SMEs involvement in public procurement

Project Active from to State Effectiveness and State

Small and medium-sized enterprises (SMEs) have a huge potential for job creation, growth and innovation. The strong involvement of SMEs in public procurement allows unlocking this potential for the economy. It also allows contracting authorities to considerably broaden their potential supplier base, therefore enhancing competition on public contracts and counterbalancing dominant market players.

Despite a reputation for a vibrant entrepreneurial landscape and a strong base of SMEs, constituting almost 95% of enterprises across the country, Lebanon suffers from a number of barriers and inefficiencies that restrict SMEs’ access to procurement markets. For instance, Lebanon scores 120/137 on the effectiveness of anti-monopoly policy, 108/137 on the availability of latest technologies and 114/137 for Government procurement of advanced technology products.

Public Procurement (PP) is estimated to account for an average of 13% of the Lebanese budget and 4% of GDP. However, this figure is underestimated as it does not include procurement made at the local government level (i.e. municipalities) nor by autonomous agencies. In the Arab world, this share is estimated by the World Bank to reach 15-20% of GDP.

Lebanon’s difficulties to channel public spending into domestic sectors are hampering the government from increasing the well-being of Lebanese citizens, while investment in SMEs can help foster innovation through risk-sharing practices. The analysis of barriers to entry to procurement markets is further inhibited by the absence of aggregated data on bids, contract awards and suppliers.

This project aims to look at the international experience as well as at national procurement data and SMEs performance in bidding for government contracts and provide concrete recommendations for improving the conditions and performance of SMEs participation to procurement markets.