Policies aiming to increase participation of small business in government procurement are instruments used in several countries of the world and involve the allocation of resources equivalent to almost 18% of Gross World Product (GWP). However, few studies have verified how effective are the various procurement policy instruments in achieving goals such as growth of small firms and employment. This article studies these policies with the purpose of identifying good practices to support small businesses in public procurement programs. To achieve this objective, we use theoretical and empirical contributions on the potential effects resulting from the inclusion mechanisms of small companies in government procurement. The analysis of this literature suggests that giving preference to small businesses in government procurement does not penalize efficiency and has the potential to raise the growth rates of small firms. The recurring problem of liquidity constraint among small firms is mitigated by such policies and the division of contracts into smaller lots increases participation. Giving greater transparency to public procurement processes is essential to encourage small businesses to participate in public procurement auctions. In order to strengthen the role of smaller companies in economic growth, this work recommends that government procurement policies also stimulate innovation.
public procurement small business growth efficiency