If you follow the BUILD project, you might have captured how powerful innovation procurement can be. Especially when targeting societal, environmental and economic challenges. The victory comes, when innovative solutions that are not yet available or do not exist, reach the market to solve the issues. Such a practice goes beyond conventional procurement. Mainly by emphasizing collaboration, risk-sharing, and the stimulation of innovation within industries.

Types of innovation procurement

Innovation procurement can be achieved using different methods:

• Pre-commercial procurement (PCP)
  The government covers the expenses for research and development of the acquisition of an innovative solution.
• Public procurement of innovative solutions (PPI)
  It refers to obtaining innovative solutions that exist but are not yet extensively adopted. Here the government acts as a procurer.
• Open innovation procurement
  When inventive solutions are solicited in response to government-identified challenges.

List of advantages of innovation procurement

Depending on the innovation procurement tools listed above, one can expect to gain various benefits, e.g.:

• Mitigating Risk through Public-Private Partnerships

Innovation procurement involves sharing risks between public and private entities. The result being the reduced financial burdens for both parties. A report by the World Bank Group emphasizes that well-structured public-private partnerships, established through innovation procurement, enhance project sustainability and success rates. In this way, the private sector is more encouraged to participate into innovative projects that might be otherwise considered too risky: a gain for everyone.

• Enhancing research and development investment

Numerous studies indicate that innovation procurement spurs increased investment in research and development (R&D). The European Observatory for Innovation Procurement reports that governments, through strategic procurement practices, have the power to stimulate private sector R&D expenditure. Such an effect not only boosts technological innovation but also elevates a country’s overall innovation capacity, leading to a competitive advantage on the global stage.

• Fostering Economic Growth and Competitiveness

A research conducted by the Organization for Economic Co-operation and Development (OECD) reveals that innovation procurement contributes significantly to economic growth and enhances a country’s competitiveness. By investing in innovative products and services, governments stimulate demand and create markets for novel technologies, spurring job creation and industrial growth. Countries that effectively implement innovation procurement strategies position themselves as leaders in emerging industries and attract foreign investments, further bolstering their economic standing.

• Support for start-ups and small and medium-sized enterprises (SMEs)

Innovation procurement can help support start-ups and SMEs by providing them with an opportunity to develop and test their products and services in the public sector market. For example, the European Commission has funded a number of innovation procurement projects that have helped launch new businesses and create jobs.

• Technological advancements

As companies compete to provide innovative solutions, they are incentivized to invest in research and development, ultimately advancing technology and cutting-edge solutions across various sectors. The European Union’s Horizon 2020 research program underscores this impact, stating that innovation-driven procurement approaches lead to faster technology development and deployment.

• Encouraging cross-sector collaboration

The European Commission highlights that involving various stakeholders, including SMEs, research institutions, and startups, fosters a dynamic ecosystem that drives innovation. Collaborative efforts lead to knowledge exchange, technology transfer, and the emergence of new business models, benefiting the overall innovation landscape.

• Creation of new markets

Innovation procurement can help create new markets by stimulating demand for innovative products and services. For example, the Dutch government used innovation procurement to develop a new type of solar panel. This panel is now being used in solar farms across Europe.

• Reduced costs

Innovation procurement assists in reducing costs thanks to the access to more efficient and cost-effective solutions. For example, the German government used innovation procurement to develop a new type of train. This train is more energy efficient and has helped to reduce the cost of public transportation.

• Job creation

Several studies have found that innovation procurement can have a positive impact on the economy, public services and the environment. For example, one study found that it can create up to 100.000 jobs in the EU each year.

The aligning of procurement practices with innovation goals, governments and businesses can harness the transformative power of collaboration and technology to shape a more prosperous and sustainable future.

The BUILD project aspires to contribute by acting as an innovation procurement catalyst.