Opening new doors (and new challenges) to our small businesses

The announcement by Finance Minister Winston Jordan in his budget presentation that government intends to activate a provision of the Small Business Act of 2004 that allows for medium and small enterprises to access up to 20 percent of government contracts will be music to the ears of those smaller goods and service providers who have been complaining for years about being locked out of access to contracts for services to the state even in circumstances where they say they are capable of providing those services.

The argument has been made, of course, that in most cases the exclusion of smaller operators from access to fair-sized contracts has had to do with what is felt to be their lack of capacity that inhibits their ability to deliver effectively. The argument has been used particularly in the case of the monopoly which, up until recently, the New Guyana Pharmaceutical Corporation (New GPC) had enjoyed in the matter of the procurement of drugs on behalf of the state, though the countervailing argument has been that the New GPC’s protracted good fortune has been a function of the fact that it was heavily politically favoured by the previous political administration.

The decision by the new government to announce the activation of this particular provision in the Small Business Act has obviously been taken with the attendant political mileage in mind though one assumes that it recognises too that the creation of jobs for the host of small business that have sprung up in Guyana can work wonders not only for enhancing the fortunes of those businesses but also for raising employment levels to somewhere approaching respectability.

The government, of course, must be mindful that the aggressive activation of this provision in the Small Business Act does not open the way for it to become vulnerable to the same kind of criticism that had bedevilled its predecessor, that is, that the facility is simply intended to open new doors to halls of cronyism, nepotism and favouritism in the allocation of state contracts. The other concern that one has, is that smaller businesses contracted to deliver goods and services for and on behalf of the state might not be properly equipped to do so. To allow this sort of access for small businesses is to run the considerable risk of opening doors to entities that are ill-equipped to deliver in whatever area of good or service that might be required but are singularly preoccupied with the size of the contract and what it might mean for their particular business enterprise. They might feel too that their political positioning is a sufficient credential for them to be favoured with being trusted with serious undertakings on behalf of the people of this country.

A great many of the complaints that have come from smaller firms in the matter of access to state contracts have surfaced in the construction sector. Those complaints have mostly pointed fingers at what the complainants say is a tendering regime that is skewed in favour of the so-called   ‘regulars,’ whatever the criteria used for making those kinds of determinations. The state tender authority has continually rejected this accusation insisting that its criteria for awards have to do with eligibility based on clearly laid-down rules and expert assessment of contractors’ ability to deliver to the standards required by government though it has to be said that there have been several instances of woeful incompetence and a complete waste of public funds arising out of some contracts awarded by government.

One of the likely pluses of the decision to open up sizeable government contracts to businesses which, hitherto, felt that they had no chance of securing such contracts, is that the decision is likely to result in those smaller businesses raising their game by better equipping themselves to qualify for the award of those contracts.

Enhancing capacity will, of course, give rise to the necessity to raise operating standards which will mean embracing sound and orthodox business practices like paying employees National Insurance contributions and taxes, where appropriate, ensuring good health and safety standards at the workplace, raising the competence of workers and acquiring the equipment that might be needed to raise operating standards to the levels that the state tender rules might require.

One implication of this, of course, will be the need for smaller businesses to have access to the sort of financing that will be necessary for them to properly invest in raising their own standards and here one must hope that they can develop the sorts of relationships with the commercial banking system that allows for access to funding for business development.

There is nothing to be gained for the country as a whole to maintaining a distance between small and larger service providers by failing to create some sort of a ladder that allows for earned upward mobility. Allowing smaller businesses the opportunity to ‘fight out of their weight’ – so to speak – will allow some of them (it will not happen in every instance and perhaps not even in most instances) to rise to the challenge. That is the ladder that many of them seek as a route to upward mobility.