In this exclusive article for PASA, Paul Rogers, Practice Manager at Landell, reflects on a persistent challenge facing small and medium-sized enterprises (SMEs) in Australia.
In July 2025, I sat in a conference room in the Australian Parliament Building and listened as senior managers from Australian SMEs shared their tales of woe when dealing with Federal Government procurement processes.
With each war story, I sunk lower in my chair. It is fair to say that there was not a lot of love for procurement folk in that room! One of the (many) gripes was the ‘lack of relevant experience’ trap.
A small or medium-sized company will not be considered for a large contract unless they have experience delivering similar large-scale work, but without being awarded such a contract in the first place, they cannot acquire the required experience.
What is a Catch-22?
A ‘Catch-22’ is a paradoxical situation from which you can’t escape because of contradictory rules. The term comes from Joseph Heller’s iconic novel ‘Catch-22’, where a military rule stated that a pilot could be excused from flying dangerous missions if they were insane.
The Catch-22 was that if a pilot pleaded insanity to avoid flying the dangerous mission, it proved they were sane and therefore were ineligible to be grounded.
Is the ‘experience trap’ a Catch-22?
Imagine you are the CEO of a small or medium-sized company and you meet a prospect who has an upcoming requirement for work that aligns with your value proposition. The prospect sets the ‘experience trap’:
“Who else have you done this for?”
Your heart sinks. Not that question again! How can you gain relevant experience if no one will give you a chance?
This creates a frustrating loop where past success becomes a prerequisite for future opportunity, with no allowance for potential, innovation or alternative forms of capability. For many SMEs, especially those in emerging sectors, this requirement becomes a near-impenetrable barrier to entry. A Catch-22.
Why do clients demand prior experience?
From a client’s perspective, demanding prior experience is primarily a form of risk mitigation. If an organisation is procuring a complex, high-value or high-visibility service or product, it is reasonable to seek assurance that the supplier can deliver.
Prior performance on past contracts is a legitimate proxy for future reliability. There is also a practical reason: in a market with many bidders, requiring relevant past performance helps reduce the field. It’s a quick and objective way to shortlist.
Take a chance on me?
The problem for procurement people, like you and me, is that this criterion assumes that all experience is equal and that newer players cannot match or exceed the performance of established ones. It also privileges incumbents and penalises new entrants, regardless of capability or value proposition.
It’s easy to forget that some of today’s large corporations started small. Boeing was founded in a boathouse in Seattle, in 1916, by a man who wanted to improve on a friend’s seaplane design.
Here in Australia, Atlassian began as a modest tech start-up in Sydney, and Canva was founded by two university students in Perth. SEEK, now a global employment marketplace, began as a side hustle in 1997.
None of these companies had prior experience in what they eventually became world-class at. The challenge for procurement practitioners is that we are not responsible for the development of contractors, we are responsible for a successful project for our employer.
The impact on SMEs
For SMEs in Australia and New Zealand, being locked out of major procurements due to lack of directly comparable experience represents a major obstacle to scaling up.
This barrier to entry prevents them from:
- Diversifying their portfolio of clients
- Gaining visibility and reputation in new sectors
- Achieving economies of scale
- Employing more staff and growing revenue
The knock-on effect is stunted innovation, reduced competition and slower regional economic development. SMEs represent over 97 percent of businesses, yet their share of large-scale public and corporate contracts remain disproportionately low.
Without a pathway to larger opportunities, many SMEs remain confined to small projects, perpetuating a cycle of dependency on a narrow client base. In regions where the government or a few corporates dominate procurement, this can become economically stifling.
Stop admiring the problem! What’s the solution?
Many organisations have a risk-averse culture, and no one wants to be associated with “Project Titanic”. Rather than rely solely on past experience to shortlist, here are some alternative options to treat perceived risk:
- Phased Delivery: Break the contract into manageable phases, awarding an initial tranche to an SME with performance-based criteria for subsequent phases
- Managing Contractor Model: Use a managing contractor to supervise or support the SME, with knowledge transfer and accountability built in
- Performance Bonds or Insurance: Performance bonds are as popular as a rattlesnake in a lucky dip, but can motivate the client to take the risk
- Joint Ventures: Encourage partnerships between SMEs and experienced firms where capabilities are shared
- Enhanced Oversight: Increase contract supervision, milestones and reporting to ensure visibility over delivery
What can SMEs do to overcome risk aversion?
There are some practical steps that SMEs can take to overcome the experience trap:
- Build a Track Record in Adjacent Fields: Even if the exact scope hasn’t been done before, related projects can demonstrate transferable capabilities
- Partner Strategically: Form alliances or joint ventures with more experienced partners
- Document Capability in Detail: Develop strong case studies, client testimonials and documented evidence of capability
- Pilot Projects: Offer to undertake a smaller, proof-of-concept project as a gateway to larger opportunities
- Certifications and Accreditation: Achieve relevant industry certifications to demonstrate maturity and capability
Rhetoric vs. reality in SME engagement
I used to work for a woman-owned SME. The total number of opportunities that came our way because of the identity of the business owner was…zero, but the public statements of many organisations would convince you to believe that they were laying out a red carpet for SMEs in general and female-owned businesses in particular.
Many large organisations, especially in the public sector, proudly declare their support for SMEs. The Commonwealth Procurement Rules require officials to consider SMEs and Indigenous-owned businesses. Large corporations often promote their SME engagement strategies in glossy sustainability reports.
The experience trap is one of the hidden barriers, but there are others:
- Minimum turnover thresholds
- Long payment terms that SMEs cannot absorb
- Insurance and indemnity requirements that are disproportionate
These contradictions reveal a gap between intention and execution. My plea to people developing procurement plans and those who have good intentions about engaging SMEs, is that SME engagement requires not just inclusion in policy, but access in practice.
We’re caught in a trap
In Catch-22, Yossarian says, “That’s some catch, that Catch-22,” to which Doc Daneeka replies, “It’s the best there is.”
Procurement professionals don’t need to be caught in a trap. To give SMEs a break, consider the following:
- Undertake capability-based assessments, not just “have you done this before?”
- Introduce innovation pathways or SME tranches in large procurements
- Collaborate with industry bodies to identify and mentor high-potential SMEs
- Include evaluation criteria that reward growth potential and innovation
- Trial a ‘small first, scale later’ approach for untested suppliers
Every big company was once a small one, and every successful contract was once a leap of faith. It’s time to fix the catch and give SMEs a chance.
