Many small businesses have given up hope of winning business with government. The perceived challenges are: bias towards big business, complex tender processes with high costs and heavy bureaucratic burden and then also an uneven playing field when it comes to procurement ethics. A fresh look at this may convince some to reconsider given the potential of the huge public procurement purse.
Natalie Greve last week reported on a talk by Eastern Cape Treasury audit and risk management chief director Andries Louw in a Smart Procurement World session in Midrand. He shared the opinion that there is ample opportunity for success in dealing with government if small businesses understand the rules of the game and know the playing field. The reality is however that there are many obstacles other than just the tender process to succeed. Small or medium businesses need to be aware of these and cross these hurdles to be successful.
Louw argued that small, medium-sized and micro-enterprises (SMMEs) are easily able to access the opportunities the public tendering system, if they understand in the basic requirements of the process and able to detect certain inherent procedural failings. He dismissed views that tenders remained the domain of larger, more established firms, asserting that smaller suppliers simply needed to understand the procurement rules applicable under the relevant organ of state. “No [company] that sets out to get business from government can be unsuccessful, because, if you go through a series of improvements, you’ll get it." He maintained that the Constitution and legislation allows fair opportunity to all contenders.
In this article I will not discuss the effect of ethics, corruption and the obstacles that upstanding new entrants face in that regard. Despite best efforts from legislators and regulators undue influence clearly still has an effect on many a procurement decision. That is best left for another discussion.
Landing a large government contract can put an SMME on the winning path forever. Once an existing supplier has a good chance of staying for the long haul if the service is good and the right emphasis is placed on customer relationships. But this is also a risky sector to serve and the financial calculations have to be in your favour before accepting additional risk.
Good customer relationship management will suggest that you need to know about an opportunity long before it is published in a tender bulletin. The reality of the SME scenario is that they do not have the resources to knock all the doors on a continuous basis to keep abreast of what is on the horison at every department.
Discovering tender notices from more than 600 organs of state in time to prepare a timely response is a daunting task and for SMME's almost impossible without a third party notification system. Small businesses simply cannot spare the resources to wade through all the tender bulletins, newspapers and websites on a daily basis. It will be foolish to even attempt to do this in-house and not use a tender notification service.
A fairly tedious set of documents need to be submitted along with every tender. The preparation of these documents can take up a large portion of the effort an SMME has to put into the tender submission.
Often all the tender preparation in SMME's may be done by a very small team. The key is to re-use your work. Once you do this work for the first tender make sure you keep copies of these documents and create summary sheets of all numbers and registrations for easy reference in a central location. Also make copies of all the standard bidding documents once completed but before you sign and date them to merely copy and sign the next time. The next tenders will then be much easier to complete and allow more time to focus on the proposition, financial calculations and the quality of the bid.
Firstly try to be sure this tender is for you before buying expensive tender documents. (Hopefully the days of high fees are counted but in the mean time be selective in paying for tenders.)
Investigate the financial health and funding position of the department, municipality or state owned company in question. Delays in payment are most often due to lack of funding and mismanagement in the organ of state. Despite serious attempts to improve public sector payment cycles, we still hear many complaints about non-payment by organs of state. It is important to protect your business from this severe pressure. Ensure there is sufficient working capital in your business to wait at least 60 to 90 days for payment and work that into your costing at tender time.
If you do not understand the requirements in detail do not waste the effort to submit a tender. When the requirements are vague ensure you attend the briefing/clarification session and ask for absolute clarification. Take care not to expect the customer to explain the industry to you, however. Make sure you know more about your product/service than the bid teams at the customer do. That will prevent exposing a lack of knowledge or insight that will damage your reputation right at the start. Being unclear of the requirements will cause you to lose the bid and your evening(s) may be better spent in the movies.
Over the years a number of horror stories have emerged on how suppliers have been scammed in tender processes. Impostors pretend to act on behalf of a public entity and then walk away with hefty tender fees or even worse, your merchandise. Check the legitimacy of the tender by using some good old fashioned common sense and some investigation skills: Are they asking for products or services related to the services produced by the department of public entity? Do the contact details make sense. Check the bank account you pay tender fees into. Location of briefing sessions and tender box should make sense. Just check on these aspects and you should be safe.
Engage the bid team to find out why your bid was not successful and at which step the bid dropped out. Solicit as much feedback as possible and learn from that. A good suggestion is to create a database of failed bids and lessons learned. Review this before you start your next tender and improve on the reasons for previous failure.
Government tenders are not for everyone but if it will put your business on a growth path then pursue it with passion, capability and caution in appropriate doses. To start competing for a share of the R500 billion procurement budget of the South African government start with finding the tenders and then initiate a good logical bid process.
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