MyFondia VirtualLawyer
April 8, 2020

Public procurement contracts – a recession insurance for your business?

A colleague of ours always describes the positive sides of public sector customers with words like stability, long-term contracts, safety, and solvency. These attributes sure are of great value when thinking about a company’s bid strategies these days. Now it’s time to start following procurements before everyone else starts doing it, too!

In times of economic boom, companies may decide not to bid in public procurements. Public procurements are sometimes associated with bureaucratic tendering processes that require in-depth understanding and in which you can’t make any typos. In addition, compared to price-centered public contracts, suppliers can often find more lucrative deals within the private sector. Thus, B2B may, at first glimpse, appear more lucrative.

When the economy takes a downturn, public procurements begin to interest all kinds of companies, and competition within the procurement field tends to rise. Every possible deal becomes very important in times of recession. If orders from the private sector suddenly stop coming, companies will seek to fill their order books by pursuing the “stable” and “long-term” contracts that the public sector has to offer. Because that is exactly what public contracts usually are, stable and long-term.

Are we heading for a recession?

We have lived in the midst of the pandemic for a while now, and there is no end in sight. As a result of the past month’s economic collapse, many companies already struggle with their financial standing, profit warnings are issued, and private persons worry about their jobs.

Everyone understands that despite the resuscitation mechanisms, the upcoming months and years will be challenging. If the history repeats itself, companies will turn to public sector customers. As bid strategies surely are the last thing on the minds of company heads, we think that it will take a couple of months before the gold rush towards the stable public contracts begins.

Time to focus on public procurement

According to a recent Finnish study, no bids are made in a third of public procurement procedures. In more than half of the public procurements there are only two bids. In practice, a great amount of potential tenderers decide not to leave a tender. This means that sometimes you can grab a deal by simply reaching out.

Public operators, such as municipalities or state administration, cannot go bankrupt. These operators will also need help from the private sector in different ways, as a direct result of this corona chaos we find ourselves in. Even though the private sector is unlikely to kick off in a fast pace after the crisis settles, the need for private companies’ products will be as wide as before. And of course with rock-solid solvency.

In Finland, public procurement is worth 35 billion euros a year, and in Sweden 700 billion crowns a year. At the time of writing, there are over 1200 publicly published procurements in Finland and about 3000 in Sweden. We, thus, encourage all companies to start following the Finnish www.hankintailmoitukset.fi and the Swedish www.opic.com to grab the deals from the stable procurement market before everyone else comes rushing!