Comment

27.02.17

The challenges for innovative procurement

Source: PSE Feb/Mar 17

Malcolm Harbour CBE, who wrote Parliament’s first report on innovation in public procurement in 2008 and now chairs the LGA Task and Finish Group on this subject, considers how the new Industrial Strategy is a great opportunity for local government to back the extension of procurement innovation support more widely across the public sector.

A previous article in the December/January PSE, ‘Putting Innovation at the Heart of Public Procurement’, set out the opportunities for reshaping procurement into a strategic tool for driving innovation. It introduced the initiative taken by the LGA to establish an expert group on procurement innovation that will report in spring 2017. It also highlighted the prime minister’s speech to the CBI, in which she emphasised the need to boost innovative public procurement. 

The strategic role of public procurement is starting to gain more recognition. The government’s Industrial Strategy green paper, launched in January, includes procurement as one of its 10 pillars for “increasing productivity and driving growth”. It announced “new guidance for public buyers on how to drive innovation”. It confirms the review of the Innovate UK Small Business Research Initiative (SBRI), announced in the prime minister’s speech. 

The green paper invites responses by mid-April. It will be a great opportunity for local government to support its suggestion of extending procurement innovation support more widely across the public sector. 

Embedding innovative approaches 

At a meeting at Innovation Birmingham, small innovative companies were invited to share views about supplying to local authorities. One participant had a clear opinion: “Public procurement is designed to buy old stuff.” Many prospective suppliers, particularly from small innovative companies, do not see the public sector as being their natural customers. For Britain’s economic future, we have to harness all the talents available.

Procedural issues can be overcome. There are already initiatives to make access to public contracts easier and cheaper for small companies. Many procurements can only be fulfilled by a custom-made solution, one that is not predetermined. The regulations now encourage more competitive dialogue, to enable suppliers to develop optimised solutions during the tendering process.

The Industrial Strategy green paper mentions the concept of “innovation review points” within contracts to “add value or make cost savings”. The Innovative Partnership procurement procedure, written into the 2015 Public Contract Regulations, already covers these ideas. This instrument remains largely unexploited, but there are many other opportunities to encourage procurement solutions that embed innovative approaches. 

Identifying and fulfilling unmet needs 

Procurement has the potential to shape markets. Customers can define and publish their most difficult problems, their “unmet needs”. They can invite the market to come up with their best ideas to solve them. Entering these into a competitive challenge, with the incentive of financial support to develop the best into viable concepts, is very attractive to inventors and entrepreneurs. Pre Commercial Procurement (PCP), as described in a previous PSE article, shows how this can be managed as a structured process. 

Procurement challenges require new skills and resources, and in current circumstances may appear to be difficult to justify. But unless public authorities start to address the challenges of deploying innovative solutions, then the quality and efficiency of service delivery will stagnate. The Innovate UK SBRI programme has provided expertise and financial support for PCP projects since 2009. But there have been comparatively few projects in local government. The LGA taskforce is examining the reasons for this, and will be sharing its findings with the government. 

Devolving innovation challenge leadership 

Sharing procurement challenges between authorities would spread contracting costs and also offer suppliers larger and more attractive customers. Governments would find it more efficient and effective to invest in support programmes on a larger scale. Devolved leadership could be more effective in encouraging participation and monitoring outcomes. 

It is no coincidence that some of the best practice deployments of local government PCP projects are in Wales, Northern Ireland and Scotland. In Europe, Tuscany and Flanders are cited as best practice beacons. Since another pillar of the Industrial Strategy is driving regional growth, launching a network of innovative public procurement hubs is an evident opportunity. Promoting procurement innovation could be a key task of the new regional mayors who will be elected this year.

For more information

To view the Industrial Strategy and take part in its consultation, please visit:

W: www.gov.uk/government/consultations/building-our-industrial-strategy

Tell us what you think – have your say below or email opinion@publicsectorexecutive.com

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