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International Development Opportunities – Why Irish SMEs should start bidding

By 26th March 2017 No Comments
International Development

We were delighted to be invited onto the Sunday Business Show on TodayFM to outline the opportunities for growth through international development projects. There is a limit to what can be conveyed in a relatively brief slot on radio so here are some additional substantive reasons why this is too good an opportunity to miss out on.

Companies should consider international opportunities from organisations like the EU, World Bank and IMF for the following reasons:

  • The size of the market. The UK State spends about USD 1tn every year providing goods and services to the UK. The market for international funding programmes is actually bigger than this because it nearly all goes to contractors providing goods and services. The UK budget covers buying goods & services for the whole state but about 70% of the budget in the UK every year pays for salaries and pensions. The international funding market is like seven UK public procurement markets. None of the economic development money overlaps with conventional government expenditure.
  • Working capital. Up to 60% of a project fee is paid up front. This means that companies do not have to go to huge expense funding international expansion. The work is confirmed and much of the cost is defrayed prior to any work commencing.
  • Captive markets provide economic buffers against shocks. Public procurement can insulate companies against shocks, downcycles and other kinds of unforeseen circumstances. This money is spent every year. It is also transparent as they tell you what they want.
  • It rewards specialisation. Multi-nationals rarely innovate, they tend to buy small innovative companies instead. The commissioners of these kinds of programmes want agile companies that offer the best multi-disciplinary solution possible. Companies with deep knowledge and expertise make for good business partners. The majority of this work is won by consortiums.
  • It avoids speculative overseas expansion. Breaking foreign markets can be capital intensive and very costly. This is a captive market transparently telling the market that it needs its goods and services. This massively reduces the risk of international expansion.
  • Importance of English. English is the key language for many of these projects (for bidding let alone project reporting) and Irish people are natively fluent. This alone makes Irish companies attractive prospective partners. In some cases, like that of the European development programmes, British firms will not be eligible for these programmes after Brexit, increasing the attractiveness of Irish companies to international partner firms.
  • Ireland has a great story. Ireland and South Korea are the only countries to have jumped from least developed nation to a highly developed nation in two generations. Many of these countries are curious about our journey and want to learn from the experience we have garnered domestically doing this.
  • This is additive to most businesses rather than a business in itself. This is a new income stream for companies that can help them grow for a modest overall investment. At a cost per bid of approximately €5,000 in opportunity cost (for the lead bidder), win rates of up to 15% are achievable. As the costs are typically shared across groups and most programmes are worth at least €1m, this represents a very low cost of winning work (between €1 and €3 per €20 earned).
  • If you want to make it happen you can. You have to learn how to bid, commit to building international networks and relationships and then start bidding and delivering work. There is significant inertia – this is not an efficient market. It is however a transparent market and companies can check historic projects to confirm there are opportunities related to their experience.

Some useful links:

Please note: the figure quoted in the podcast is a rough composite of European Commission funding, other sources of funding like the EIB, EU member bi-lateral aid programmes and other such sources. The image above shows the number of World Bank projects across the world at present).