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Public Procurement Policy

Developing a public procurement culture that stimulates innovation in the economy to meet future public sector needs at better value for money for the taxpayer

The DTI has a keen interest in using public procurement as a tool for stimulating innovation in the UK economy. We believe that challenging the market to provide solutions to future public sector needs can provide that stimulus as well as bring more innovation into the public sector at better long term value for money.

The rationale for our position was publicly expressed in the DTI Innovation Report “Competing in the Global Economy – The Innovation Challenge” which highlights the role that innovation can play in wealth creation in the UK economy, giving huge commercial benefits. It also promotes the Government’s role as a demanding and intelligent customer in stimulating innovation in the marketplace. By acting as an early adopter of innovative solutions and contracting for them in sufficient volume, Government can give industry enough of a market to justify investment in new skills, equipment or R&D with resultant benefits for suppliers’ long-term innovative capacity and competitiveness in other markets.

We are working closely with colleagues in other Government Departments and other stakeholders to ensure the important role that innovation can play in procurement is more widely endorsed. We therefore welcomed the Transforming Government Procurement document published by HM Treasury in January 2007 which makes clear statements regarding the importance of innovation in driving improvement in Government procurement:

  • Innovation, science and technology have driven businesses’ quality and productivity improvements. To bring about the transformation needed to deliver high quality public services at good value for money, the Government will need to harness that innovation. This will require the Government to be more open to adopting an outcome based approach to procurements where appropriate – working with suppliers to solve problems rather than attempting to specify the precise solutions at the outset.
  • It is much easier to evaluate the costs and benefits of a tried and tested product, rather than something that may not have previously been used in practice, or may not even exist at the time the Government first considers using procurement as a means of solving a complex delivery problem. However, if a new and better solution is already developed, or could be made available, this might provide better value for money than a tried and tested product.

In addition, the UK Government’s Sustainable Procurement Action Plan will play a key role in enabling the effective use of Government procurement to transform the market for innovative and sustainable solutions, making them more affordable and widely available.

The European Commission has also been looking at how procuring, within the current EU Procurement Directives, can be used to stimulate innovation in markets. It has published a paper on Pre-commercial Procurement of Innovation of March 2006 and a subsequent Guide on Dealing with Innovative Solutions to Public Procurement of February 2007.

The key recommendations from these, and other, activities on innovation and procurement are:

  • Defining public needs more holistically, and publicising them well in advance of procurement;
  • Embedding long term dialogue with markets and suppliers into procurement processes;
  • Stating the need/problem through outcomes and allowing the market to propose innovative solutions;
  • Accepting and managing higher degrees of risk in some procurements;
  • Improving procurer skills to make procurement of more innovative solutions part of the process rather than an afterthought; and
  • Establishing clear linkages between innovation and value for money.

We recognise that while these activities help set the enabling environment for using procurement to stimulate innovation, those tasked with turning high level policy objectives into procurement reality also need more practical advice. We have therefore been working closely with OGC on providing such advice. In 2004 OGC/DTI published a booklet entitled Capturing Innovation. This guidance provided practical advice to ensure innovation featured from the very beginning of the policy process through identifying needs, deciding the procurement strategy and managing contracts.