A shake-up of public procurement aims to drive a quarter of all contracts to small firms. How do you make your bid stand out from competitors?

Public sector procurement has frustrated SMEs for a long time. They say the award of government contracts is skewed towards larger businesses and proves too complicated for smaller firms to spot opportunities. But changes due next month will make the process easier, with the government aiming for 25 per cent of public contracts to be given to SMEs. Recent research by freelancers' marketplace PeoplePerHour shows that more than a third of small businesses planned to bid for government contracts this year. But the Small Business Survey also found that 40 per cent of respondents feared that the contracts would be won by bigger companies.

Public sector bodies, including central government, the armed forces and the NHS, spend around £220bn a year on goods and services—everything from stationery and office furniture to medical equipment and catering services.

Emma Jaques, author of Bid Management, says competing for contracts may be tough, but it is worth the effort. "SMEs should consider this as a route to market, it could be very lucrative; bidding to the public sector means an almost guaranteed income, they will pay you well and you will definitely have a contract," she explains. "So many small businesses disqualify themselves from bidding because it is too difficult or time-consuming and you just know they could do a fantastic job for the public sector."

Following 2008's Glover Report, which looked at how best to engage SMEs in public sector tendering, the government has revised the rules. In her report, Anne Glover made 12 recommendations; among them introducing a single portal where contracts valued over £20,000 should be published as well as a standardised pre-qualification questionnaire, or PQQ, to avoid suppliers having to submit the same information for each bid they make-a current requirement.

Jaques says the PQQ—where businesses submit documentation on issues such as health and safety policy, equal opportunities and sustainability—is the hardest part of the bidding system and takes up a lot of time, too, but it is crucial if you want to be successful.

"The pre-qualification stage is essentially a disqualification process, you look for reasons to get rid of people and if you, as a bidder, don't take it seriously it is a bit like applying for a job and not answering all the questions," she says. "People can get very disheartened at this stage because it is a lot of work and then it is so hard to get through the PQQ stage."

Fulfilling Glover's key recommendation from April, a new website, Contracts Finder, will replace Supply2.gov.uk, the main portal for public sector contracts. Tendering opportunities thought especially suitable for SMEs will now be flagged clearly.

But Supply2.gov.uk has not been the only portal to publish tendering opportunities and that is one of the main gripes for smaller businesses, which say locating the right opportunities has been too complex. European Union legislation stipulates that all contracts with a value above £100,000 must be published through the Official Journal of the European Union (OJEU) so any supplier across Europe can bid for those contracts. But below that threshold there is no requirement to publish on the main European register. In the UK there has so far not been a single register on which to publicise opportunities, but from next month Contracts Finder will list all central government opportunities above £10,000.

Gill Thorpe, managing director of merchandise supplier The Sourcing Team, says the system has been difficult to navigate. "Our company is signed up to approximately 43 sites to make sure we see all the relevant opportunities, which is just ridiculous. We have one person who spends most of her time dealing with it," she says. "We need a simpler system for SMEs to come in and go for the business because at the end of the day they say they want the best price and the best service, and they want to find these great suppliers and manufacturers, but how many UK manufacturers have got the time to do it?" she asks.

David Dinsdale, formerly a director of outsourcing firm Serco, says companies must treat bidding for public sector contracts in the same way they approach other aspects of their business. "It is like entering a new market or launching a product, you need to commit to it, you need to invest the time and resources to make the approaches successful," he says. "The times I find people get disheartened is when they think 'we'll have a go at that', stick in a couple of bids and not get anywhere because they don't really understand the system and so they think it is all bad."

PQQs are usually whittled down to a shortlist of six to eight bidders, which are invited to tender. "That is the point at which you have been pre-qualified so they know you are a credible and competent supplier," says Jaques. "In an invitation to tender (ITT), suppliers put forward a proposal against the set of requirements and they put a price on their proposal." Buyers look for the so-called Meat criteria: the most economically advantageous tender. But it doesn't mean the cheapest proposal wins; buyers look for the perfect mix of quality and cost.

"What tends to happen is that contracts go to those who are prepared to make the effort or who have the resources and this is why it becomes skewed towards larger organisations because they are the ones capable of getting themselves through the bidding process," explains Jaques, who adds that SMEs should grasp the nettle. "It is not as difficult as they think and there are good opportunities out there; with a relatively modest investment in time and effort they could get themselves bid-ready."

Her advice is to be realistic, pragmatic and to maximise effort. "It is a competition after all," she says. And Dinsdale agrees. "In the same way as any other business development process you should define how you will run this business development, decide how many bids to submit and how many you expect to win," he says. "The commercial details of the deals that are won have got to support the fact that half of them are lost."

The bid: three golden rules

1. Is it deliverable? Consider whether this is a contract that can be delivered; look closely at your operating model as well as your capacity, skill, experience and expertise. Make sure that what the client requires can be delivered without too much extra investment.

2. Is it winnable?
Ask yourself how well you know the client and if you have any credentials that set you apart from competitors.

3. Is it profitable?
Make sure that in making your bid winnable you have not built in so much cost that you are now uncompetitive.