SME Participation in Public Purchasing: Procurement Policy Matters

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.

Keywords: international good practice, lot size, public procurement, regulation, SME participation