Last July Commonwealth procurement rules doubled the target for the proportion of government contracts delivered by SMEs, from 10 per cent of the value of all contracts to 20 per cent. Plus each state has its own targets, for example Queensland’s is 30 per cent and NSW states that for procurement up to $3 million, the government must consider SMEs first.
Author of Winning government business – the 6 rules and 9 absolutes for SMEs and managing director of Gov Ready Thomas Pollock says that, since 2020 in particular, opportunities have accelerated as the government finds ways to support SMEs, partly an effort to aid pandemic recovery.
“A lot of incentives have been put in place to level the playing field with big business and to give small businesses a better chance to win these contracts,” he says.
Pollock adds that the average government contract is $60,000 – within the capability of many small businesses to deliver, especially if they collaborate. He estimates that in the early 2000s he missed out on millions of dollars worth of contracts because he didn’t think his business would be able to meet 100% of the contract requirements.
“What I didn’t know back then was collaborative bids – or some governments call them cooperative bids – are really welcomed by government,” Pollock says.
“Forty-four cents in every dollar that a small business makes stays in its local community, so there are economic, social and cultural benefits to that,” Pollock says, adding that the appointment of multiple small businesses in collaboration has the potential to spread the benefits across several local communities.
Finding the right fit
When choosing a prospective collaborator, Pollock says it’s key to consider whether a business complements or competes with you.
“When a tender is released, you usually only have three to four weeks to respond, which is where most small businesses fall down because they don’t have the partnerships in place, or they don’t have their capability statements ready. It’s a really good idea to get a handful of potential partners and have them ready to go should the opportunity arise,” he says.
These partners can be found in places such as your local business networks, chambers of commerce and government networking events.
Be prepared
The short time frame for responses to contract opportunities also means SMEs should have all their paperwork pre-prepared, and have decided who the main contact point will be in a collaborative bid.
A professional capability document is required from all parties – this can be prepared within the business but Pollock suggests that as it is a reflection on the business and will become a longer-term asset, it may be worth having it done professionally.
You will also need a range of other documents including client testimonials, and policies and procedures. These will need to cover risks familiar to small businesses, such as privacy and data security, as well as others that some small businesses may be less familiar with. For example, your business’s process and policies for assisting a staff member experiencing family violence may be taken into consideration.
“The smart small businesses get this in place beforehand, and then when tender opportunities come out, they just have to fill in the blanks,” Pollock says.
And those opportunities are there for the taking.
“The problem for both state and federal governments is that there’s not enough small businesses putting their hands up and saying ‘Hey, we’re good to go. We can service these contracts’,” Pollock says.
“There’s big demand and not enough small businesses doing it.”
Pollock points to Queensland Government procurement to illustrate this point.
“Many tenders are only getting a handful of businesses making submissions,” he says, sharing the example of a recent pest control contract worth $177,000. Despite an open offer process, just four businesses responded with submissions.
Another contract, for the supply and delivery of quarry materials worth almost a million dollars, was awarded to one of just two contractors that tendered.
Pollock says that while a lot of accountants and business advisers help their clients apply for grants, he believes government contracts are a much better bet.
“Thousands and thousands of businesses apply for grants. It’s massively competitive and there are only small pools to be shared among lots of businesses,” he says.
“Bidding for government work is much, much less competitive – you might have three or four businesses – and the contracts are far greater. The much bigger opportunity is to get into government supply chains.”
Thomas Pollock recently hosted a CPD seminar for the IPA, discussing the actions that help small businesses bid for and win government contracts. His session is now available on demand.
