Small and medium enterprises in public procurement: Factors affecting the decisions of public bodies

Abstract

The study assesses factors influencing public bodies’decisions to conduct purchases with small and medium enterprises (SMEs). Mechanisms supporting SMEs are enshrined in the laws governing the system of state and state-corporate procurement in Russia and are mandatory for Russian contracting authorities. The inclusion of these mechanisms in the public procurement legislation implies their direct (explicit) impact, which applies equally to all regulated organizations. However, despite some similarities in the mechanisms for supporting SMEs in the laws on public procurement (both laws dictate to conduct set-aside procedures for SMEs), the frequency of procurement with SMEs participation differs between 44 FL and 223 FL. The study revealed that the choice of contracting authorities is influenced by the type of law, the position in the public power hierarchy, and the form of ownership of the organisation. The decision to purchase from SMEs is also related to the subject of the procurement and the method of identifying a supplier. The results of the study demonstrate heterogeneity in the behaviour of contracting authorities when purchasing from SMEs and explain the reasons of heterogeneity by differences in the regulatory pressure.