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In a EU-wide research regarding the needs of SMEs in public procurement (2021), companies indicated main barriers to participating in foreign tenders:
It seems a large part of suppliers face obstacles to participating in foreign tenders. Problems range from prohibitive requirements and information availability to language and unequal treatment.
This has partially been responsible for the low rate in inter-country collaboration through tendering, despite the EU Single market agenda: On average in EU, only 2.1% of tenders are won by foreign companies. More common are scenarios where tenders are won by a subsidiary of a foreign company (20.7%)
So, a quarter of tenders are won by “foreign companies” (directly and indirectly) and three quarters are won by the local player. Is this cross-country collaboration sufficient?
Buyers are interested in high-quality competition, i.e. active participation by suppliers, which increase the Buyer’s chances to receive good quality products or services, while keeping costs low (both administrative and financial).
By engaging foreign suppliers during tender planning, Buyers can both inform potential suppliers regarding planned tenders, and give them the opportunity to comment planned requirements, potentially decreasing their barriers to bid the upcoming tender.
It is then possible for Buyers to evaluate the pros and cons of engaging foreign suppliers.
+ Decreased costs from competition
The level of competition, i.e. the number of tender participants, directly decreases Buyer costs. In a research commissioned by the European Commission, substantial reductions on the final contract price of 3.9% per bidder. This is one of the reasons why increased tender competition is one of the strategic objectives outlined by the European Commission.
+ Decreased risk of not concluding a contract
Higher involvement of foreign bidders in the tender can overcome the risk of local market supply not being sufficiently deep to fulfill all Buyer requirements and meet the Buyer’s budget. Foreign bidder engagement could decrease such cases, where a tendering procedure ends without results due to insufficient qualified bidders.
+ Experience and quality
In some cases, foreign bidders can have certain advantages in terms of experience or better value-for-money offerings. Such cases are frequent when a certain industry is more developed in foreign markets. Only by involving foreign companies can the Buyer learn regarding potentially important improvements to offers, which must be reflected in tender requirements.
Proactive communication with suppliers during tender planning requires time and effort from busy Buyer specialists. Buyer agents must often analyze foreign markets to identify such suppliers, which is no easy task. This is why at Sorsera we are so focused to offer easy supplier identification to Buyers.
To engage and communicate with foreign suppliers, Buyer agents must write and talk in English. This language barrier can provide additional challenges, for example, to effectively describe Buyer needs, as well as to understand supplier offers in detail.
Buyers can also be deterred by concerns regarding contract execution, if it is concluded with a foreign company, for example, regarding effective communication. Therefore, already when planning a tender, requirements should be comprised in a way that, if a foreign bidder wins the contract, the contract would be optimized for this (for example, by prescribing the methods of communication, involvement of translators, reports, etc.)
Based on these consideration, Buyers can decide how much effort to put into engaging foreign market players during tender planning. This level of involvement can depend on many factors, incl. industry dynamics, Buyer experience, contract subject, among others.
From a legal perspective, Buyers cannot make unjust barriers for bidding tender, as well as EU-wide notice must be published on the TED system above a certain threshold. However, as data shows, these instruments are not sufficient to promote foreign competition in local tenders.
By understanding the barriers suppliers face to bid foreign tenders, Buyers can encourage their involvement in tenders - but they must approach this consciously, proactively and with foresight.
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