis should be adopted. The proposed Charter in Appendix 2 addresses this problem and brings public purchasers into line with European Commission 2008 Best Practice Principles. Public purchasers should emphasise and explain within their ITT documentation and/or through carefully phrased questions that adopting a client-focused approach to answering key tender questions is essential to ensuring that SMEs are realistically able to win public sector tenders.
The results from the post-review interviews provide supporting evidence of this weakness category’s existence, with 52% of the SMEs interviewed stating that they had only learned about these tendering strategies for success because of their participation in the TRS exercise.
Category 4 weaknesses can be distinguished from the other categories because they typically refer to those weaknesses that lead evaluators to question the professionalism of SME tenderers, resulting in concerns relating to the SMEs’ appetite and their commitment to the work that they are bidding on, as well as their ability to carry out the work in a competent manner. The examples provided in Table 8 illustrate that weaknesses in relation to tender professionalism can manifest themselves in a number of ways, including (1) inappropriate presentation of information; (2) poorly written narrative epitomised by having little underpinning substance; (3) lack of attention to procurer instructions; and (4) approaches that suggest a lack of care and attention or a lack of commitment.
The examples included in Table 8 suggest these weaknesses can impact SMEs in differing ways depending on the nature of the unprofessionalism demonstrated. For instance, when an SME does not comply with the instructions within a procurer question, this failure can have a direct impact on the score it receives for that question. In other cases, the effect is arguably less tangible but potentially equally, if not more, damaging to an SME’s chances in that the tender paints an unprofessional picture of the SME, thus creating the perception that contracting with that organisation would potentially be a high-risk option.
Interestingly, the procurer ITT documentation has no mention of these weaknesses or their significance. This may suggest that procurers do not feel it is necessary to remind SMEs about tender professionalism, given that professionalism should be an innate characteristic of a competent firm. The Charter seeks to address this deficiency in Appendix 2 by requiring public purchasers to transparently communicate their expectations to tenderers (e.g., in relation to the level of tender depth required) to help SMEs gauge how to respond to ITTs, and to build trust between both parties. Additionally, the Charter would require public procurers to routinely provide meaningful and transparent feedback to SMEs following unsuccessful tender submissions as a matter of course, going beyond mere communication of submission evaluation scores, thus enabling SMEs to understand where they went wrong in their submissions and how they might improve. Public procurers should also actively refer to the tendering weaknesses identified in this study as part of their feedback protocols.
As with other weakness categories, the tendency for SMEs to work informally or engage in inadequate pre–tender submission planning or the increased likelihood that SMEs are disadvantaged by a lack of resources could provide a basis for understanding why this weakness materialises. The Charter would require SMEs to reflect on how they can become more professional in their approach to tender submission preparation and require SME representative organisations to hammer home the message that an unprofessional approach to tendering is not acceptable. To complement this approach, the Charter proposes that public purchasers reflect upon whether any of their behaviour—such as the imposition of short tender deadlines, the use of excessive questions, or a lack of word limits for responses—are contributory factors in encouraging poor SME practice. The Charter further proposes that public purchasers commit to remedying their approach as necessary.
Category 5 weaknesses relate to the ways in which SMEs present information within their tender submission documents. While such aspects are not necessarily directly considered as part of the tender evaluation process, they can nonetheless negatively impact SMEs’ chances of success because they can reduce the likelihood of evaluators understanding key tender propositions/strengths. This, in turn, can prevent SMEs from achieving their full potential in tender competitions even where the fundamental information and case they present is strong.
While Category 5 weaknesses manifest themselves in various forms, as illustrated in Table 9, they all relate to the way in which SMEs present information, making it difficult for evaluators to digest key information that could be central to SMEs’ chances of success. Put simply, Category 5 weaknesses can potentially prevent otherwise competent tenderers from winning.
This weakness category most likely arises from the propensity for SMEs to adopt informal ways of working and to be less attuned to the requirements of written documents. This weakness category also acknowledges that evaluators do not have unlimited time to evaluate tender submissions; their ability to absorb key tender messages are therefore inevitably impacted by the ways in which SMEs present their responses. Nonetheless, no reference by procurers to the need for tenderers to adopt strong tender presentation strategies was observed in the ITTs viewed. The results from the post–review interviews provide some support for this weakness category, with 20% of the SMEs interviewed noting, as a result of participating in the TRS, their newfound appreciation for the importance of presenting their tenders well.
In this study, we examined the weaknesses in the unsuccessful SME tenders analysed and grouped these weaknesses into five categories. Each weakness was identified through conventional content analysis using an emergent coding scheme, with the codes ultimately structured into individual categories based on how they were related.
Interestingly, this data-driven exercise yielded a very different picture from the one perceived by many of the SMEs. Based on interviews with SMEs, 80% of them either felt that the public sector was the reason for their lack of success or did not acknowledge that their approach to their tenders or their tender behaviour might be suboptimal. The Charter in Appendix 2 illuminates how both sides, SMEs and public purchasers, can take active, practical steps to improve their tendering interactions and to align their behaviour and practice with the European Commission’s 2008 Best Practice Principles for public sector procurement.
No previous study has focused on the tender stage of the tendering process to examine the reasons underlying suboptimal SME tender quality. By analysing data contained within real tenders submitted by SMEs to public bodies, our study contributes to the public procurement literature by using evidence, for the first time, to identify key weaknesses in the written content of unsuccessful SME public sector tender submissions.
The results of the study were also used to construct a framework to categorise SME tender submissions’ weaknesses that can be utilized to reveal the core reasons why SMEs are sometimes ineffective in producing compelling written tender submissions tailored to the needs of public procurers. Figure 1 provides a summary of the framework; Appendix 1 details the full framework.
Each weakness category was identified based on common and repetitive weaknesses in unsuccessful SME tender submissions. The five categories that form the basis of the Framework help explain SMEs’ often suboptimal tender quality from the perspective of unsuccessful tender submissions. They also provide an informed and structured basis to aid SMEs in improving their tendering performance and thereby in minimising common and recurring tender errors that can prove costly to SMEs, public sector organisations, and taxpayers. In addition to presenting a framework to categorise SME tender weaknesses, this study provides new evidence, drawn from unsuccessful SME tender submissions, that some SMEs lack an understanding of how to prepare written tenders that have a realistic chance of winning.
This study also addresses the gap between SME perceptions of their ability to tender effectively and their actual abilities to do so. The study reveals that too many SMEs erroneously think there is little wrong with their tenders and believe that the reasons for their failures are external. This misunderstanding adds to the debate about the tendency for SMEs to pass responsibility for their failures to the public sector and highlights that SMEs can be prone to outward, rather than inward, reflection when assessing their tendering failures. To this end, the study suggests that some SMEs may only achieve success in future public sector tender competitions by first engaging in robust inward-facing reflection on the contents of their past failed tenders. This conclusion empirically provides a new premise for further study on unsuccessful tender submissions, particularly in the context of better understanding the mechanics of how SMEs reflect upon their failed tenders.
In terms of practitioner and managerial insights, this study yields a number of important findings and suggestions for progress. The findings, taken together, suggest that some of the tendering practices that SMEs engage in are suboptimal; this insight, however, has not been adequately conveyed to the SME population. Thus, there is room for enterprise support agencies and SME representative groups to do more to enlighten the SME sector on these issues. Given the proliferation of those weakness categories that can prevent an SME from winning a contract (e.g., Category 1 weaknesses, particularly Code 1A: “Lack of evidence”), the research suggests a need for SMEs to be made aware that a public sector contract should only be considered an opportunity when SMEs are tender-ready.
The need for SME enlightenment is further supported by the potential disconnect that was revealed between what some SMEs consider to be good tender submissions and what actually are good tender submissions (i.e., those with a realistic chance of winning). The authors therefore do not agree with the view put forward in a major U.K. government report that it should be left to SMEs in isolation to ensure that they are bid-ready. The authors instead argue that the disconnect revealed in this study is highly problematic. For example, with greater enlightenment, SMEs might be incentivised to commit extra resources to tendering, either internally or by sourcing external tendering experts with proven track records, because they may be more confident about the likely payback. Those SMEs who have grown frustrated by public sector tendering may decide to reenter the public sector marketplace, and those new to tendering could potentially avoid the tendering “pain” barrier.
Widespread SME enlightenment may also mean that some SMEs decide not to rectify their weaknesses. The implication here is that SMEs should reflect upon whether they should focus their efforts on the private sector, where a less formal method of acquiring customers is typical and bidding costs are lower.
Further, this study demonstrates the scope in which public purchasers can act to avoid exposing SMEs to the five categories of weaknesses listed. The research points to the need for procurers to adopt a transparent approach in relaying their expectations to tenderers, particularly in the context of avoiding a lack of specificity in their tender questions to avoid Category 2 weaknesses. The research also suggests that procurers should routinely communicate within ITT documents the parameters that should be observed by bidders to improve the prospects of more tender submissions being “fit for purpose” and thereby help bidders to avoid the various categories of tender weakness. Furnishing SMEs with sufficient information in this way should help SMEs decide whether to opt in or out of particular tender opportunities, thus avoiding unnecessary transactional and opportunity costs for both SMEs and evaluators. Public purchasers can also help SMEs improve their tender quality by providing meaningful feedback following unsuccessful tender submissions. This feedback will simultaneously reduce the likelihood of an SME blaming the public sector when attempting to understand the tendering failure. The Charter’s proposals involve neither legislation, nor significant expense, nor organisational disruption. The Charter can easily be used to make progress to remedy issues arising in these areas and make public purchasers’ practices consistent with the European Commission’s Best Practice Principles.
SME owners and managers committed to doing public sector work must also take action to remedy the weaknesses presented herein, which our Charter’s proposals seek to motivate. For example, some SMEs may benefit significantly from more actively reflecting upon whether they have optimised their previous tenders, with the framework presented in Appendix 1 providing a useful starting point for reflection. In addition, SMEs must acknowledge that, while SME representative bodies, enterprise agencies, and procurers can proactively raise awareness of SME tender weaknesses, ultimately SMEs themselves must be receptive to advice provided and work proactively to amend their tendering practices.
To the extent that this study is seen as suggesting action from both sides of the SME supplier-public procurer interface, a pragmatic route forward would be for a Charter, similar to the one proposed here, to be adopted between SME representative bodies, enterprise agencies, and the public sector in order to highlight clear actions and responsibilities required of both parties. The Appendix 2 model provides an illustrative SME-Public Sector Tendering Charter and Intervention methodology, framed to broadly align with some of the key SME-friendly Best Practice Procurement Principles. This Charter builds upon the authors’ research and has the potential to adapt to local conditions in jurisdictions around the world that have adopted a proactive stance towards embracing SMEs in public sector procurement.
