Procurement needs to support economic development AND help to address Grand Societal Challenges

We're pleased to welcome Lisa Dale as a guest writer. Lisa is a Doctoral Researcher at the University of Birmingham in the UK, researching innovation in public procurement. 

Lisa Dale

It’s hard to see beyond the austerity and economic uncertainty focussing the minds of governments and affecting public spending decisions. Yet one thing seems clear: once the debt-crisis fire-fighting is over, governments will have to focus on doing more to support economic growth.

The link between procurement and supporting economic growth has historically been mired in controversy about protectionism and creating national champions – two of the fundamental issues the EC Procurement Directives were created to address. The arguments for and barriers to using public procurement to stimulate innovation (leading to economic growth) were covered in a recent Spend Matters series (http://spendmatters.co.uk/tag/innovation/ ) which included good practice advice for ensuring that procurement and supply management strategies don’t unnecessarily preclude innovation.

However, there is a significant amount of policy and academic debate about the potential for procurers to take a more active role in encouraging the development of new technologies and bringing innovations to the market place, one example of which is the recent House of Lords Science and Technology Committee inquiry into the use of public procurement to stimulate innovation (http://www.parliament.uk/business/committees/committees-a-z/lords-select/science-and-technology-committee/inquiries/public-procurement/ ).

The first report of this inquiry (published in May 2011) states that as Government is the UK’s biggest customer it has enormous potential to stimulate innovation and encourage economic growth – which is not being realised. The Committee have called for a "root and branch" change in attitude to adopting innovative solutions throughout the public sector.

The European Commission is equally as keen to see innovation and procurement more closely linked, both to increase the economic competitiveness of the region, but also to address important societal challenges including high quality, affordable healthcare and education, an ageing population, climate change and energy efficiency and security threats.

The theory is that technology at the early stages of the innovation process can become trapped in an innovation no man’s land that grants and tax incentives  can’t address. Where the public sector needs a product, good or service to meet a particular policy requirement that doesn’t exist on the market yet, public procurement can provide a link between unmet demand and unrealised innovations.

Forward Commitment Procurement’ (FCP), developed by BIS, and ‘Pre-Commercial Procurement’ (PCP) encouraged by the European Commission, are two methodologies that have been suggested for procurers to use in this situation. Broadly speaking they are designed to provide a framework for managing the financial and technology related risks of innovation, intellectual property rights, and regulatory barriers to the procurement of R&D.  The procurement is managed through phased competitive stages that culminate in the development of a commercially viable product/service.

It is worth noting that the PCP methodology doesn’t include the actual procurement of the product/service – this must be done as a separate procurement in the usual manner as defined by the EC Directives. The FCP process, being more akin to a specialised outcome based procurement strategy has resulted in the direct purchase of products or services including zero waste mattresses for the prison service and energy efficient lighting for use in healthcare settings (see http://www.bis.gov.uk/policies/innovation/procurement/forward-commitment for more information on the process and case studies).

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