Aussie small firms struggle to tender for govt contracts

Australian small businesses are experiencing multiple barriers to tendering for Australian Government procurement contracts, making them “feel excluded” from the procurement process, according to the Small Business and Family Enterprise Ombudsman, Bruce Billson, who led the release of a procurement inquiry issues paper today.

According to data, in 2021-22 the Government and its entities awarded 92,303 contracts with a combined value of $80.8 billion.

It is estimated small and medium-sized enterprises were awarded 55 per cent of the contracts by volume or 31 per cent by value, worth almost $25 billion. Small businesses alone accounted for $8.5 billion worth of the work (or 10.5 per cent of all contracts by value).

However, the sentiment from the small and medium businesses showed they often felt they were “not part of the ‘in-crowd’” and said that the processes were hard to navigate for them but, at the same time, they faced high cost and investment of time pointing to a lack of consideration of this opportunities cost by agencies.

Other barriers impeding their chances of being rewarded the Government contracts included low awareness about procurement opportunities, unless they were already have established relationships with procuring agencies, of had a previous experience in government procurement.

The smaller firms also complained about the use of government panels for awarding contracts, which are a short list of providers that departments can draw from to have work carried out up to a particular value.

“Yet being on a panel does not guarantee work. Many small businesses have told us how they have been on panels for years and never been approached for a request to quote,” Billson noted.

Some other issues included a “limited or no feedback when a tender is unsuccessful” and, additionally, Billson also noted a significant barrier imposed on small businesses was the requirement to have certain kinds of expensive insurances just so they have the chance to do the work – with no guarantees.

“We are looking at the Commonwealth Procurement Rules to see how they are being applied, which departments are doing well, and whether there’s further steps that can be taken to improve the system,” he said.

“These are among the barriers we’ve heard about and our issues paper seeks to draw out more experiences and insights as we hear what small businesses and individuals say about the challenges or difficulties they faced when approaching government for procurement and where things might be improved.”

However, at the same time, Ombudsman stressed that he was “keen to hear” about examples of exemplar agencies with effective process or approaches which could be extended as ‘better practices’ across wider government.

Billson said he was also looking to get more feedback and ideas from those using the procurement system or those who would like to use it.

“Winning a government contract can be life-changing for a small business.  As all businesses know, there is no substitute for good customers,” he added.

“Enabling SMEs to fully compete for government work helps deliver better value, supports innovation and drives stronger Australian-based capability – all worthwhile and important benefits for the taxpayer and our nation,”