businessnewstips
In the UK, partnerships between the public and private sectors represent a longstanding and common practice that can benefit all parties involved. This enables institutions and organisations controlled and funded by the government to tap into the private sector’s resources and expertise, obtaining the goods and services they require for their programmes and projects. It also gives private companies the opportunity to access new markets, ensure repeat business, and increase their revenue.
However, despite the many mutual advantages that can arise from these collaborations, for some entrepreneurs and business owners, the world of public sector tendering remains uncharted territory. Part of the reluctance to step into the public sector might stem from the false belief that government contracts are generally awarded to large businesses, which couldn’t be further from the truth.
While in some cases, particularly those involving large-scale projects, bigger companies might seem better suited to deliver contracts due to their significant resources and robust infrastructures, the UK government actively supports the participation of small and medium-sized enterprises (SMEs) in public procurement through a series of specific policies such as the Procurement Act 2023.
So, if you’ve never dared to explore the public sector space until now and you’re wondering if it’s worth bidding for these types of contracts, a deep dive into the topic can clarify things for you.
What are public sector contracts?
As someone who is not familiar with how public sector contracts function, you might find the terminology and the rules related to them quite confusing and hard to decipher, so we should start with an introduction to the basics of public sector contracts and tendering in the UK.
Government contracts represent the foundation of public procurement, which refers to the process by which the bodies that form the public sector, such as local authorities, national healthcare systems, educational institutions and other state-owned entities, acquire goods, services and work from private companies.
On average, the UK Government puts out 50,000 contracts each year, creating a marketplace estimated at around £300 billion. Contracts that go above £10,000 (for central government) or £25,000 (for the wider public sector) have to be publicly advertised, either via an invitation to Tender (ITT), a request for proposal (RFP), a request for information (RFI), or a request for quotation (RFQ).
This ensures transparency and fair competition, providing private companies across all industries with many lucrative tenders that they can bid for. However, not all government contracts are going to be a good fit for every business, so you first need to research the market and find a UK tender that’s right for your company.
Once you’ve identified relevant opportunities that align with your needs and requirements, you can craft a proposal and enter the bidding process, which follows very strict rules and procedures that both buyers and suppliers have to abide by to guarantee taxpayer money is spent sensibly.
It’s extremely important to pay attention to the evaluation criteria, examine the terms and conditions carefully, and comply with all the specific requirements outlined in the tender documents, so you know exactly what the contract implies and increase your chances of submitting a winning bid, while also avoiding potential risks.
Why should you consider doing business with the public sector?
If you’ve never collaborated with government entities, it’s perfectly normal to wonder if working with the public sector is a good choice for your company or not. So, here are a few reasons why you might want to give public sector tendering a try.
The first and most obvious motivation for competing for government contracts is the easy access to a wide range of business opportunities. In the public sector, there’s a high demand for all sorts of goods/services from private companies, which means there are high chances of finding tenders that match your business’s offerings, and thus expand your customer base.
One of the best things about government contracts is that they typically involve long-term agreements, often spanning several years. Some of them go on for decades, without interruption, and require multiple suppliers. So, if you’ve managed to secure a contract with a public entity, it can guarantee work for many years, during which you’ll enjoy a stable source of revenue and have a solid foundation on which to plan for the future.
Another perk that government contracts offer is the 30-day payment period. Under the agreement terms, after the public entity has accepted the goods or services and received the invoice from the vendor, they are required by law to settle the invoice within 30 days. Timely payment is crucial for maintaining healthy cash flow, particularly when you’re a small enterprise that relies on consistent cash flow to cover running expenses.
The fact that the public sector is focused on working with SMEs also serves as an incentive. Currently, the UK Government aims to award 33% of the funds earmarked for public procurement to SMEs, which account for 99% of all UK businesses.
Moreover, out of the 50,000 contracts that the public sector publishes every year, over 70% are low-value tenders, meaning they are easily accessible for SMEs. The tendering process has also been simplified by the Procurement Act 2023, making it easier for interested parties to compete for contracts. This creates an ideal environment for SMEs to seize new business opportunities.
It’s also important to mention that securing contracts in the public sector can enhance your company’s reputation, serving as a validation of your reliability and capabilities. It also improves visibility for your business and facilitates networking as you get to interact with various stakeholders and expand your connections.
Final thoughts
While they may seem daunting and pose unique challenges for newcomers, public sector contracts can be a catalyst for growth for all types of companies, fuelling their development by providing access to a thriving market, creating prospects for repeat business, offering a steady source of income, and enhancing credibility and reputation. Therefore, if you wish to enjoy all these benefits and more, pursuing government contracts may be a worthwhile endeavour.
