New opportunities for SMEs under the reform of public procurement legislation

The reform of public procurement legislation will soon make it easier for small and medium-sized enterprises (SMEs) to participate in public tenders.

The main improvements under the new EU public procurement rules are:

• contracting authorities will be encouraged to divide contracts into lots, making tenders more accessible to SMEs.
• the turnover required to participate in a tender procedure will be limited, allowing more SMEs and start-ups to participate.
• the documentation requirements for procurement procedures will be considerably decreased.

The reform will introduce the following major changes:

1. Small enterprises with limited financial capacity can bid for contracts

In the past, smaller bidders were often excluded from procurement procedures because the contracting authorities required high annual turnover figures. This was the case even for contracts of low monetary value. In the future, the required annual turnover should normally not be higher than twice the contract value. As contracting authorities will be required to accept all bidders with adequate financial status for the contract, this measure will help SMEs.

2. Awarding contracts in small portions (lots)

Large contracts can often be divided into smaller parts, which allows for the participation of smaller companies. Contracting authorities are encouraged to divide larger contracts into lots. If they decide not to split contracts into lots, they will have to explain why.

3. Slashing administrative burden:  The European Single Procurement Document (ESPD)

The European Single Procurement Document (ESPD) is a self-declaration form replacing the various different forms used in the past by EU countries for proving that a bidder fulfils the exclusion and selection criteria (e.g. they have paid taxes and have sufficient financial standing). Evidence will only have to be provided by the tender winners. However, even this obligation could be removed in the future once e-procurement solutions are linked to repositories of actual evidence. The ESPD would then act as a ’business passport‘ for companies bidding for tenders anywhere in the EU.  To generate an e-ESPD, the European Commission has developed a free online service.

ESPD: Simplification and administrative burden reduction

4. Improving the access of SMEs to defence and security contracts

The Commission is also working on improving the access of SMEs to defence and security contracts (awarded under the separate Defence Directive 2009/81/EC).

Background: SMEs potential for jobs, growth and innovation

SMEs have great potential to create jobs and drive innovation. Currently, SMEs win 45% of the aggregate contract value above EU thresholds directly, as joint bidders or as subcontractors. Taking into account the overall weight of SMEs in the general economy however, their share of public procurement should be 58%. When it comes to procurement below the threshold of EU Directives, SMEs preform according to their economic weight.

A more detailed analysis of SMEs’ access to public procurement can be found in the study ‘SMEs' access to public procurement markets and aggregation of demand in the EU

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Find out more on public procurement reform: slashingthe administrative burden, improving access for SMEs, preventing corruption and allowing for social and environmental considerations: more articles on the reform of public procurement