Public and private organizations rely on external suppliers for a wide variety of goods, works and services they need to run their daily operations. Public and private procurement can be a big and profitable market for your company. Governments, for example, spend millions of dollars in procurement, estimated at 15-20% of a country’s gross domestic product (GDP), according to World Bank data. If you access procurement opportunities, you can increase sales substantially and make your business grow.
Opportunities exist from a wide variety of sectors, including construction, agribusiness, information technology, tourism, telecommunications, education, health, environment, etc. Below are some examples of goods, works, and services often procured by public and private institutions:
• Goods: telecommunications equipment (computers, telephones, etc.), office furniture and stationery, motor vehicles, uniforms, medicines, food and beverages, fuel and lubricants, fertilizers, etc.
• Works: construction of buildings (governmental offices, schools, hospitals, warehouses, etc.) and other infrastructure (roads, water and sanitation infrastructure, etc.)
• Services: activities such as security, information technology support, routine cleaning, consulting services, provision of training, transport and logistics, engineering, marketing and communications, printing services, waste management, etc.
You can find out what type of opportunities may exist from a specific organization by analyzing current and past bid advertisements.
• Private organizations: this category comprises a wide range of international and domestic companies, from big corporations to small and medium enterprises. Private institutions use their own internal procurement rules and regulations, which are not public, but you may be able to obtain them by contacting the company. Sometimes, private companies use bidding processes that are similar to the processes used by public institutions.
• Public organizations: this category comprises the organizations financed and/or operated by the government. It may vary by country, but usually public institutions include national public authorities, such as the Ministries (Education, Agriculture, Health, Public Works, etc.), local public authorities (e.g. City Councils), and public and state-owned companies or institutions (public hospitals, public schools, public port authorities, public water and sewage company, etc.). The procurement processes of public institutions and related bodies are public and regulated by law in each country.
• International organizations and programs: this category includes multilateral and bilateral organizations such as the World Bank Group, the African Development Bank, the United Nations Agencies, the World Food Program, the European Commission, etc. These institutions use their own procurement rules and regulations, which are public, and you can find them on each organization’s webpage.
• Private organizations: Procurement opportunities from private organizations may be difficult to detect, unless they are advertised on the company’s website or major media. You should look at your potential clients’ webpages to find out if a procurement portal or request for solicitations space exists. If no information exists (or the entity does not have a webpage), you should get in touch with the procurement department and ask for further information about where invitation for bids are published and what the procurement procedures are.
• Public organizations: Usually, national procurement laws in each country state where public tenders need to be advertised, including those from state-owned companies and public funded organizations. In general, bids get advertised by law in the official state gazette, journal or bulletin and in the webpages of the procuring authorities. Some public institutions may publish their bids in local major newspapers, and other major media, such as TV or radio.
• International organizations and programs: Generally, international organizations publish their bid notices on their webpages or in a procurement portal created specifically for it. For example, the United Nations publishes its bids in the United Nations Global Marketplace. The World Bank has developed a new Application for companies to be able to monitor projects and related business opportunities financed by the Bank. The African Development Bank has its own Procurement Portal.
There is a variety of national and international organizations that offer tender services advertisements. For example, the Development Galway through the DG Market webpage or the International Trade Center through the Procurement Map. Also, many procuring organizations have an internal database of qualified or potential suppliers to whom they usually send the invitations for bids. It is important that you find out if such a database exists for each of your potential clients of interest.
Also, procurement authorities often award small contracts to pre-identified suppliers, without advertising or opening a competitive process (also called sole-sourcing or direct sourcing). These contracts, small in nature, are usually accessible to SMEs. In order to gain access to them, it is imperative that you to establish a trusting relationship with the procuring entity.
Finally, specialized SMEs can participate as members of a consortium formed by companies of different sizes and different areas of expertise. SMEs may also want to consider their participation as subcontractors of a prime or main contractor. This can be an effective way for you to gain experience with public procurement or procurement from large corporations. The work references that you obtain as a subcontractor will be useful in the future when you apply for contracts directly.
If you want to learn how to write a Partnership Agreement have a look at the following article.
The most commonly used procurement methods include:
• Open competitive bidding (national or international). Any potential supplier can participate in the procurement process. It consists of an invitation to any potential supplier to bid, followed by an evaluation process and a contract award. In some cases, there is an invitation to express interest (or a pre-qualification process) prior to the invitation to bid.
• Restricted bidding. Only invited firms are allowed to bid. It consists of an invitation to bid to a pre-identified list of firms, followed by an evaluation process and a contract award.
• Request for quotations. It can be public or restricted to a pre-identified list of firms (usually a minimum of three). In this case, the most important element is the price.
• Sole-sourcing [direct sourcing]. This is a non-competitive bidding process. The buyer solicit and negotiate with only one supplier, because there is a reason that justifies it (for example, if there is only one provider in the market that can supply the requested goods and services, in an emergency situation, when the use of this method represents a clear advantage over the use of a competitive method, or when the procurement is within the thresholds).
Procurement entities use different evaluation criteria, depending on what they are procuring. The method used should be clearly explained in the bidding documents.
There are four main evaluation methods:
• Quality- and Cost-Based Selection. This method takes into account both quality and cost as a percentage weight of each. For example, 70% quality and 30% cost. The proposal that offers the highest score based on the weights is selected. In most cases, technical and financial proposals must be sent in separate sealed envelopes. First, technical proposals are opened, evaluated and scored. Only the firms that achieve the minimum technical marks will have their financial proposal opened and evaluated.
• Quality Based Selection (QBS). The offer is selected on the basis of technical quality. The proposal with the highest technical score is selected. This method is normally used for very complex and highly important assignments for the organization (e.g. legal services). Once the technical proposal is selected, the buying authority negotiates the price and the terms of the contract with the supplier.
• Fixed budget selection. The offer with the highest technical score that meets the pre-established budget is selected.
• Least cost selection. This method selects the lowest-priced proposal that achieves the required technical quality established by the contracting authority. It is normally used for the procurement of standardized goods (e.g. stationary material).
Any bid advertisement must give concrete details about the information needed from interested suppliers to participate in the procurement process. The required documentation will depend on each procuring authority and may include all or some of the following:
• Corporate presentation: explanation of goods/works/services offered, mission, vision, and methodology of work, organigram, etc.
• Certificates and legal documents: business registration certificates, tax clearance certificates, national social security and insurance certificates, goods and services tax certificates, audited accounts, articles of incorporation, etc.
• Financial information: audited accounts, financial statements, etc. from current and previous years. Other financial details, such as insurance cover, may also be required.
• CVs: of management and technical staff who will be involved in the project (to show previous experience and the technical ability to carry it out especially required for the procurement of services and works).
• Others: Further documents/details may be required for particular contracts.
You can find out what information is usually needed by analyzing past notices from your clients of interest. Also, check if you need to have the information available in several languages, depending on the client.
You should have all the standard information prepared in advance, because the time to prepare an offer is very limited. Having the standard information prepared will save you time and allow you to focus on the specifics of each bid (approach to work, timeline, pricing, etc.), which will be unique to each project.
Business support organizations (e.g. Chamber of Commerce) may offer a variety of (online) resources to support companies accessing government tenders. These services may include training, advice, mentoring, publication of guides and manuals to help companies’ access procurement opportunities. Some organizations also organize “Meet the Buyer” events, which are very useful for networking and business development. You can also check with professional or trade associations for your industry and your personal network.
Governments, both at national and local levels, may have a dedicated section on their websites about public procurement resources, including bidding templates, publication of tender notices, manuals and guides.
Procurement terminology may vary by country and may be confusing for SMEs that are new in this business. The following vocabulary is widely used in procurement, but the list is not exhaustive and only includes some of the most common procurement terms.
Bid advertisement [also called procurement or tender/bid notice]: public announcement from a procuring authority of the intention to purchase goods, works or services.
Consortium: it is a temporary association of two or more companies to bid together. A consortium is formed by contract and each company retains its separate legal status.
Invitation to/for bid [also called bid solicitation or request/invitation to tender]: invitation to suppliers to submit a proposal on a specific project, whose details are specified in the bid or tender documents.
Joint venture: a new legally and temporarily formed company by two or more companies to achieve a specific purpose. A joint venture is a separate company, has shared ownership and it is governed by its own rules.
One-stage procurement process consists of an invitation to bid, followed by an evaluation process and a contract award. A two-stage procurement process consists of an invitation to express interest (or a pre-qualification process), followed by an evaluation process and creation of a shortlist of candidates (normally 3 to 8 companies are shortlisted). Then all the shortlisted candidates are invited to bid, followed by an evaluation process and a contract award.
Pre-qualification: preliminary stage in the bidding process where procurement authorities determine if a bidder is qualified (has the required experience and qualifications) to complete the job successfully.
Prime contractor [also called main contractor]: an individual or a company that has a direct contract with a procurement authority and who has the full responsibility for its full execution. A prime contractor may hire several subcontractors to perform parts of the contract on his behalf.
Procurement plan: document that describes or lists what a procurement authority intends to buy, when, from what source and within what budget. Usually, procurement plans are one year plans revised every 3 to 6 months.
Request for Expression of Interest (EOI): an EOI is used to assess interest and capabilities from prospective suppliers in the project. The EOI usually serves to shortlist potential suppliers in a two-stage procurement process, before the invitation to bid. It can also be used to gather information from potential suppliers interested in the project, and to refine the project itself according to what is available in the market.
Subcontractor: an individual or a company hired by a prime contractor to provide a specified product or service as part of an overall contract.
Terms of reference: document that describes de scope of work of a procurement, including the background, work to be performed, the timeline, and deliverables.
Thresholds: the procurement thresholds establish the procurement method that procurement entities need to use (e.g. international competitive bidding, national competitive bidding, request for quotation, etc.) according to the contract value of the procurement. The thresholds also establish who has the rejecting and signing authority for procurement contract awards at the entity level. Procurement thresholds are established by law (in public procurement) or by each company’s internal regulations (in private procurement).
- Knowing about what it takes to become a successful supplier? Consult 4 Steps to Success: Become a Supplier of a Public or Private Organization
- Preparing yourself to access procurement opportunities? Explore Quick Tips to Accessing Procurement Opportunities and assess yourself: how prepared are you?
- Preparing a winning proposal? Learn How to Prepare a Winning Proposal. Do's and Don'ts
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