Challenging Competition at Public Procurement Markets: Are SMEs Too Big to Fail? The Case of BiH and Croatia

This study empirically evaluates the role and perspectives for SMEs to successfully compete at public procurement markets. The government procurement markets in post-transition countries make a significant share of national economy and seemingly their importance rises in the times of economic crisis. The literature on public procurement and involvement of SMEs noted severe obstacles for companies to access public procurement markets, and the set of policies were established in the EU to promote SMEs’ involvement in public procurement. This case study encompasses business sector in two post-transition countries, Croatia and Bosnia and Herzegovina (BiH) in order to explore competitiveness and entry barriers specifically for SMEs to participate at the public procurement market. We compare the views of managers and business people representing companies of the small and medium size on the level of competition and on the range and intensity of obstacles to participate at public procurement tenders, in terms of availability of resources, corruption risks, transparency and fairness of procedure, clarity of documentation, principles and standards achieved, price, deadlines and other dimensions of public procurement. If there are differences between the two countries, do they stem from the different EU membership status? Are there differences between subgroups of micro, small, and medium companies? In order to provide plausible answers to these questions, we use the empirical evidence collected through the survey of companies in BiH in 2014, and comparable data on Croatian companies surveyed in 2013. The findings are put in the context of public procurement as an opportunity to enhance growth and economic development in post-transition era.