The SME Guide to Landing Public Sector Contracts
Working with the public sector can be a lucrative (if daunting) option for small businesses offering any product or service.
The UK public sector spends an estimated £242 billion per year on procurement – that is, hiring goods and services from contractors. It’s a massive market for any business, but there’s still a misconception that only big brands can compete for this work.
However, in recent years there’s been a drive for public sector organisations to award contracts of all sizes to smaller firms, with the UK Government setting an ambitious target of 33% of procurement spend going to small businesses by 2022.
With so much work on the line, why do small businesses still feel like they can’t compete? Let’s first bust some myths about working with the Government.
Myth #1
“Public sector clients aren’t worth the effort”
Busted!
As well as being part of a lucrative and wide-ranging market, government organisations can actually make fantastic clients. As publicly funded organisations, they have to adhere to strict guidelines surrounding fairness and transparency. They’re also required by law to pay their invoices within 30 days.
Myth #2
“It's difficult to find and win work”
Busted!
In 2015, the then coalition government lifted a number of barriers to make it easier for SMEs to compete for public sector work – such as getting rid of the pre-qualification questionnaire (PQQ) stage on lower-value projects and requiring public sector organisations to advertise all upcoming contracts in one place for added transparency.
Myth #3
“I don’t know where to start!”
Busted!
Despite these changes, public procurement is still a complicated field. So why not start with this guide? We'll walk you through the basics of public procurement – from what it is and where to find contracts to applying for and landing your first big contract.
Section 1
Getting to know the public sector
Before making a move into public sector work, it’s worth familiarising yourself with some of the key terms you’re likely to encounter. Government-based organisations can use a lot of jargon, and a basic knowledge of the language will go a long way.
Some of the basics include:
Public sector: includes all state-run organisations and bodies financed through the taxes you pay, for example local councils and central government, the NHS and so on.
Public procurement: the purchase of goods and services by public sector organisations.
Public contracts: public sector job opportunities. Contracts are awarded to the business that can offer the best value for money. Note that this doesn’t necessarily mean the lowest bidder – it means the bidder offering the best product for the price.
Awarding authority: the organisation buying the goods or service, advertising the contract and deciding who wins.
Section 2
What is the procurement process?
When the Government or any other public sector organisation needs to buy anything, from pens and paper to multimillion-pound equipment and infrastructure, it publishes a contract notice and invites organisations like yours to bid for it.
This, in a nutshell, is the procurement process, and understanding the ins and outs of this process will help you when it’s time to bid for contracts.
Because public procurement falls under such strict guidelines, governed both by EU and UK law, there is a lot of regulatory detail to get right. That means following a strict procedure when bidding for public sector work.
The process can be broken down into four main stages:
Stage 1: Advertisement
Public sector contract notices above a certain value have to be published on Contracts Finder – the UK Government’s official source of contract opportunities. The minimum values are:
- £10,000 for central government contracts
- £25,000 for the wider public sector
Scotland, Wales and Northern Ireland have their own websites advertising local contracts and it's also currently possible to bid for EU contracts using their dedicated website, TED.
The contract notice contains all the information about the opportunity being advertised, including the name of the buying organisation, what they’re seeking, any selection criteria, and the scope of the contract.
Stage 2: Selection
As it’s public and taxpayer public funds that are being spent, selecting who can formally bid for contracts has to be a detailed process. For high-value contracts, you'll still need to fill in a pre-qualification questionnaire – also known as a PQQ.
This is a screening questionnaire used to produce a shortlist of suppliers who will then be invited to tender. The PQQ examines the capability and suitability of potential suppliers to perform the contract, and covers your company's financial background, experience and references.
When submitting a PQQ, follow any instructions to the letter, making sure everything you submit is accurate and up to date. Be as clear as you can be and include all information that will help present your business in the best light, but don’t provide anything that’s irrelevant – it can be a case of ‘too long, didn’t read’!
Stage 3: Tendering
The PQQ lets the authority put together a shortlist of three to five companies who it believes are best placed to fulfil the contract. These companies are given an invitation to tender (ITT) and invited to submit a full tender response.
While the PQQ is kind of like your company’s CV, dealing with your background and experience, your tender response deals with how your business will fulfil the needs of this contract specifically.
While there’s no tried and tested template to follow when submitting your tender response, we’ll go through some hints and tips on submitting a bid in section three.
Stage 4: Award
Once submitted, each bid is then graded on a number of criteria on a pass/fail basis – a bit like the driving test. This includes deciding if the bid is feasible, is based on appropriate technology and meets the minimum technical requirements of the project.
After grading all the bids, the public sector organisation will have an idea of who is best placed to carry out the work. This company becomes the single preferred bidder.
They're sent an acceptance letter – a legally binding agreement before the formal contract is signed. There's then a ten-day 'standstill' period where any unsuccessful bidders are able to review the application and appeal the decision.
Section 3
The beginner's guide to writing a public sector bid
Writing a bid is a lot like applying for any job. To be awarded the contract, you have to know how to sell yourself and what your business can do.
Swot up
All the information you need to write your bid should be provided by the awarding authority before you start to put together the bid. If you have any questions, or need something clarified, get in touch with the organisation – they're required to be fully transparent.
Read through the documents and make sure you have all the skills to carry out the contract, and ensure that it will be cost effective for your organisation. You should also check if there any additional requirements sought – such as environmental considerations, insurance or accreditation expectations and diversity requirements – to ensure your business fits the bill.
What to include in a bid
The bid should include a series of documents, including a cover letter which summarises the bid itself and responds to the tender invitation.
- Include the purpose of the bid, and what problems you – and only you – can solve for the awarding authority should you win the contract.
- Summarise your company's experience, list similar projects you have worked on and any qualifications that will be useful in the role.
- Manage the client's expectations by including details on the deliverables and a timetable of delivery.
- Justify your pricing strategy – how do you provide good value for money?
- Introduce your team and how responsibilities will be distributed should you win.
- Include a SWOT analysis with a short overview of potential issues – you don't want to run the risk of over-promising.
How to write a bid
Run through every point listed in the brief and explain how your company's skill-set can solve the problems. Be obvious about it: use the exact phrasing from the brief, list each criteria and explain how you meet it to ensure the reader knows that you've read and understood everything and that your organisation is the best fit for the job.
Some things to consider:
- Remember: the customer is always right. Your bid should always come back to whatever the awarding authority wants and needs. Only include information that is relevant to the contract. When you do talk about your company's skills and experience, tie it back to how it would benefit this particular project.
- Be unique. Show off innovative ways to solve the problem outlined in the contract. You want to stand out against other bidders, so explain why this solution is exclusive to your organisation. This could also help justify a higher price-point.
- Go above and beyond. How will your solution to the problem provide added value? Will it improve the buying authority for the better long term? Will you create new jobs for the local area? Or benefit the environment?
- Include CVs or biographies for your team, making sure these documents focus on the attributes that will benefit the company.
- Check the details: edit your bid for grammar, spelling and readability.
- Check you are delivering it in the specified format. Each contract on the Contracts Finder website has information on how to apply – if the organisation wants a PDF, send it in PDF. As well as showing you have attention to detail, it will also ensure your bid can continue in the process.
How to price your public sector bid
It’s important to remember that when deciding on a price for your work in a tender proposal, it’s not about who is the cheapest. It’s about value for money.
That means proving that your bid offers the best outcome at the best price.
Consider including a breakdown of costs at each stage of the project, estimates of expenses, and always justify how you’ve arrived at your cost price. Be fair and realistic – the last thing you want is to undervalue your services or quote a price you can’t possibly deliver.
Protect your information
Everything in your bid will be eligible to be included in Freedom of Information requests. If your bid includes any sensitive data that could damage future commercial interests, or is considered a trade secret, include a protection of information clause.
It's also worth including a non-disclosure agreement (NDA) to prevent the organisation from using your ideas without hiring your company.
Section 4
Where to bid for work
While there are hundreds of new contracts and opportunities published every day, finding them can be one area where small businesses in particular don’t know where to even begin.
First-stop: the official websites
Public sector organisations are required to advertise transparently on the following official sites:
- Contracts Finder: for high-value contracts
- Public Contracts Scotland: contracts based in Scotland
- eSourcing NI: Northern Ireland-based contracts
- Sell2Wales: Wales-based contracts
- TED: for EU-based contracts
Stay in the loop
Local authorities often have lower-value contracts that don't need to be advertised on the official websites. Get in touch with your local council's procurement department and explain who you are and what you can offer. Let them know that you'd be interested in any upcoming opportunities.
Setting up email alerts on the official websites can help you to find out about new contracts and opportunities before your competitors, giving you more time to write your bid and pull together your paperwork.
Other types of opportunity
Sometimes a public sector authority may know they require work to be completed or a service to be fulfilled, but won’t necessarily know all the details up front – for example, how large the project might be or how many suppliers may be needed to provide a particular service. In these cases they often issue a Framework Agreement.
In a Framework Agreement, the buyer chooses a few pre-approved suppliers and sets the terms and prices in advance, then calls on those suppliers to deliver the contract when required.
Framework agreements can cover things required on a routine basis, like construction and maintenance, office and IT supplies, ongoing consultancy and so on.
Although there is often no concrete guarantee of work on a Framework Agreement, being awarded a place on a framework is a sign to others that your business is a key player in the industry.
Section 5
What happens after bidding?
If you’re unsuccessful
Treat it like any other failed application: dust yourself off and try again.
Study the award decision notice, which outlines the reasons why you were unsuccessful this time, and ask for feedback to find out what you could do better. It might be that another provider could offer more service at a lower cost, but it could be a small technical aspect such as your bid being formatted in a different manner. It’s all an opportunity to learn for next time.
In the rare cases where you don’t think the choice was made fairly – for example if it seems that the contract was handed to a friend of the reviewer – you can challenge the decision in some circumstances, such as proof of bias or incorrect exclusion.
And if you’re successful…
Well done! You’ve won your first public sector contract. It’s also now likely that your SME will be added to the approved list as a preferred supplier. This list includes every organisation that has already been vetted and meets the public sector organisation’s criteria, and a place on this list means your application could go through a lot more quickly in future.
Next steps
Remember, whether your business wins the contract or is unsuccessful this time, there’s always an opportunity to learn. What could you have done differently? It’ll help next time round. And if you’re willing to take the time and put in the work, you could find yourself winning lucrative contracts with the public sector, no matter the size of your business.