Abstract
This paper investigates the relationship between regulatory policies governing public procurement and participation by small and medium enterprises (SMEs), using a large dataset on European procurement. We find that countries with better quality procurement regulation have greater SME participation and higher probability that SMEs win contracts. Dividing contracts into smaller lots bolsters participation by SMEs, but only increases the probability of SMEs winning contracts for small value lots (â?¬25,000 or less). Counterfactual simulations suggest if governments want to enhance participation by SMEs in public procurement the focus should be on improving the overall quality of procurement processes.
Highlights
This paper investigates the relationship between the quality of regulatory policies governing public procurement and participation in public tenders by small and medium enterprises (SMEs)
We find that the quality of Public procurement (PP) regulation, as measured by indicators compiled by the World Bank and by Digiwhist – a European public sector accountability research initiative5 – has a statistically significant positive relationship with Small and medium-sized enterprises (SMEs) participation in PP tenders
Competition is a key feature of good public procurement regulation
Summary
Small and medium-sized enterprises (SMEs) are the backbone of every economy. They account for more than half of total employment globally, play a vital role in improving and sustaining social cohesion and integration (OECD, 2018), and are drivers of economic growth in developing nations (Obi et al 2018). A substantial body of research has shown that many constraints faced by SMEs diminish their ability to grow. We use detailed panel data to examine the impact of PP regulation on SME participation in public contracts in 32 European countries.. We assess both the impact of generally applicable PP administrative policies and a type of policy used by many countries to increase SME participation in PP: reducing the size of contracts and subdividing lots. Our interest is to investigate whether PP policies affect participation in procurement processes by SMEs and the probability of success in winning contracts.
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