Start-up friendly procurement experiment has proven useful

Better access for SMEs to public tenders in Denmark

It is a demanding process, but it works.

That is the conclusion from Niels Martin Andersen, Chief Advisor at the Danish Ministry of Industry, Business and Financial Affairs and the lead manager on a project to use the flexibility allowed in Danish public procurement legislation to offer better access to tenders for small and medium-sized companies (SMEs).

SMEs often find it too difficult to participate in public tenders, as they require too much effort for small companies which usually throw in the towel even before getting started.

The purpose of the so-called GovTech programme organised in cooperation between the Ministry of Industry, Business and Financial Affairs and the Agency for Digitisation has been to find new ways of doing public tenders to bring the process closer to the realities in which SMEs thrive. The first round of the programme was launched last year, and the beginning of this year saw the start of a larger round encompassing six government bodies and agencies.

Participating in that round were the European Consumer Centre Denmark (Forbruger Europa) the Danish Agency for Digitisation (Digitaliseringsstyrelsen), the Ministry of Industry, Business and Financial Affairs (Erhvervsministeriet), Aarhus Municipality, the Ministry of Environment and Food (Miljø- og fødevareministeriet) and the Danish Safety Technology Authority (Sikkerhedsstyrelsen), all looking for creative solutions to their challenges.

Clearly defined challenges

The aim of the program has been to write up, in brief, a specific and clearly defined challenge and then invite suggestions for solutions from companies of all sizes in Denmark and abroad, followed by pitches and then a particular tender procedure conducted by each of the participants.

The aim was to avoid missing out on innovation by not finding the best solutions on the market from merely having smaller companies pass on such opportunities.

“We have been innovating and learnt a lot from this process, but it’s always easier said than done,” is the take-home conclusion from Niels Martin Andersen. He explains that the GovTech programme has been aimed at testing a new, more innovative approach to the process that leads up to a tendering round. The procurement process itself has not been a part of the programme.

Usually, public procurement processes can be quite substantial, requiring a comprehensive understanding of the solution that is sought. However, in the project period, the aim has merely been to describe a challenge, invite the best possible companies to a dialogue on possible solutions and then offering advice on how to use flexible procurement schemes within the procurement law.

Challenging conventional ways of thinking

While the project has been a success, it has also thrown up important lessons on what it takes to get a completely different way of running tenders off the ground.

“We still have a challenge in the public sector in how we procure from and cooperate with smaller companies. We also have some conventional ways of thinking to change. It’s easier to run a framework contract, and typically it’s easier to go for what you already know, whereas going for a small start-up might seem risky. It takes some work to think in new ways,” Niels Martin Andersen says.

In his experience, such a change in thinking needs to broad-based.

“We’ve learned that it’s important to have everyone on-board and have a strong mandate. In my view, it requires top-level engagement in an organisation to move this plan,” he says.

Not born out of idleness

“We’ve learnt that we, as the public sector, get a greater selection of innovative solutions if we engage with SMEs as well as the larger companies. The GovTech programme was not born out of idleness. It’s an approach that was picked to get the best and most innovative solutions. And quite frankly we’re doing everyone a favour here. We in the public sector gets access to more innovative tech solutions; and by handing out contracts more evenly to small as well as large companies we’re supporting a growing ecosystem of innovative tech companies”, he says.

He also stresses that the process has not been aimed at excluding large companies – where there is also often great innovation to be found. The only difference is that problem-driven tendering and market dialogue allows higher chances for everyone to be heard.

While the second round of the GovTech programme ended in February, the ensuing process of the actual tender procedure has been put on hold by the coronavirus crisis.

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Several of the participating agencies have continued their work on procuring solutions for the challenges they originally described. But this is a process that will stretch across more time depending on internal processes.