Government Provides More Incentives For Local Suppliers

The micro, small and medium-sized enterprise (MSME) sector has received a boost with the passage of two Resolutions in the House of Representatives that seek to provide an opportunity for local suppliers to bid on government contracts, based on the percentage of local raw material being used.

The resolutions are the Public Procurement (Domestic Margin of Preference) Order, 2019, and The Public Procurement (Set Aside) Order, 2019.

Piloting the resolutions on October 22, Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, said the Public Procurement (Domestic Margin of Preference) Order is the application of a prescribed factor on the bid price of foreign bidders participating in international competitive bidding procedures.

“The application of this factor allows a national bidder to earn a government contract, even if its bid price exceeds the price of a foreign bidder, provided that the national bidder demonstrates a required percentage of domestic content,” the Minister noted.

“This Order dictates 20 per cent and 35 per cent, respectively. Therefore, the procuring entity shall apply a domestic margin of preference of 20 per cent on the criterion of bid price in respect of bids which demonstrate the use of domestic content of a minimum threshold of 35 per cent,” he added.

Dr. Clarke said it is intended to mitigate the competitive disadvantages of the participating Jamaican suppliers, adding that the measure will develop the local business sector over the long term.

“We are doing what other countries have been doing for some time, which is balancing the need to ensure that the Government gains competitive tenders but develops local industries, develops local firms and develops our own country,” he said.

He explained that the Public Procurement (Set Aside) Order aims to create opportunities for specific groups of bidders who may be otherwise unable to earn government contracts with undertakings in industries targeted for development.

The Minister said with the Order, micro, small and medium-sized enterprises (MSMEs) will also have access to a certain percentage of government contracts under the public procurement Set Aside Order 2019.

“What we are saying is that a minimum for all procuring agencies, all ministries, all government departments, all public bodies… is to be reserved for micro, small and medium-sized businesses,” he said.

He argued that the incentives will encourage national growth and development by enabling greater participation of local MSMEs in public procurement, through special and differential measures.

“In any society, the Government is one of the largest purchasers of goods and services. As a result of that, the policy of the Government towards procurement can have an impact, not only on the cost of those services that the Government procures but on the economic vibrancy of the society,” Dr. Clarke said.

He said that, increasingly, governments across the world are using public procurement, not only for the economic advantage of gaining the lowest possible cost, but to ensure that cost reduction is pursued with longer term objectives in mind.