Innovation procurement is challenging, and many commercial departments struggle to engage with it. We recommend that the planned dissemination programme, already announced, should be extended to include a best practice centre in innovative procurement to build up a knowledge centre with case studies, training and practical advice on contract development.

Integration with UK strategic goals

The Government is promoting strategic procurement as a powerful tool for delivering innovation and competitiveness objectives for Global Britain.  If you think that the world of public sector procurement might make your eyes glaze over – stop a moment and think again!  Perhaps you won’t be surprised that UK public sector procurement accounts for around £300 billion a year of public spending.  That’s why this bill is important – and welcomed, by Connected Places Catapult. Imagine if that £300 billion a year can be better leveraged to inspire greater British innovation and competitiveness.  That is what the Government’s Innovation Strategy, published in July 2021, and this Bill, aims to do.  The Innovation Strategy says:

“There is enormous potential to make better use of [public spending] to provide a route to market for innovative new products and services. By procuring more innovative solutions, the public sector can be a driver of innovative new ideas, providing innovative firms with the foothold they need to succeed in the market, fuelling the scale-up ecosystem and facilitating wider adoption of new tech services”.

The Government’s Levelling Up White Paper also points to the transformative power of public spending. Strategic use of public procurement is also cited in the UK Net Zero Strategy, in which it is named one of the six key commitments for embedding net zero in government.

The Bill ​seeks to address innovation, sustainability and local development goals as procurement objectives by stating that ‘a contracting authority must have regard’ to the national procurement policy statement. ​ As the Bill passes through its various stages, the Government is working with Parliament to fine tune the Bill.  We have several reflections for that revising process. A first reflection is that perhaps some kind of explicit mention in the Bill of these crucial Government goals could send a powerful signal to help to prompt both innovative private businesses and the public authorities that they work with, to be more ambitious with utilising public procurement for the public good through harnessing the ingenuity of the private sector.

Promoting innovative small enterprises

A common factor in both the innovation and levelling up ambitions is encouraging more innovative small businesses and start-ups. This is critical in building lively ecosystems where start-up companies that offer innovations to meet desirable outcomes can thrive.

There is scope for the proposed reforms to do more to promote practices that make public procurement more appealing to small enterprises. The planned digital platform is highlighted in the impact assessment as the key element of delivering small business access. Perhaps the inclusion in the Bill of a reference to the digital platform would help to further strengthen the Government’s support for small business access. Issues to be considered are the encouragement of electronic tendering, burdensome requirements for pre-qualification, and overly onerous access to frameworks and dynamic procurements.

Encouraging an innovative culture

Transformation of public procurement practice towards a truly innovation-friendly culture will be extremely challenging, as risk aversion is deeply embedded. This was recognised in the impact assessment, which noted, 

“Contracting authorities concerned of legal challenge may opt for familiarity and procure the bulk of contracts under open procedure”.

The encouragement of planning and pre-market engagement is very welcome. The new public notice requirements for procurement pipelines and processes may help capture potential supplier attention. However, it is very important that these procedures do not become overly inflexible and bureaucratic in a way not originally intended by the Bill. The nature of the innovative process of course must be flexible and dynamic. Approaches such as design contests and hackathons should be equally acceptable under the rules, and it would be helpful for this to be clarified. Where the Bill’s impact assessment indicates that new requirements may add cost and regulatory burden, this ought to be carefully monitored.

Choice of procedures

A culture of risk aversion can also impact procurement procedure choices, but this is changing.  Since 2015, when the new public contract regulations were implemented, UK procurers have significantly increased the use of procedures that encourage innovation.

A comprehensive European Commission benchmarking study rated the UK’s use of innovative procurement tools as the best of any large economy in the EU. This is a good base on which to build. It will be beneficial if the streamlined (“modern”) flexible, competitive procedures provide signposts that would help procurers relate to the ones they are already familiar with. For example, the concept of the new procedure is very close to the existing competitive dialogue. This would also avoid a freeze in innovation activity before the new Bill comes into force.

Pre-commercial procurement and SBRI

In pursuance of the Government’s procurement policy agenda, InnovateUK has just published a powerful report demonstrating the benefits of innovation procurement, particularly through the deployment of the small business research initiative (SBRI) tool. However, the report highlights that SBRI procedures often frustrate innovative companies because they do not extend through to a final deployment contract.

It is hoped that the Government’s ongoing revisions to the Bill take full account of this research, which was unavailable when the green paper consultations took place. It could include a new innovation partnership procedure that allows the successful supplier to transition from development into fully deploying their solutions without needing multiple tenders. This would significantly depart from the current European rules and give UK innovators a significant competitive advantage.

An innovation procurement knowledge centre

Innovation procurement is challenging, and many commercial departments struggle to engage with it. We recommend that the planned dissemination programme, already announced, should be extended to include a best practice centre in innovative procurement to build up a knowledge centre with case studies, training and practical advice on contract development.

Such a centre could also potentially help develop widerspread dialogues between public and private sectors, building the UK’s innovation culture by challenging and stimulating each other.  The centre could further galvanise that dialogue by increasing understanding of where the UK’s distinct and permissive Common Law culture has helped foster serendipitous conditions advantageous to British innovation, entrepreneurialism, and the civil society which in turn helps to buttress that culture.  Greater understanding of that Common Law tradition may help drive cultural change by giving innovators and procurement officers a sense of ‘permission’ that some may feel they need.

Revised July 2022

Further reading