How innovative is public procurement?

public procurement
July 23th, 2019
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In France, taking innovation into account is considered to be a major challenge when evaluating public procurement. However, using innovative goods or services improves public services and reduces costs. Furthermore, looking at innovation from the perspective of public procurement gives innovative SMEs (small and medium-sized businesses) access to public markets, which in turn promotes the growth of these companies.

To help the entire public procurement chain focus on this theme, the French government has published a practical guide to innovative public procurement. This guide aims to help public procurement decision-makers to define and implement an innovation-focused approach for all their public purchases, including repeat purchases.

One section of the publication defines innovative public procurement and applies to the procurement profession in general. This section poses three questions:

How can you recognise an innovative public purchase?

Several attributes can be identified to ensure that legal certainty is maintained for buyers who opt for innovative public purchases, and therefore legitimise a derogation procedure:

  • Novelty: recent appearance on the market with low levels of distribution.
  • Availability: adaptation of the solution serves no purpose or would have minimal impact, while innovation is a workable solution.
  • Desired objectives: significant improvements in service quality, value for money, timeframes in receiving a product or service or control over any environmental impacts.
  • Supplier: the company is integrated into the innovation ecosystem, benefits from innovation-related funding and/or incentives, possesses patents and has invested a substantial part of their turnover into research and development.

Once their purchases are recognised as innovative, procurement departments can apply specific processing procedures which motivate them to contribute at an appropriate level:

  • Procedure with negotiation
  • Competitive dialogue
  • Innovation partnership
  • Experimental procedure

What are the four types of innovation in public procurement?

The practical guide to innovative public procurement, published by the French government, distinguishes between four types of innovative purchases:

  • Product innovation
    Goods or services offering new or improved features or a new and improved function. Social networks and self-service scooters are two examples of product innovation.
  • Process innovation
    ​Methods that improve production or logistics in a specific context. 3D printing is a process innovation.
  • Commercialisation innovation
    ​Changes to the design, packaging, promotion or pricing of particular goods or services that affect distribution methods. The objective here is to optimise costs and reduce the company's carbon footprint. Introducing delivery rounds on fixed days instead of deliveries for each order is an example of commercialisation innovation.
  • Organisational innovation
    This type of innovation affects how goods or services are made available. In particular, it refers to noticeable improvements in availability that benefit users and the overall productivity of the organisation. For example, vending machines are an organisational innovation.

What does innovative public procurement have to offer?

Innovation changes existing situations. There are four main ways to innovate the public sector, and each one is part of the effort to transform the 90 billion euro[1] spent on public procurement every year: 

  • Breakthrough innovation: revolutionises the market and practices.
  • Incremental innovation: improves existing products, services or processes.
  • Social innovation: addresses societal issues.
  • Co-innovation: unites customers and suppliers.

Innovation is the theme that binds these different typologies together. Another common factor is the operational aspects of the innovative goods or services. An innovation differs from an invention in that it is available or is in the process of being made available on the market.

The French government aims to allocate 2% of public purchases to "innovative" SMEs by 2020. An SME is considered to be innovative if it receives research tax credit, innovation tax credit or has Young Innovative Company status.

To find out more about public procurement, take a look at the "Public procurement/private procurement: converged practices on the horizon?" article.

 

[1] OECP (French economic monitoring centre for public procurement) — 2017 figures

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