Information on how to encourage the participation of SMEs

1. Introduction

This guideline provides a framework for public authorities to enhance engagement with market actors, particularly focusing on how cities and communities can foster broad involvement in procurement activities. The document outlines specific strategies and activities to increase accessibility for diverse suppliers, with a strong emphasis on MSMEs and startups. Activities include developing digital resources, facilitating supplier mapping, and organizing working groups and events for direct engagement. Further, it addresses ways to simplify requirements, promote participation, and establish fair and transparent criteria to evaluate suppliers, ensuring inclusivity and competition in the procurement landscape.

2. Why the involvement of MSME’s is important

The role of public procurement extends beyond merely acquiring goods and services; it can drive local economic development, foster innovation, and build robust partnerships across sectors. This guideline provides actionable strategies for cities and communities to effectively engage a diverse range of market actors, with particular attention to MSMEs (micro, small, and medium-sized enterprises) and startups.

Involving a broad spectrum of suppliers not only supports a fairer, more dynamic procurement environment but also contributes to a more innovative and resilient economy. By making procurement processes more accessible to smaller and emerging businesses, public authorities can foster a marketplace where MSMEs and startups are empowered to compete, collaborate, and grow. Such inclusivity allows these firms to gain valuable experience and resources through public contracts, helping them scale their operations and strengthen their market presence.

3. Procurement initiatives and strategies

This section presents procurement initiatives aimed at increasing the engagement and participation of diverse market actors. These initiatives encompass supplier mapping, simplified requirements, events for market engagement, and pre-tender consultations.

3.1 Supplier mapping

To better understand the landscape of potential suppliers and ensure that procurement opportunities are well-publicized, public authorities could develop a digital repository of suppliers. This repository serves as an accessible and up-to-date source of information about available market actors, making it easier to target and engage diverse suppliers.

Digital repository/supplier list: Authorities could establish a simple, user-friendly online registration process for suppliers. Steps should include:

1. Initial registration through an online form, capturing essential information such as company size, areas of expertise, and contact details.
2. Verification procedures to ensure the reliability and accuracy of supplier information.
3. Options for suppliers to update their profiles as needed.

European Space Agency’s Registered SME List

Registration forms: A standardised registration form template, including fields for contact information, qualifications, capabilities, and certifications, can streamline the process. The form should be simple and accessible, accommodating the needs of smaller businesses that may have limited administrative resources.

Criteria for notifications of upcoming tenders: Set criteria for notifying suppliers about upcoming tenders. For instance, suppliers registered in relevant categories may receive early notifications, especially for projects requiring specialised expertise. Prior Information Notices (PINs) can be used to alert the market in advance, allowing potential suppliers sufficient preparation time to submit competitive bids.

The German Federal Government Procurement PINs’ portal

3.2 Participation Strategies

Public authorities play an important role in levelling the playing field for MSMEs and startups. By structuring procurement opportunities that are accessible to smaller entities, they encourage broader participation and foster a competitive environment.

Smaller companies often face challenges when bidding for large projects due to resource limitations and lack of experience in bidding for tenders. Public authorities can address this by:

• Dividing by smaller lots: When possible, break down larger projects into smaller lots, which can be more manageable for MSMEs to handle. This approach allows these companies to participate in public procurement without facing overwhelming competition from larger companies.

Rome’s multiple lots tender

• Create guidelines for collaboration in consortia: To enable MSMEs and startups to participate in larger procurement projects, public authorities can support the creation of consortia, allowing smaller firms to combine resources and expertise. By forming consortia, MSMEs and startups can strengthen their competitive position and collaborate effectively to meet project requirements typically suited to larger firms. The guidelines encourage consortia to clearly define each member’s roles and responsibilities, with one partner designated as the lead for project coordination and communication. Additionally, these guidelines recommend establishing a contractual framework that covers essential elements like responsibilities, intellectual property, and dispute resolution. Public authorities can further support consortia formation by organizing consortium-building workshops and offering administrative assistance to ease the entry of MSMEs and startups into larger projects.
• Framework agreement: Framework agreement designed for startups and MSMEs streamline procurement by allowing firms to undergo a one-time pre-qualification process, making them eligible for multiple opportunities without repeated bids. These framework agreement often span several years, offering recurring “call-off” projects that smaller firms can pursue within an established pool. Subsequently, for each specific need, application contracts will be stipulated within the framework agreement. With a flexible structure, they break larger projects into smaller, manageable lots, allowing MSMEs to select tasks suited to their resources. Pre-set terms for pricing, quality, and delivery reduce uncertainties, while support provisions—such as training sessions or feedback mechanisms—help MSMEs build capacity, creating a stable and growth-oriented procurement pathway. 

3.3 Requirements simplifications

Complex requirements can be a significant barrier for smaller companies. Simplifying documentation and making processes more accessible help ensure that smaller market actors are not discouraged from participating. 

• Simplified documentation: Reducing the amount of required documentation and clarifying application requirements is a practical step in making the process more accessible. This could include templates with only essential information requirements and instructions that are concise and easy to understand, or the use of the e-CERTIS / European Single Procurement Document (ESPD), available here.  
• Clear and concise tender documentation: Draft tender documents that are straightforward and avoid unnecessary jargon. Offer example templates or brief explanations of key documents to help suppliers understand what is needed without extensive administrative support.
  

3.4 Market analysis and community development

To maintain relevance and inclusivity, public authorities should actively engage with the market and community, organizing events and consultations that build stronger relationships with suppliers.

Creating a participative community through events helps public authorities engage directly with the supplier market, fostering transparency, collaboration, and alignment between procurement goals and market capabilities. Events such as working groups, seminars, pitching sessions, and community coding events provide invaluable opportunities for public entities to communicate their needs while suppliers gain insights into procurement processes and expectations. Different types of events serve various engagement purposes:

• Working groups, seminars, dialogues: These sessions can be educational, aimed at familiarizing suppliers with procurement requirements, processes, and best practices, such as sustainable procurement standards. They allow MSMEs to understand eligibility criteria, navigate tender documentation, and clarify administrative procedures. These may include preliminary or open market consultations.
• Pitching events: These events offer suppliers a platform to showcase their innovative products or services, promoting creativity and competition. They are especially beneficial for startups, as they provide a direct channel to present solutions and explore potential partnerships with public entities. 
• Challenges, hackathons and community coding events (e.g., “codes for…” sessions): Hackathons and coding events enable collaboration on digital or tech-focused challenges and are useful for sourcing quick, creative solutions to specific public challenges. These formats encourage problem-solving and networking, creating opportunities for local talent to connect with procurement opportunities while gaining visibility and experience.

Space4Cities Project’s community development   The Space4Cities projects bring together innovative digital solutions providers for Municipalities and other organisations at local, regional and EU level. The community is developed through Challenges, Question&Answers, Matchmaking, and Open Market Consultations.

• Startup in residence programme: A "Startup in Residence" programme enables public authorities to become the launching customer for innovative solutions developed by startups. Through this programme, startups collaborate directly with government agencies to co-create solutions addressing specific public-sector challenges, with the intent that these solutions will be implemented within the government itself. Public officials provide mentorship and support, helping startups refine and pilot their offerings within a real-world context. This approach not only facilitates market entry for startups but also enables the government to adopt innovative solutions tailored to its needs and building a community of start-ups around them. 

The Dutch Startup in Residence

To ensure event effectiveness, authorities should set clear objectives, tailor activities to the needs of MSMEs and startups, and provide structured formats that facilitate engagement. Objectives might range from gathering feedback on tender requirements in working groups to identifying innovative solutions in pitching sessions. Events should be accessible to smaller suppliers, addressing their unique challenges through simplified materials and briefings. Incorporating networking and feedback opportunities enables MSMEs and startups to connect with public officials and gain insights, helping them navigate procurement processes and prepare stronger bids.

4. Criteria for assessing suppliers

To promote a fair and inclusive procurement process, authorities can design supplier award criteria (in the case CA will decide to proceed with MEAT award criteria) that value the contributions of MSMEs and startups, focusing on quality, innovation potential, and local impact. Examples of these award criteria are:

• Innovation potential: Recognize the startup’s innovative technical solutions or creative approaches. For example, a tech-based MSME proposing a predictive analytics tool to optimize resource allocation could score points for innovation based on the tool’s novelty and applicability to specific governmental needs.
• Technical capability and quality: Evaluate the solution’s feasibility and quality in addressing the government’s challenge. For example, a solution that integrates seamlessly with existing government systems and offers robust data security measures would score well on technical capability.
• Local community impact: Award additional points for startups and MSMEs that demonstrate local or regional impact. A small business offering sustainable packaging solutions that support the local supply chain, for instance, could receive favourable consideration for promoting local economic growth.
• Points for MSME involvement: Assign additional points for bids led by MSMEs or those in partnership with larger companies. This encourages joint ventures and consortia where startups can contribute innovative ideas and expertise to larger, more resource-intensive projects.
• Sustainability and social objectives: Align evaluation criteria with broader goals such as environmental sustainability, local job creation, or social impact. For example, MSMEs focused on green technologies or those providing employment to underserved communities could receive higher scores for contributing to long-term sustainability objectives.

Regarding financial requirements during selection phase: 

• Flexibility in financial requirements: Where possible, assess MSMEs based on growth potential, scalability, and innovative contributions rather than strictly financial capacity. For example, startups offering disruptive technologies may not have significant financial histories but demonstrate high future value. Adjusting financial thresholds or offering flexible evaluation criteria can make procurement more inclusive. For instance, offering consortia of MSMEs to jointly fulfilling financial (or technical) requirements. 
• Feedback mechanisms: Offer specific, actionable feedback to unsuccessful MSME and startup bidders. For example, feedback might highlight areas for improvement in proposal clarity, adherence to technical requirements enabling MSMEs to refine future submissions.

5. Conclusions

This guideline has highlighted how public procurement can go beyond simply buying goods and services to actively supporting economic growth and innovation by involving a wide range of market actors, especially MSMEs and startups. By implementing strategies like supplier mapping, framework agreements, simpler requirements, and interactive community events, public authorities can make procurement more accessible, fair, and supportive for smaller businesses. These practices allow MSMEs and startups to bring fresh ideas, agility, and expertise into public projects, helping them grow and contribute meaningfully to the local economy.

The award criteria outlined here also promote inclusivity by recognizing the strengths of smaller suppliers and emphasizing local impact and sustainability. By following these guidelines, public authorities can create a procurement process that values diversity, encourages innovation, and builds strong partnerships. In doing so, procurement becomes a tool not only for meeting public needs but also for building a vibrant and connected community of businesses that contribute to a stronger, more resilient economy.