Why Procurement Rules Decide Which Businesses Get to Grow

Procurement is one of the most powerful business systems most people never see.

Every year, governments, hospitals, universities, housing providers, and large corporations spend billions through tenders and contracts. On paper, these processes exist to ensure fairness, value, and accountability.

In practice, procurement quietly decides which businesses get the chance to grow — and which are excluded before they ever compete.

Procurement as a Filtering Mechanism

Procurement frameworks don’t just select suppliers.

They filter them.

Common requirements include:

• minimum turnover levels

• multi-year trading history

• high insurance thresholds

• extensive compliance documentation

• proof of having delivered similar contracts at scale

Individually, these criteria make sense.Collectively, they create a system optimised for existing scale, not emerging capability.

For many small businesses, the issue isn’t quality or ambition — it’s access.

Case Study: Breaking Contracts in Canada

In parts of Canada, some municipal authorities have experimented with unbundling large contracts — particularly in facilities management and local services.

Instead of issuing a single, nationwide tender, contracts were split into smaller, regional lots.

The result:

• more local bidders

• increased participation from Indigenous-owned and minority-owned businesses

• shorter supply chains

• stronger local employment retention

Importantly, standards didn’t fall.They were recalibrated to match actual delivery risk, not inherited assumptions.

Case Study: South Africa’s Supplier Development Tension

South Africa has long attempted to use procurement as a tool for economic inclusion, particularly through policies designed to support smaller and historically disadvantaged businesses.

In practice, the results have been mixed.

Where supplier development was paired with:

• phased contract scaling

• mentoring and financial readiness support

• realistic cash-flow terms

small firms were able to grow into reliable suppliers.

Where access was granted without readiness, contracts failed — harming workers, service users, and the very businesses the system aimed to support.

The lesson was uncomfortable but important: access without capability support creates different risks.

Case Study: UK Cleaning and Care Contracts

In the UK, local authorities frequently award large cleaning or care contracts to national providers.

These providers often subcontract the actual work to small, local firms — the same firms that failed the original tender due to scale requirements.

The consequences:

• margin extraction by intermediaries

• reduced pay and stability for frontline workers

• weaker accountability chains

• less money circulating locally

The capability exists locally.The procurement structure doesn’t recognise it.

What Changes When Small Businesses Can Compete Properly

When procurement systems are redesigned — not relaxed — several things tend to shift.

Local Economic Retention

More contract value stays within communities through wages, suppliers, and reinvestment.

Workforce Stability

Smaller firms often rely on long-standing teams. Continuity improves service quality in sectors like care, maintenance, and catering.

Innovation Under Constraint

Small suppliers adapt faster — not because they’re creative by default, but because survival demands it.

The Readiness Problem No One Likes Talking About

Opening procurement isn’t a moral exercise.

It’s operational.

Some small businesses:

• lack the cash flow to survive delayed payments

• struggle with reporting and audit requirements

• underestimate the pressure of contract delivery

When failures occur, the damage lands on:

• workers

• service users

• commissioning bodies

That’s why effective procurement reform focuses as much on readiness as access.

Where Procurement Reform Actually Works

The most effective systems don’t “favour” small businesses.

They redesign the rules.

Common features include:

• breaking large contracts into realistic delivery lots

• insurance requirements aligned to actual risk

• simplified documentation for lower-value tenders

• allowance for SME consortium bids

• evaluation weighted toward delivery approach, not just past scale

Across multiple countries, these approaches consistently increase supplier diversity without increasing failure rates.

The Hidden Community Impact

Procurement decisions determine:

• who hires locally

• who trains apprentices

• which firms survive downturns

• where economic power concentrates

When systems default to scale, communities lose ownership and resilience.

When systems are designed for fit, opportunity spreads.

The Question Beneath the Process

Procurement isn’t just about buying services.

It’s about deciding:

• whose work is trusted

• whose growth is supported

• whose risk is tolerated

Those decisions shape local economies long after contracts are signed.

And once procurement rules are set, outcomes follow — quietly, predictably, and at scale.