NGOs in Public Tenders: Prospects and Pitfalls ?

Recently, the Bangladesh Government has revised the public procurement law to let NGOs to compete on tenders.

In the evolving landscape of public procurement, ensuring inclusive, transparent, and competitive processes remains a top priority. One area gaining attention is the potential for Non-Governmental Organizations (NGOs) to formally participate in public tendering processes. Traditionally viewed as service providers in social sectors, NGOs possess unique capacities that can be valuable in delivering public services and development projects. This feature explores the opportunities and challenges of allowing NGOs to compete for tenders, especially in the context of open competition and public value creation.

If NGOs are allowed to compete for public procurement tenders, private firms are likely to have a mixed but largely cautious or critical reaction, depending on the sector, the type of procurement, and the structure of competition.

Here’s an analysis of potential reactions from private firms:

Concerns Over Uneven Playing Field

Main Reaction: Private firms may argue that NGOs enjoy certain advantages that distort fair competition.

• NGOs often receive donor funding, tax exemptions, or preferential treatment in regulations, which private firms don’t.

• Companies may view this as unfair competition, especially if NGOs are allowed to bid without similar levels of tax, audit, or legal compliance.

• A perception may grow that NGOs are not subject to the same profitability pressures, allowing them to undercut bids.

Private Sector Viewpoint:
“We follow commercial rules, pay taxes, and maintain balance sheets under strict audits. If NGOs compete, they must do so on the same regulatory and financial terms.”

Fear of Market Share Loss

Main Reaction: Private firms may worry that NGOs will encroach on their existing business sectors.

• Especially in health services, training, community development, or education programs, NGOs have strong networks and reputations.

• Firms that operate in these areas may feel threatened by NGOs’ grassroots capabilities and lower operating costs.

• Smaller firms may find it harder to compete if NGOs are awarded contracts based on social credentials rather than technical merit or price.

Skepticism About Capacity and Quality

Main Reaction: Some private firms may question whether NGOs have the technical expertise to deliver on large-scale contracts.

• Private engineering or infrastructure firms might challenge the operational capacity of NGOs for large, complex projects.

• They may highlight risks like project delays, weak financial controls, or limited scalability when NGOs are chosen over experienced contractors.

Business Sector Argument:
“Let NGOs focus on advocacy and outreach. Development projects need reliable commercial delivery partners.”

Advocacy for Level-Playing Reforms

Main Reaction: If NGO participation becomes formalized, private firms may demand reciprocal policy changes.

• Industry associations may lobby for:

  • Equal treatment in taxation, subsidies, and access to public grants.

  • Strict qualification and evaluation criteria for NGOs.

  • Clear rules to avoid conflict of interest in cases where NGOs have prior involvement in project design.

Collaboration Over Competition (in some cases)

Main Reaction: Forward-looking firms might explore partnerships with NGOs to create value.

• Especially in social impact sectors, some private companies may see benefit in partnering with NGOs:

  • NGOs bring trust and outreach; firms bring efficiency and scale.

  • This could encourage joint ventures or subcontracting models under public tenders.

Progressive Business Strategy:
“Instead of competing, let’s collaborate. NGOs can help with community engagement, and we can manage technical delivery.”

Summary of Likely Reactions from Private Firms: