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Participation in public tenders is a considerable burden for small and medium-sized construction companies
Participating in public tenders costs small and medium-sized companies both financially and psychologically. Researchers at the IfM Bonn have examined how high these costs are in construction companies of different sizes. The result: While the financial costs are acceptable, the negative emotions lead to a decision not to participate in public tenders.
Nov 28, 2024, 11:03:26 AM
Dr. Jutta Gröschl
, Institut für Mittelstandsforschung (IfM) Bonn
Incomprehensible requirements, the same documentation over and over again and inefficient processes lead to psychological stress such as frustration and anger in small and medium-sized construction companies (SMEs) when participating in public tenders. This is the result of a recent study by the IfM Bonn, which examined the bureaucratic burden on three companies in the construction industry. It showed that such psychological stress occurs particularly in the phases of searching, compiling the formalities and submitting the offer. In addition to psychological burdens, the study also analysed the monetary costs. For the smallest construction company (with up to 9 employees), the costs amount to around 3,070 euros per public tender at the municipal level. The small and medium-sized companies spend between 900 and 1,600 euros because they benefit of economies of scale and routine processes. The monetary costs are particularly high when preparing the offer. 50% or 90% of all monetary costs arise in this phase depending on the company. However, these costs are usually accepted because the preparation of the offer is perceived as a fundamental requirement for participation in public procurement. The digitalisation of procurement is urgently needed Since there is little scope to reduce monetary costs and negative emotions such as frustration, anger, and irritation can lead to a withdrawal from public tenders, the researchers at IfM Bonn recommend to focus more on the psychological costs when reducing bureaucracy. "An important step would be the rapid introduction of the ’Once-Only' principle. This would mean that companies, having already submitted their data to public authorities, would not need to provide it again elsewhere. Additionally, a central procurement platform where tenders from all public contracting authorities are easily accessible, along with standardised processes and seamless data entry, would significantly reduce the psychological burden on companies," recommends IfM researcher Sebastian Schneider.