Why do organisations compete for government contracts?
This might seem like a fairly basic question, however, it is important to understand the advantages and disadvantages of doing so.
What are the disadvantages to competing for government contracts?
Knowledge – Knowing how to find government contracts can be very difficult and incredibly time consuming. Also, procurement in itself is a technical and complex process. If you don’t understand how a tender process works then it can be daunting and off-putting, particularly for an SME.
Resource – writing a tender for government contracts can be very time consuming and take up a lot of resource. It can seem like a wasted effort if the tender does not win.
Cost – aside from the human resource, there is also the issue of cost. Not everybody knows how to write a tender and so companies usually hire external consultants to help them. There is a cost to doing this which isn’t always recoverable. This can be particularly risky if there isn’t a high chance of success.
So, what are the advantages to competing for government contracts?
Stability – Securing a government contract is a ‘safe bet’ in that the payment terms are good, they pay invoices regularly and the contracts are often for a defined value for a defined term thereby providing security. This is how an SME can increase business security.
Value – public sector contracts are usually large in value, certainly larger than most private sector opportunities. This means that the return on investment for bid writing or tender writing can be substantial.
Fairness – there is a strong initiative for small companies to compete for public sector contracts (Click Here) and so the system is now much fairer and there are clear opportunities for SMEs to win government contracts.
In summary, many organisations see tangible benefits of tendering for public sector work and once they understand how to write a tender and how to win government a contract; the rationale becomes clear.
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