According to the Entrepreneur Gallup conducted in August, SMEs are interested in expanding their operations into new and smaller municipalities if public procurement increases. Of the more than one thousand SMEs that responded to the survey, as many as 41 percent said they were interested in expanding their services to new areas. In addition, 51 percent stated they would be willing to offer their services if procurement activity increased.
The government is in the process of amending regulations concerning in-house companies, also known as affiliated entities. In the future, a contracting authority would be required to own at least 10 percent of the company from which it makes in-house procurements. Katja Rajala, business policy expert at the Federation of Finnish Enterprises, notes that the current law has enabled the use of in-house companies and the avoidance of competitive tendering with minimal ownership.
“Circumventing procurement must be stopped so that taxpayers’ money is used efficiently,” Rajala says.
Small municipalities have expressed concerns about the availability of services if in-house procurements are restricted from affiliated entities. According to Harri Jaskari, Director at the Federation of Finnish Enterprises, these concerns are unfounded, as entrepreneurs are indeed ready to provide their services and participate in tenders if the markets are opened.
“Competitive tendering can serve as a springboard for business growth,” Jaskari says.
Of the companies responding to the survey, one in five believed that in-house companies had weakened their opportunities to provide services to the public sector. Meanwhile, 46 percent disagreed. One third of the respondents believe they can compete successfully against in-house companies in tenders.
Number of Procurements in Decline
The economic situation in recent years has had a strong impact on public procurement. Entrepreneurs’ experiences emphasize the reduction of procurement volumes. Twenty-five percent of SMEs estimated that the number of public procurements had decreased over the past year, while only 5 percent reported an increase.
Of the SMEs surveyed, 29 percent said they had participated in tenders over the past year. About half of these were companies with more than ten employees. The most common reasons for not participating were that their products did not fit the tenders, or that small businesses found it difficult to compete against large operators.
“Market dialogue and breaking down procurements into smaller parts also enable smaller companies to participate and create genuine competition. Fair competition benefits citizens, businesses, and the entire economy,” Jaskari says.