Supply Side
Berlin European Commission Conference – Procurement of Innovation

The first panel discussion at last week’s European Commission  Innovative Public Procurement conference in Berlin was titled Procurement of Innovation – Friend or Foe? A slightly obscure title – we think it means whether public procurement is a friend or foe of innovation generally?

There has been increased focus on this topic in recent years, with the view that public money can help support and promote innovative, usually young or smaller firms. But how to do this effectively – and not waste taxpayers’ money – is still a huge issue for the public sector. This panel proved very interesting and was certainly a highlight of the day in Berlin.

Most controversially, one of the speakers, Eric Magdanz, Economic Officer from the US Embassy and an ex-entrepreneur himself, said he generally advises start-ups that he deals with not to work with governments. Too slow, too much bureaucracy and so on. He was very interesting; he spoke about how in the innovation world, you initially need to have a big funnel of ideas to consider, so you can choose a few, and even then quite a percentage will fail. So the public sector needs to realise that even if we encourage innovation, not everything will succeed.

Other participants talked about the need to change the culture. “I am paid a salary to get better healthcare to the citizen” said Stefan Vlachos, acting Head of the Innovation Centre at Karolinska University Hospital in Sweden.  Public sector staff need to understand they are in their jobs to serve the citizen, and innovation should be part of that culture. But to move outside traditional mindsets we will need to overcome internal objections and show real leadership.

Juan Manuel Garrido Moreno form the Ministry of Economy and Competitiveness in Spain told us that a guide for public procurement of innovation has been produced in that country. That can support the potential to promote private investment in R&D and innovation for the benefit of the public sector. Anita Poort, Legal Counsel for the city of Amsterdam, gave some very useful and practical lessons to improve procurement practice.

She emphasised that point about leaders and leadership again, but also said that innovation works best if we start by addressing small, practical problems – we can show success and go from there, rather than immediately starting with some he and difficult project. That means more junior staff need to understand the processes, and can then drive procurement of innovation from the bottom up.

Procurement also needs to give re-assurance to budget holders that legal aspects are understood. That fits well with our recent comments on risk aversion in public procurement – professionals have to understand the rules thoroughly before they can look for innovative and creative ways of executing procurement and staying legal! Everyone should realise that there will always be a “moment of competition”, Poort said, and we should plan for that early in the process.

We should also be looking at peer to peer learning, drawing knowledge form successes and failures, and we need to communicate well with the entrepreneurs who have innovative ideas. We need to be talking to them before the formal 45 day tendering process starts if we want innovative proposals.

There were comments that the new “innovation partnership” procedure defined in the latest directives is not being used much as yet, and there is uncertainty in some countries about exactly how it should be used. But the general principle in procurement of innovation is to “put the problem out to the market and ask for solutions” – in other words, don’t tie down the specification, as that wills stifle innovation.

Coming back to Vlachos, he spoke about the real experience of procuring Medtech for a new hospital in Sweden. It is linked to the value based healthcare concept being promoted by Michael Porter – we should come back to that topic at some point. We were slightly worried by the 20 year contract that the hospital has been agreed with the supplier – whilst that gives confidence, who knows were Medtech will be in 20 years’ time? So we hope the buyer is not locked in too firmly to a particular supplier and technology!

But he also suggested some good general principles. Aligning incentives between private and public sectors is key, for example, and all the stakeholders, including patients, must be considered in these programmes.

A very good session; and we’ll be back with more from the Berlin event next week.