From Frameworks to Direct Awards: A Clear Guide of Contract Types for SMEs

1. Open Tender

If you’ve submitted bids to tenders before, you’re probably already familiar with this type of contract. Open Tenders are the most common in public procurement. According to the Opentender data base, almost 30% of the procedures use an Open Tender. Any supplier, big or small, who meets the requirements is able to submit a bid. 

 

The Pros of an Open Tender for SMEs

As a small business getting into public procurement, an open tender might be one of the first things you’ll try. Everyone is able to bid, once they reach the requirements and criteria. You’ve got just as much of a chance to win as the next small business, making it an accessible type of procurement. This ensures a lot of healthy competition, as well, encouraging you to make high-quality bids with sharp pricing and innovative solutions.

The Cons of an Open Tender for SMEs

The downside of having a healthy competition is that you'll be up against big(ger) organisations. They might have more experience writing bids or more knowledge about the market. But with the right knowledge and tools, you’ll be able to take on the big guys.

An open tender is accessible, but time-consuming. There are no shortcuts. You’ll need to follow every step of the procedure. We recommend hiring a specialised bid team or bid manager, who focuses on writing the best bids possible.

Next to that, open tenders have a steep learning curve, especially if you’re new to public procurement. You’ll have to read up about which information is mandatory, which information is nice-to-have and how to write winning bids. But once you’ve learned how to submit a high-quality bid at an Open Tender, the other types of contracts might feel less daunting. 

 

2. Direct Award

A Direct Award goes by many names, such as a Negotiated Tender or Single Tender Procedure. However, they all come down to the same principle: the buyer seeks direct contact with a selected supplier. Instead of inviting multiple suppliers to bid, a buyer will ask one supplier to submit their bid. Buyers may use a Direct Award when their contracts stay below the threshold of € 20.000. It’s usually used for low-value contracts, when only one supplier is able to provide the service, or when the need is urgent.

 

The Pros of a Direct Award for SMEs

A Direct Award is a faster and simpler way of securing public contracts. At the same time, there are a couple of rules to ensure fairness and transparency.

As a supplier, you’ll find this procedure to be less time-consuming than an open tender. Since the buyer already knows which supplier they would like to hire, you won’t have to submit a bid. Of course, you’ll still have to know the scope of the project and negotiate the terms and conditions, but you won’t have to go through the entire procurement process. 

Chances are, you are already in contact with the buyer, making it easier to discuss the needs and expectations. For SMEs, this saves both time and energy. You can use this time to strengthen your relationship or sharpen your other bids.

The Cons of a Direct Award for SMEs

A Direct Award is almost exclusively used below the threshold of € 20.000, making them less desirable for suppliers who prefer to bid on bigger contracts.

On top of that, you’ll need to know the buyers and their needs, first, but this takes time. You often need to already have a connection with the organisation, and build their trust before they’ll even consider you.

As an SME, you can do this by working on other projects with them, big or small. You can also put your network to use, by telling other businesses and colleagues about your wishes and your strengths. This way, these people are able to recommend you and your work to the bigger organisations they might be in contact with. 

It takes effort to grow your network and keep in touch, but once you’ve gained their trust and have convinced them of your value, you’ll be able to get Direct Awards easier and faster.

 

3. Selective Tender or a Restricted Tender

A Selective or Restricted Tender exists out of two stages where only pre-selected suppliers are invited to bid. This type of tender is generally used when competition is high, and the buyers prefer to draw up a shortlist. You’ll see a Restricted Tender being used in fields like IT equipment, cleaning or furniture. 

 

The Pros of a Selective Tender for SMEs

Want to get onto the short list? You’ll need to show interest by submitting a detailed procurement document on the buyer’s contract notice. If you’re selected, you’ll move on to stage two, where you’ll compete with at least five other suppliers.

While creating your bid, you know the pool of competitors is limited. Yes, there’s still competition, so standing out matters. But at the same time, the chances of winning the bid are higher, compared to an Open Tender.

The Cons of a Selective Tender for SMEs

Bidding on a Selective Tender takes time and energy, just like bidding on an Open Tender. You’ll have to submit a procurement document, and based on that, you either make it to the shortlist – or you don’t. Afterwards, you still have to compete with at least five other suppliers while submitting your bid.

 

4. Framework Agreement

With a Framework Agreement, the buyer makes an agreement with multiple suppliers for a limited amount of time - usually a couple of years. During that period of time, the buyer will share any contracts that fit within the scope of the framework with the pre-selected group of suppliers. 

The Pros of a Framework Agreement for SMEs

A Framework Agreement usually has two parts: 

1. the part in which you apply to be included in the framework. 

2. the part in which you bid on the contracts. 

Once you’re part of the Framework Agreement, the bidding process is faster than with an Open Tender. Plus, the competition per bid is a lot less. The pool of suppliers is smaller, which gives you a better shot at securing that contract.

The Cons of a Framework Agreement for SMEs

Even though the bidding process is more streamlined, a Framework Agreement still takes about as much time overall as an open tender. It’s just split into several parts— but those parts add up.

And while it’s efficient, a Framework Agreement can feel a bit rigid. The scope and pricing are set at the start, and after a few years, they might not match current market conditions. For smaller businesses, that can become a challenge.

 

5. DPS

A Dynamic Purchasing System (DPS) ensures a flexible procurement process. It’s popular with Dutch, Norwegian, Swedish and Finnish buyers due to its open setup. Like a Framework Agreement, a DPS uses a pool of suppliers to share their contracts with. Instead of having a fixed number of suppliers, a DPS has an open construction: new suppliers are able to join at any time. 

The Pros of a DPS for SMEs

Unlike Framework Agreements, which lock in suppliers and contract terms from day one, a DPS allows for continuous adaptation to market developments. New suppliers are able to join at any time, keeping the supplier pool fresh.

This open structure ensures a healthy competition and maintains a dynamic, diverse supplier base. Once you’re in, the lead time is faster than with an Open Tender. This makes it more accessible for SMEs and start-ups. Depending on the DPS, each contract usually involves fewer competitors than with an Open Tender, enhancing your chances of winning.

A DPS is especially useful in fast-changing industries, such as IT, infrastructure and healthcare, where new technologies and providers frequently enter the market. 

The Cons of a DPS for SMEs

On the other hand, there has to be a DPS available for you to apply for. In countries like the Netherlands, this might be a no-brainer, but in other European countries the options are more limited.

On top of that, DPS’s are generally used for recurring purchases. This means that the range of contracts you can bid on may be narrower.

Which Contract Types Should SMEs Focus On?

Some contract types make it easier for SMEs to get started than others. Take a Framework Agreement, for example — you’ll compete with fewer suppliers, which improves your chances. Once you're in, the bidding process moves faster, freeing up time to focus on your business.

A Direct Award is also worth exploring. There’s little to no competition, but they’re based on trust. That means building relationships first. 

So start connecting with buyers in your sector: through bidding, market consultations or networking. The better they know you, the more likely they’ll send opportunities your way.

 

How Mercell Can Help SMEs Getting Their Next Contract

The public sector offers big growth potential for SMEs, but many don’t take the leap. Why? Because bidding often seems too complex or time-consuming. We’re here to change that.

Whether you’re new to bidding or already experienced, Mercell helps you find undiscovered opportunities for your business. From Open Tenders to Framework Agreements, our platform supports all major contract types and makes public procurement easier.

Grow your business using Tender Discovery: In public procurement, timing is everything. With Tender Discovery, you get real-time access to relevant opportunities - the moment they’re published. Our AI capabilities turn complex and lengthy documents into clear summaries. Saving you time, so you can decide faster and bid smarter. 

Tailored recommendations based on the needs of your SME: Customise your profile to get only the most relevant business opportunities straight to your inbox. No more scrolling through endless opportunities. You’ll save time and energy, allowing you to focus on ones that really fit your business.

Work smarter by automating tasks and processes: Create, organise and submit your bids - all in one place with Bid Delivery. Save time and simplify your bidding process, from bid preparation to the submission of your offer. Automation takes care of the repetitive work, so you can respond to more tenders without extra resources.

Base the sales strategies on solid market insights: With Market Intelligence, you get access to valuable data that helps you spot trends and plan ahead. Understand where the market’s heading and use that insight to grow your business.