Good Practice
Procurement Innovation Features Strongly at the Wales Procurement Week

One of the major topics for discussion at the Wales Procurement Week (last week) was “Procurement Innovation.”  Speakers included Gareth Browning and Robert Vaughan from Wales and Professor Geo Quinot from South Africa.

What is relatively new in this debate as Quinot pointed out is the state taking such an interest in driving innovation through the mechanisms of public procurement. The sheer magnitude of state spend means there must be considerable opportunity to make a difference by directing some of this money towards innovative developments; but in practice it is not always easy.

Now the first issue is defining “procurement innovation.”  Buying innovation can mean simply buying research and development services, which may not be very different from awarding research grants. Or it can mean developing and using procurement techniques in an innovative manner, perhaps by using the latest clever eSourcing software.

But the meaning that the event was most concerned with is how to encourage suppliers to produce innovative ideas and solutions when they provide goods or services to the public sector.  (Of course, we may need to use innovative procurement methodologies in order to “buy innovation”!) There was some debate in Wales about whether we could expect procurement to search for “innovation” even in the buying of routine and mundane goods or services; or is innovation limited to areas such as IT, complex services or equipment?

That argument was not resolved, but one thing is clear – it is key to “leave space for the innovation” when we are defining the need and the specification to the market. And of course, at the same time, we must also make sure we don’t lose the value of money imperative

Quinot pointed out that procurement regulation focuses on the tendering and supplier selection aspects of the process. The demand management side is more lightly regulated. But do the legal  rules work against procurement in support of innovation?

They certainly seem to in some ways. Start ups may not be able to provide financial guarantees, or pass qualification barriers that are often set  – they may be simply excluded from the competition even before they can put forward their ideas. The “way procurement is considered as transactional in law is a barrier to procurement of innovation” said Quinot. However, some of those barriers we might argue are created by organisations’ interpretation of regulation rather than the law itself – you don’t have to seek financial guarantees or impose turnover thresholds for instance.

A further issue and perhaps barrier is around “long-term transfer” of innovation. The innovation has to have a longer-term viability, rather than  merely being a good idea in the short term for one buyer.  So how do we achieve transfer in such a fragmented public sector procurement landscape? Perhaps we should consider public entities with a role to facilitate transfer, and “to look for more coherence in the public market.”  Would that work, or is trying to institutionalise “innovation” just too much of a contradiction?

Of course, the innovation agenda is yet another example of using public procurement as a policy tool, just like other policies such as supporting SMEs, anti-corruption, or supporting minorities. That raises difficult questions around evaluation criteria, and just how we might assess and evaluate innovation procurement proposals.

So this all seems like an area that needs more thought, and it will be interesting to see if the new EU regulations around innovation procurement actually do lead to more interest and activity in this field. But public authorities are increasingly keen to develop this, as they see the potential for economic success increasingly coming from new ideas and innovation – and hence want public procurement to support that.

It does feel like buyers need to learn more about successful examples of innovation procurement – it’s a topic that really comes to life when you can talk about real examples. So in part 2, we will look at exactly that – a genuine case, from Wales, that shows how opening up a procurement to innovation can bring some genuinely new approaches, even in an area that certainly does not look very high-tech at first sight!