Negative effects on SMEs' success rates when framework agreements are used in bidding for public contracts

This article presents a critical analysis of the impact of public procurement rules on small and medium enterprises (SMEs), specifically focusing on framework agreements within the EU. Addressing procurement specialists, policy-makers, and public management professionals, the authors highlight how framework agreements, particularly in the IT sector in Spain, reduce SMEs' chances of securing public contracts by 34%. The article speaks to practitioners at all levels of public procurement-especially those in policy development and implementation-offering valuable insights into the issues that jeopardize SME success in procurement competitions. The findings are crucial for those striving to balance administrative efficiency with fair market access for SMEs, thereby shaping a more competitive market landscape. Public procurement plays a significant role in countries' economies, for example it accounts for 14.9% of the European Union's (EU) GDP. The authors examined the impact of public procurement rules on IT companies in Spain, particularly framework agreements, on the probability of small and medium enterprises (SMEs) being awarded a public contract. Despite accounting for the majority of companies in the EU, SMEs are under-represented in public procurement and are particularly disadvantaged by aggregation of demand methods. The results, based on a quantitative analysis of the public procurement market, indicate that a higher proportion of larger companies are awarded contracts when aggregation of demand mechanisms is used. The findings align with the legal and economic literature but, importantly, provide empirical evidence of their actual impact. The introduction of framework agreements in the IT services market reduces the chances of SMEs being awarded a contract by 34% compared to the general market. Building reliable evidence on the behaviour of the public procurement markets and the effects of the procurement setting is crucial for policy-makers and practitioners in the public procurement field to achieve the strategic objectives of public procurement.