Buying small

There are always going to be tradeoffs made when awarding contracts for government business opportunities. The federal Competition Act states that small- and medium-size enterprises (SME) should have equal access to public sector spending. This is a worthy objective. The more common strategy is to consolidate the spending requirements by commodities and award to the lowest priced, qualified supplier. This strategy in itself makes it difficult for SMEs to compete against multinational companies (MNC) in the market. The research conducted in many jurisdictions, through US-based Civic Economics indicates that a local SME would recirculate 22.6% of its revenue locally. This compares with only 12.9% where an MNC is involved. Another study when measuring the benefits of local suppliers indicates that for every $100 in spending, $68 remains with the local economy whereas only $43 is retained when dealing with national chains.