How can public procurement support innovation? The need for deep cultural change

During the session, the Consortium for Research in Innovative and Strategic Public Procurement (CRISPP) presented an examination of the research gap and their plans to bridge it. This was followed by expert perspectives from practitioners from Flanders, Finland, Wales, and the USA who are addressing the challenge and facilitating innovative procurement outcomes at city, region and country level.

Public procurement is valued at $11 trillion globally and constitutes 29.1% of government spending among OECD countries. The need to deploy this spending as a catalyst to enhance value and encourage innovation is rising up on global policy agendas, accelerated by the imperative of achieving a zero-carbon economy. However, transforming public procurement requires a deep cultural change, moving away from a least-cost orientation to a value-based mindset, and scaling up good practices. Critically, there has been limited investment in procurement research itself and a significant data gap limits researchers in supporting policy and practice around procurement.

It’s not about procedures

The strategic use of public procurement is not new, and a historical perspective suggests that for much of the 19th and 20th centuries, governments (including the UK government) attempted to leverage public spending to ensure employment at acceptable wage rates and improve working conditions through government contracts. However, towards the end of the 20th century, public procurement, like much of public policy in western Europe, was recast within the framework of neoliberal economics and politics. The theoretical background of public procurement research came to be dominated by theories of auction, opportunism and transaction costs, and agency theory, conceptualising public procurement as an impersonal, rule-bound transaction.

Using public procurement strategically requires moving away from such a view, and An Schrivjers, advisor on the Flanders Programme for Innovation Procurement (PIP), started and ended her presentation with the line that innovation procurement is “not about procedures, it’s about the culture”. Launched in 2016-17, PIP supports the Flemish public sector procure innovation to address social challenges. On the PIP journey, civil servants learn to “define their needs and reflect on what they are going to procure, since an innovative solution often doesn’t exist in a readily available market”.

Greg Green, Head of R&D projects in the Innovation Team of the Welsh government also described how innovative procurement demands new ways of working and “owning the problem”. There is now an SBRI Centre of Excellence in Wales which focuses on public health challenges and seeks to develop innovative solutions in collaboration with local industries, universities, and other partners.

Sascha Haselmayer, CEO of CityMart and author of Serving the Citizens - Not the Bureaucracy shared a vision of making public procurement a “public service”. This can sound bizarre because one commonly assumes that public procurement is already a public service! However, the transactions-based view has reduced procurement teams to “clerical and administrative functions”, which impedes efforts to use procurement strategically. Making public procurement a public service requires procurement to have a strong societal objective or mission (employment, sustainability, social mobility, etc.), greater citizen participation and a more public-facing public sector.

Building research capacity

Transforming public procurement also needs to be underpinned by rich data and robust scientific analysis. Basic procurement data like what is procured, by whom and from whom, and by what procedure remains largely fragmented or even missing from the public domain. Tender or contract award notices rarely store information on bidding parties which did not win the contract, but such information could provide an important counterfactual to measuring the impact of public procurement. Most importantly, the ambiguity over innovation procurement concepts makes it difficult to distinguish and measure innovation or strategic procurement from regular public procurement.

Ville Valovirta, senior scientist at KEINO, the Finnish competence centre for innovative procurement, suggested that while there are several ways of connecting procurement with societal grand challenges, there is much research to be done to understand how procurement’s contribution can be maximised for society. KEINO connects a variety of actors within the procurement landscape — government, businesses, and academics and its research activities include conducting surveys and exploring big data for insights on procurement policy.

Existing research on innovation procurement also tends to be aspatial and there is limited understanding regarding the use of strategic public procurement at the regional or city level. Local governments may face greater constraints in deploying procurement strategically, despite their proximity to citizens. The raison d’etre of CRISPP is to address this research gap by building a research network across different city-regions and local procurement authorities.

If we are to harness the potential for public procurement to support innovation, deep cultural change is needed. We must emphasise the important role that public procurement can play in facilitating innovation, rather than simply viewing it as an administrative function, and develop the research capacity to really understand how it can best do so. At CRISPP, we are gathering evidence to quantify the impact of innovation procurement, strengthen best practice lessons and support public sector leaders seeking new ways of delivering public services, with the aim of unlocking the potential of public procurement to deliver social value.