U.K. Costliest Country To Bid On Government Contracts

U.K. tops all European Union countries in expenses incurred by firms bidding on government contracts. It's tough as ever for small companies, especially those in IT, to win government business.

Gary Flood, Contributor

July 12, 2013

2 Min Read

The British government has long acknowledged that it's inordinately difficult for small firms, especially those in IT, to win its business. Now we know why.

The U.K.'s government procurement process is the most expensive of any country's in the European Union; in other words, the costliest of 27 countries. EU suppliers on average spend £23,900 ($36,124) to bid on a public sector contract, according to a new report from the Centre for Economics and Business Research. In the U.K., the average cost is almost twice that, at £45,200 ($68,319),

The procurement process lasts 53 days longer in the U.K. than the EU average, and 20 days longer than Italy's, the next-longest cycle.

The average cost to a U.K. branch of government of taking bids is £1,260, according to the report, making the country the fourth most expensive place in Europe for public bodies to put contracts out to market. Only Denmark, Norway and Italy record higher costs for this part of the process. The U.K.'s cost is well above the EU average of £800, making its public procurement process 58% more costly than its European neighbors.

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The British government spends £230 billion ($348 billion) a year on contracts. However, the cost and complexity of bidding on government contracts has a negative effect on the value the public sector is able to achieve, said the report: "Longer, more difficult processes dissuade potential suppliers from submitting bids, meaning that the eventual winner comes from a smaller pool of bids which is less competitive."

It also said complex processes also "tend to discriminate" against smaller firms which can lack the required resources to commit staff to a time-consuming, and therefore expensive, procurement process.

The study noted that a recent Brussels mandate to make more e-procurement obligatory for all European government bodies goes into effect in 2016. Meanwhile, the British government says it has been attempting to remove barriers for small- and midsize businesses (SMBs) in all sectors to win business, with a stated goal of 25% of all contracts awarded to small firms by 2015.

It has acknowleged the issues that can make life difficult for smaller companies to bid, even going so far as to appoint an SMB "czar," Stephen Allott.

One of Allott's jobs is to monitor the government's "Mystery Shopper" program, set up to tackle bad procurement practices. Last December, it published data suggesting that of 300 complaints received so far, 80% were about the procurement process, with some SMBs expressing concern about "unachievable" pre-qualification financial requirements.

If the Cebr is still finding the procurement process this difficult three years after the Coalition said it was going to reform the process, what progress is being made, ask critics.

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