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Supplier barriers to entry in public sector markets

12/18/2020 By

Public Spend Forum, the market intelligence platform and community for public sector buyers and suppliers, and Govshop, its free-to-use database that houses supplier data from various markets, have been conducting a survey to explore the barriers to entry into public sector markets. They have looked at all levels of the public sector, including central/federal, local and at state level, and gathered feedback from suppliers about their experiences and challenges of working with, or trying to work with, the public sector.

The study is ongoing in order ultimately to provide a fact-based view of the challenges and barriers faced by suppliers wishing to work with government departments, but preliminary findings are now available in a new report “Barriers to Entry in Public Sector Markets.”

The report targets why this $10 trillion global market is so difficult to navigate, and why there are still so many barriers challenging companies, small and large, that wish to do business with it. Some of these barriers it highlights as being: overly complex, lengthy and costly procurement processes, challenging legal requirements and insufficient communication between suppliers and public sector buyers.

Aims of the Barriers to Entry study

The overarching goals of the study are to:

  • Understand the main challenges faced by companies when working with government agencies
  • Identify how these challenges vary across markets and demographics
  • Identify gaps in perception between government and suppliers
  • Start to identify solutions that are being implemented or could be implemented to address these challenges

The methodology used has been to talk with government leaders and suppliers, develop this survey based on input from suppliers, conduct government/supplier focus group discussions, and examine findings from previous studies.

Preliminary findings highlights

As we’d expect, the preliminary findings come as no surprise:

  • Complex regulatory requirements stand out as the most significant issue across the entire survey, ranked as a major issue by 70% of the respondents
  • Government solicitation/RFP process, slow cycle times and prohibitive evaluation criteria rank among the most significant issues for all types of business
  • Lengthy terms and conditions are deemed to be costly and prohibitive
  • Political and budget uncertainly further lengthen the cycle time of solicitations/RFPs and increase costs for vendors
  • Incumbent advantages and bias towards legacy solutions, to the detriment of new innovations, and prohibitive past performance criteria were identified as significant issues, especially by smaller companies
  • Lack of communication with government and confusing contracting language create additional barriers

The underlying challenges of each barrier are reported in the subsequent section of the report, and that is followed by the rating each supplier gave each barrier in terms of their impact. All five major entry barriers rated as highly problematic by at least 50% of suppliers. And incumbent supplier advantages, as well as complex, costly processes were also rated as highly significant barriers.

The report then drills down into the top three challenges in each area.

Advice from government leaders

The final section of the report contains an outline of advice from public sector leaders about the changes that governments can implement right now, starting incrementally and working towards more substantial and sustainable improvements. These include:

  • Engage suppliers earlier in the procurement process
  • Streamline, simplify and cost manage the procurement process, focusing on lowering associated internal and supplier costs
  • Simplify requirements and improve supplier evaluation, improving clarity of requirements and aligning supplier evaluation with department needs and impact
  • Provide transparency into public department opportunities and aggressively market to non-traditional suppliers
  • Actively target specific programs for new, innovative, emerging suppliers

Easier said than done, but fuller considerations and recommendations will appear in the final report, once PSF and Govshop have continued gathering responses.

If you would like to contribute to the survey, please visit Barriers to Entry into Public Sector Markets where you can also download the Preliminary Findings Report.

This report is sponsored by Ivalua and conducted in collaboration with Professor Rob Handfield of NC State University. It presents interim findings, but the full and final report will be published in January 2021 — so look out for details of that in Spend Matters’ PSF weekly news roundup.