Good Practice
Innovation and Public Procurement – Competition Must Still Be The Norm

There’s an interesting article on the Out-Law website (from Pinsent Masons, the leading law firm), which relate to a UK parliamentary committee discussion about innovation in science and technology.

Jo Johnson, the UK minister for universities, science, research and innovation (and brother of Boris), told the Science and Technology Committee that the UK government is becoming increasingly innovative in the way it uses procurement and contracting models and that it can lead the way for others to innovate too. The Committee is conducting an inquiry into how universities can be encouraged to adopt a longer term approach to the commercialisation of their intellectual property.

The transcript is here; the most interesting section is this:

Jo Johnson:  I do think Government as a smart procurer can be a real driver of innovation in the economy. It is one of the most concrete ways in which Government can drive innovation by, for example, writing contracts differently, using more contracts that have outcome‑based specifications that leave it open as to how a specific outcome can be delivered and give scope for more innovative solutions to generate them. There is a strong understanding in Government that procurement is one of the most important tools in their arsenal.

Matt Warman: Do you feel the Government themselves are genuinely innovative when it comes to those sorts of very practical—

Jo Johnson: Increasingly so. No one would deny there is room for improvement, and in certain procurements it is not always possible, but, as a Government, we want to focus a lot on pre‑procurement market engagement, going out talking to business to ensure that there are opportunities for dialogue with potentially innovative suppliers on how we can best deliver on Government requirements.

That is all encouraging; we’re not close enough to know whether this is really happening across the board, but clearly it shows good intent.

The rest of the Out-Law article contains a useful run-down from Jennifer Robinson, specialist in public procurement law at Pinsent Masons, who outlines how innovative procurement options can be used. She discusses innovation partnerships and using competitive dialogue for instance to help encourage innovation. But we were slightly concerned by one of her remarks:

“Where it is clear from the pre-market engagement that there is only one potential supplier, the law allows public bodies to make a direct purchase without prior advertisement of the contract.”

We would not disagree with that statement, but the note of caution must be around the “pre-market engagement” element and the rigour needed to establish that no competition is required. The original EU directive (section 50) says things like this about establishing that there is only one “exclusive” supplier and no competition is required:

Exclusivity can also arise from other reasons, but only situations of objective exclusivity can justify the use of the negotiated procedure without publication, where the situation of exclusivity has not been created by the contracting authority itself with a view to the future procurement procedure…  Where the situation of exclusivity is due to technical reasons, they should be rigorously defined and justified on a case-by-case basis.

So it would be wrong to think that simply doing a bit of market engagement gives the contracting authority the right to make a direct purchase. If such a decision were challenged, we suspect the court would want to see really extensive market engagement to establish that exclusivity or uniqueness – “rigorously defined and justified”.  It would not be enough to say, “well we asked around a bit and talked to a few people”.

Some sort of open advertising of the requirement (unless we are talking about security issues and secrets here, which takes us into a whole different game) is recommended, as well as more direct engagement and discussions. To avoid potential problems later, the buyer needs to show that they have made considerable efforts to check that there is indeed only one potential supplier.

We suspect Robinson and Pinsents understand this well, but it is important that contracting authorities understand that, except in a very few cases, market engagement is not a full substitute for a proper competitive process.



First Voice

  1. Digby Barker says:

    The underutilised PIN has always seemed to me to be a good way of initiating market engagement: if there is no response one has the evidence to support the use of the Innovation Partnership procedure and if there is but one, the evidence to justify a Negotiated procedure.

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