The Impact of Strategic Public Procurement in the Development of SMEs
Public procurement can have a significant impact on policy outcomes as it represents, on average, 12% of GDP and 29% of total government expenditure (OECD). Until only a few years ago, public procurement was perceived as an administrative, back-office function. Today however, it is seen as a crucial pillar of services delivery for governments and a strategic tool for achieving key policy objectives: from budget accountability, to spending efficiency, to buying green and improving outcomes in health, to tackling global challenges such as climate change, and promoting socially responsible suppliers into the global value chain.
The strategic use of public procurement can also make a difference in the development of SMEs by facilitating access to bidding for public contracts. In fact, this is a crucial policy objective in many countries as strategic public procurement can significantly support a more circular economy and transform supply-chain business models, given the magnitude of its size in government spending and its predominant role in delivering some of the most resource-intensive public services such as infrastructure.
Overcoming challenges to strategic public procurement
Despite these benefits, a number of challenges are faced when rolling out strategic public procurement:
A lack of understanding of the benefits of sustainable procurement amongst politicians and budget holders. Public procurement is subject to many pressures, from cutting costs to meeting the demands of internal users and the public. If there is little political support or resources available for sustainable procurement, it can easily slip down the agenda.
Changing the perceptions regarding the true cost or value of a purchase – particularly where only purchase price is assessed rather than life-cycle costs. Typical public sector instruments such as annual budgets – which do not incentivise long-term savings – tend to compound this issue.
The risk of corruption in the context of public procurement remains a perennial challenge. Nearly 60% of foreign bribery cases involved bribes to obtain public procurement contracts (OECD), reinforcing the need for greater integrity in public procurement processes.
Addressing these challenges requires building up new skills and tools in the public sector. One such tool that can be utilized is a technology-driven financial condition analysis solution that can quickly and affordably assess a company’s financial condition and capability (CreditBPO), allowing diversification of contractors to include SMEs. There is a need to ensure a common understanding of the strategic role of public procurement to achieve policy objectives and ways to evaluate and manage risks.
Ready to implement a transformational change in your procurement process? Schedule a call with us here and we will walk you through how to leverage and make use of what today’s technology offers through CreditBPO.