Opportunities for SMEs explained

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SMEs make up a whopping 99% of all businesses in the Netherlands. In practice, these companies take on comparatively fewer government contracts than you would expect, based on their number.

SMEs' share of public contracts

Studies carried out by contracting authorities show that the vast majority (80%-90%) of public contracts are awarded to SMEs. That seems a lot, but when you consider that more than 99% of businesses are SMEs, it remains disproportionately small. In addition, the percentage of contracts awarded to SME's are mainly made up of those that are below the European threshold. In the area of European public procurement, the ratio is very different.

A study commissioned by the European Commission (SMEs' access to public procurement markets, 2013) shows that the Netherlands compares poorly to other European countries when it comes to awarding European public procurements to SMEs. In the EU as a whole, 57% of European public procurements are awarded to SMEs. The corresponding figure for the Netherlands is just 50% of public procurements. That 50% represents only 21% of the total value of all Dutch European public procurements. Only five other countries score worse than this. In Germany, for example, the corresponding figures are 62% of the number of public procurements, representing 48% of the total value.

SMEs (which have limited manpower) are less able to cope with time-consuming, complex and lengthy procurement procedures. The requirements imposed by high value public procurements, together with contract size, the selected procedure and transaction costs are the main obstacles for SMEs. There are some initiatives, mostly at local authority level, to discuss specific issues with SMEs.

Definition of SMEs

What determines whether a business is defined as an SME? The most widely used yardstick is the number of employees. Within the EU, the agreed limit is 250 employees. This category is subdivided into "micro" (0-10 employees), "small" (10-50 employees) and "medium" (50-250 employees). In the Netherlands, a limit of 100 employees is still commonly used. Another form of classification is based on turnover. The relative proportions of small, medium and large businesses can vary from one sector to another.

SMEs and Most Economically Advantageous Tender (MEAT)

The mandatory use of the MEAT methodology would increase SMEs' chances of being awarded a contract. SMEs are widely seen as the engine of innovation and MEAT favours bidders who have a greater focus on quality and innovation. However, many small businesses do not (or do not yet) have the means to bid for contracts that are awarded on the basis of MEAT. For instance, they may need to call in external expertise in order to be able to bid. The transaction costs involved in MEAT are significantly higher than those involved in procurement contracts awarded based on a comparison of lowest-price. Whether or not MEAT actually strengthens the position of SMEs depends not only on the size of the contract but also the market. In a market that has traditionally relied on price-based competition, the switch to MEAT can take time and may not always work to the advantage of SMEs.

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